Toronto home sales tank 40% in July

The recent downturn in Toronto’s real estate market — brought on after Ontario introduced measures this spring, including a foreign buyers’ tax — is expected to be brief, Canada Mortgage and Housing Corp. said on Wednesday.

Property prices in the city — which fell to an average of $793,915 last month from $919,589 in April, according to data from the Toronto Real Estate Board — should pick up again due to supply constraints and a stronger economy, the CMHC said.

“The response we’re seeing in the Toronto market seems almost emotional and a knee-jerk reaction to some of the changes, which suggests that these impacts will be short-lived,” Dana Senagama, CMHC’s principal market analyst for Toronto, said during a conference call to discuss the agency’s latest housing market assessment.

The provincial government’s measures, which were retroactive to April 21, include a 15% tax on foreign buyers in the Greater Golden Horseshoe region, expanded rent controls and legislation allowing Toronto and other cities to tax vacant homes.

“If job creation continues in Toronto, and the economy continues to fuel the housing demand, we can expect some of the pressures on house prices in Toronto to resume,” says Bob Dugan, CMHC’s chief economist, in a statement.

Like Toronto, Vancouver also experienced a real estate slowdown following the implementation of a tax on foreign buyers a year ago. But there have been signs this year that the city’s housing market is heating up again.

Royal LePage said in its latest quarterly house price survey released two weeks ago that home sales in Vancouver began to recover in the April to June period after the tax “bruised consumer confidence.”

The realtor reported in April that sales in Vancouver’s housing market jumped by almost 50% on a month-over-month basis.

CMHC, in its latest housing market assessment released Wednesday, kept its overall risk rating for the national housing market at strong. The quarterly report, which is based on data from the first three months of this year, precedes the Ontario government housing rules.

Read: CMHC maintains “strong” risk for national real estate market

Photo copyright: vichie81/123RF