Toronto’s housing market cools due to new foreign buyers’ tax

Canada's red hot housing market had a significant dropin June posting their biggest monthly decline in 7 years.

Prices

are still up compared to a year ago but they are falling on a month to

month basis. In Toronto, one of Canada’s most frenzied market, lawmakers

recently implemented a foreign buyer’s tax and that seems to have put

the brakes on things.

Jennifer Issley and Chris

Gayton have been actively house hunting in Toronto for 6 months. With a

new baby, they are now looking for more space – a 4-bedroom, 3-bathroom

home.

(CGTN Photo)

Despite

a budget of 2 million Canadian dollars – more than 1.6 million US

dollars – Jennifer said the process has often left her in tears.

“When

we first started, it was crazy,” Jennifer said. “So we would literally

walk into a house and there was so much pressure. If we were interested

in something, we’d have to put in an offer within an hour of seeing it

because literally 10 offers would go in.”

Bidding

wars were the norm. Homes would sell for tens of thousands of dollars

over asking price. In March, the average price for a detached house in

the Greater Toronto Area (GTA) ballooned – approaching 1 million US

dollars – an increase of more than 33% from last year.

The

Ontario government was concerned. It swiftly implemented a 15 % foreign

buyer’s tax for the Toronto area and introduced more than 2 dozen other

measures meant to increase affordability. The efforts seem to have

worked.

In June, home sales in Canada fell 6.7% from a

month earlier – their biggest monthly decline in 7 years. In Greater

Toronto, sales fell 15% on a month to month basis and prices were down

almost 14% from their April highs.

“This is a

combination of policy induced weakness and some payback for the strength

we saw in the January to March period,” said Diana Petramala, an

economist at TD Bank.

Petramala said the Bank of Canada’s decision in July to raise interest rates also helped cool down the market.

But Jason Mercer of the Toronto Real Estate Board believes the cool-down is only temporary.

“Our

survey data suggests that there’s still a lot of households in the GTA

that are upbeat about purchasing a home and so I expect that some of

these people that are on the sidelines now will start moving back into

the market as we head back into the fall and winter,” Mercer said.