Housing sales cooling in Toronto, Vancouver
TORONTO—Home sales in two of Canada’s hottest housing markets, Toronto and Vancouver, are showing signs of a cooling trend but so far buyers are not getting a break on prices, according to local real estate associations.
The Greater Toronto Realtors Association said the number of pre-owned homes sold by its members last month was down 13 percent in the city proper and off 5.4 percent in the broader GTA region compared with the same time last year.
It also comes on the heels of a report yesterday that Vancouver home sales hit their lowest level in more than a decade in June—falling 17.2 percent from May.
However, prices in both cities remained higher than they were a year before.
Overall, there were 9,422 sales in the GTA in June at an average price of $508,622, compared with 9,959 at an average price of $474,223 in June, 2011.
The Real Estate Board of Greater Vancouver yesterday reported 2,362 sales in June—a decline from 2,853 in May and also off 27.6 percent from a year earlier when there were 3,262 sales.
The housing price index for residential properties in Vancouver was still up 1.7 percent from a year ago, though, with the price for detached properties up 3.3 percent from a year ago at $961,600.
Several studies have said Toronto real estate is overvalued, but there’s been mixed opinion about whether prices will come down quickly or gradually.
Some of the strongest concern has been focused on the hot condo market
Finance minister Jim Flaherty moved last month to cool the markets in both Toronto and Vancouver by tightening the rules for borrowers.
The changes don’t go into effect until July 9. However, the figures released today show condo apartment sales in the Greater Toronto Area in June were down a hefty 18 percent year over year at 1,996.
Flaherty’s move last month was the fourth time he has tightened the rules in as many years, included cutting the maximum amortization period for government-insured mortgages to 25 years from 30.
That change alone will mean that monthly payments on a 25-year, $350,000 mortgage at three percent interest will be $184 higher than they would have been on the same mortgage amortized over 30 years.
As well, financial regulators have since told lenders they only can issue home equity loans up to a maximum of 65 percent of the property’s value, down from the previous 80 percent.
As well, Ottawa now will insist that prospective buyers have the means to afford mortgage payments, property taxes, and heating costs on their home.
It will do so by setting cost ratios based on household income—a kind of affordability ratio—of 39 percent for gross debt service and 44 percent for total debt service.
“It’s a question of trying to moderate behaviour and I hope Canadians will reflect before they jump into a market at the high end,” Flaherty said at the time.