'Psychological impact' of taxes, measures on Toronto are easing

The Toronto residential market exhibited noticeably improved sales activity and price growth in October after several months of cooling demand and declining prices, according to the Toronto Real Estate Board said.

The Board attributed these movements to consumers’ improving sentiments surrounding recent developments in the market.

“It appears that the psychological impact of the Fair Housing Plan, including the tax on foreign buyers, is starting to unwind,” TREB director of market analysis Jason Mercer stated, as quoted by Bloomberg.

Late last week, the TREB released new data that showed a 12% month-over-month increase in sales volume in October, an above-average move that pointed to “stronger fall market conditions.” This is despite overall transactions being down by 27% from a year earlier.

Average prices climbed 2.3% to $780,104 in October from a year earlier, and were up almost 1% from September, the second straight monthly gain. That followed a summer where they fell more than 15% between May and August after the provincial government introduced new rules to cool things down.

Benchmark prices, which are weighted to account for differences in home type, fell 0.4% from September, the fifth straight monthly decline. Prices in Greater Toronto are down 8.4% since May.

The frenzy that drove the average price of a home in Canada’s largest city to almost $1 million dissipated in May, the month after the provincial government announced policies that included a tax on foreign buyers. Other regulations introduced recently include stress testing for borrowers and tightening access to mortgage insurance for commercial banks.

Read more: Will TREB take issue with Zillow?

Sales have dropped on an annual basis every month since May, and price growth slowed from its 2016 double-digit pace, prompting economists and brokers to say the Toronto market was in a correction.

Forecasters at mortgage lenders and the government housing agency predicted prices to rebound nationwide in 2018, led by a recovery in Toronto. Canada Mortgage & Housing Corp. said in October that it is expecting “balanced conditions” to enter the market as land constraints drive prices up for the next two years.

The heat in the detached market has shifted to condominiums. In October, average prices for high rise units jumped 22% from the prior year to $523,041, more than any other housing type.

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