Toronto home sales plummet 40% in July compared to last year

A sign advertises a new home for sale in Carleton Place, Ont., on March 17, 2015.
A sign advertises a new home for sale in Carleton Place, Ont., on March 17, 2015. THE CANADIAN PRESS/Sean Kilpatrick

TORONTO – After 16 years, Dina Alker is going to put her house in Toronto up for sale Monday, joining the throngs of others in the city who have decided to downsize as a chill gripping what was once one of the hottest real estate markets in North America takes hold.

“I’m at a turning point in my life,” said Alker, 58, who plans to buy a condo.

“It’s a big responsibility in a house. You’re never really worry-free.”

READ MORE: Toronto now officially a buyers’ market, amid nationwide home sales slump

Alker is unfazed by data released Thursday showing that sales in the Greater Toronto Area tanked last month by 40.4 per cent compared to July 2016 after a bout of frantic buying at the start of the year. Instead, she sees a silver lining – prices dipped for the third consecutive month.

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“It may be not as favourable (to sell), but when I go to buy, there’s an advantage there.”

The decline in property transactions was driven by fewer sales of detached homes in Toronto and its surrounding areas, the Toronto Real Estate Board said.

The average selling price of all properties in July was $746,218, roughly triple what it was when Alker bought her home and up five per cent from the same month last year.

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But that’s down nearly $175,000 since April, when the Ontario government introduced more than a dozen measures – including a 15 per cent tax on foreign buyers – aimed at improving home affordability.

Tim Syrianos, president of the Toronto Real Estate Board, said the decline in activity has less to do with foreign buyers and more to do with potential homebuyers waiting to see how the market plays out.

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“Clearly, the year-over-year decline we experienced in July had more to do with psychology, with would-be home buyers on the sidelines waiting to see how market conditions evolve,” Syrianos said in a statement.

Sal Guatieri, a senior economist with BMO Capital Markets, said Toronto’s housing market is starting to come back to normal levels after going through a “frenzy” early this year.

“Buyers are stepping back, there’s more sellers, and that just seems to be contributing to greater downward pressure on detached home prices in the Toronto region,” said Guatieri.

“That was just not sustainable and certainly not healthy, and greatly increased the risk of a severe correction if economic circumstances changed.”

A year ago, foreign buyers in Vancouver also had to pay a 15 per cent tax. The effect was immediate: the number of transactions tumbled in the ensuing months. However, Vancouver did not see the plunge in prices Toronto is now experiencing.

Tom Storey, a sales representative with Royal LePage, said he believes Toronto’s market will rebound much like Vancouver’s did.

“If you cross-reference what happened in Vancouver after the (foreign buyers’ tax ) announcement, they went through four-to-six months of people cooling down,” said Storey. “Then it ramped up again.”

READ MORE: Toronto’s real estate market could keep cooling off thanks to interest rate hike: economist

Guatieri said it’s worth noting that while detached housing was what drove the drop in sales, condo sales have remained strong, helped in part by their relative affordability.

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“But I wouldn’t be surprised if we see a little bit of cooling in that department in the next few months,” he said.

The average price of condos throughout the GTA in July was $501,750, an increase of 23.2 per cent from a year ago. Detached homes on average sold for $1 million, up 4.9 per cent.