Home sales in Canada’s two hottest markets, Toronto and Vancouver, have already begun to cool thanks to new mortgage rules. According to the Toronto Real Estate Board, July home sales in the city slipped 1.5 percent compared to a year ago. Properties in Vancouver dropped 11.2 percent from June.
Concerns about a bubble in both communities had been mounting since 2011. Recent changes to mortgage legislature has effectively slowed demand in both markets; Vancouver’s market posted a 10-year low in sales, while Toronto’s numbers were down 21 percent in the second quarter from one quarter earlier (source: Urbanation Inc.).
A Closer Look at Toronto’s Market
The Toronto Real Estate Board reported that there were 7,570 homes sold in July, compared to 7,683 a year ago. The average selling price of a home in the city was $476,947 last month, up roughly 4 percent from a year ago.
The tightening of mortgage lending rules last month, coupled with the additional cost of the Toronto land transfer tax, has prompted many potential home hunters in the city to put their purchasing decision on hold. This at a time when Toronto boasts the most skyscraper construction than any other city in North America.
According to Urbanation Inc., a market research company that specializes in the Toronto condo market, consumers are beginning to rethink the city’s growing selection of shiny new units. Larger existing apartments are coming back into focus as best mortgage rate holders attempt to seek out better deals. Urbanation Inc. claims there were 5,050 condominium apartment resale transactions in the second quarter. This accounts for a 30 percent increase from a quarter earlier and a 9 percent annual increase.
Developers in the city have made a conscious effort to shrink unit sizes in recent years in order to maintain affordability in the heated marketplace and provide easily rentable suites for investors. Resistance to smaller units clearly shows a shift in the market… and in buyer priorities.
What’s Happening in Vancouver
The Real Estate Board of Greater Vancouver reported the worst July sales numbers since 2000 last month, posting 31.2 percent below the 10-year average with just 3,051 sales. Of this, roughly 2,098 sales were of residential detached, attached and apartment properties – down 18.4 percent from the same time last year.
Phil Sopher, chief executive of Royal LePage Real Estate Services credits a slow down in foreign investment for a portion of the decline. Experts are still unsure as to whether or not the current trend in low mortgage rates will be enough to pull the market out of the slump.
Even so, prices continue to hold steady in the Greater Vancouver Area. The composite benchmark price for all residential properties in the area rose 0.6 percent to $616,000 from a year ago, dropping roughly 0.7 percent from June. A total of 4,082 new listings hit the market in July, the lowest number thus far in 2012. An yet, a total of 18,081 listings were active on the MLS last month, which constitutes an increase of 18.8 percent from a year ago.
People in both Toronto and Vancouver are cautious about making significant financial decisions at this point in time. Although the economy remains relatively strong, there is still grave concern about how international markets and new mortgage rules, will impact the housing market.
Market volatility in both Toronto and Vancouver could signal a price shift across both areas. Now’s the time to secure a best rate mortgage and take advantage of cooling home prices.