Home prices were pulled down by A drop in the amount of luxury sales in the Greater Toronto Area nationwide as the nation’s biggest property market braces for higher rates of interest and cools off.
The average cost in Canada of residential properties sold in July slipped to $478,696, down 0.3 percent in the same month in 2016 — the initial year-over-year decline nationwide since February, 2013.
The amount of Canadian home sales slumped in July to 42,238 transactions, an 11.9-per-cent reduction compared with a year earlier, the Canadian Real Estate Association said Tuesday. The downturn marked the fourth time that sales volume dropped over month in Canada.
Economists say while the home supply crisis has eased a taxation in Ontario has crimped demand from the GTA. The 15-per-cent taxation on home buyers of Ontario applies to the Greater Golden Horseshoe region and took effect.
“I’d argue that the larger impact has been emotional on risky activity which was ramping up in the GTA,” BMO Nesbitt Burns Inc. senior economist Robert Kavcic stated in an interview. “The Ontario policy changes themselves kind of sent a message that we are not going to have cost growth but a price correction. That probably caused speculators and possible buyers to step back to the sidelines.”
Mr. Kavcic stated the GTA may experience a longer recovery period than that which the Vancouver area went through over the last year. The B.C. government slapped a 15-per-cent taxation on overseas home buyers in the Vancouver region in August, 2016, a movement which helped dampen the B.C. marketplace before it began bouncing back in the spring.
“Throw in a Bank of Canada rate hike from the equation, that we got in July. Prices have risen once and they are probably going to grow again this year,” Mr. Kavcic stated. “It seems like the price correction in the GTA is running somewhat deeper than in Vancouver, and perhaps going to play out a bit more. An increasing rate environment is just another headwind not only on affordability but general buyer psychology also.”
Excluding the GTA and Greater Vancouver, the average home price in July climbed 4.5 percent nationwide in comparison to a year earlier.
Sales activity could be starting to bottom in the Greater Golden Horseshoe area, said Gregory Klump.
Residential sales in July compared with a year earlier dropped 40.7 percent in the GTA while falling 28.2 percent in the Niagara area and declining 23.6 percent in Hamilton-Burlington.
Christopher Alexander manager of the Ontario-Atlantic Canada area of Re/Max Integra, said he believes the Greater Golden Horseshoe to be a market.
The source of resale properties is not as tight as before, with 2.6 months of stock in July from the Greater Golden Horseshoe area, compared with 0.8 weeks in February and March.
“Buyers don’t need to rush to make decisions. What we experienced at the first part of the year was not healthy,” Mr. Alexander said from Mississauga.
The benchmark price of average GTA properties sold in July hit $773,000, down 4.7 percent from June but still up 18.1 percent in the same month in 2016. “Further monthly declines — albeit more modest — are probably in the long run,” Royal Bank of Canada senior economist Robert Hogue stated in a research note. “Market psychology clearly has shifted since April in the area. Gone is the sooner frenzy.”
The benchmark residential cost for Greater Vancouver reached $1.02-million in July, a 2.1-per-cent rise from June and up 8.7 percent from July, 2016. Sales activity remains below the levels in 2016’s spring.
“July statistics provided further proof that the Vancouver-area market is not on a path of overheating again,” Mr. Hogue said.