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GTA home sales plummet in May after foreign buyers' tax

Last Updated Jun 5, 2017 at 11:16 am EST

A sold sign is shown in front of west-end Toronto homes on April 9, 2017. THE CANADIAN PRESS/Graeme Roy

Home sales in the GTA plummeted by 20.3 per cent last month compared to a year ago, Canada’s largest real estate board said Monday, a sign that recent efforts to stabilize the city’s searing housing market are having an effect.

The average selling price for all properties in May was $863,910, up from $752,100 the same month last year, the Toronto Real Estate Board said. But that was down from $919,614 in April, the first month-over-month drop this year.

The data captures a month during which the Ontario government implemented a 15 per cent tax on foreign buyers in the Greater Golden Horseshoe, a fast-growing area stretching from the Niagara Region to Peterborough, Ont., retroactive to April 21.

The measures are intended to temper rapid price growth that has made Toronto unaffordable for many. They are also aimed at preventing or mitigating the damage that could result from a housing correction if one were to occur.

The board said in a statement Monday that the effects of Ontario’s housing changes have yet to be seen, but analysts said the data suggests otherwise.

“There’s little doubt the government measures to cool the housing market have had an impact, as foreign buyers have likely pulled back, while domestic buyers appear to have stepped back as well to see how the changes shake out,” BMO Capital Markets said in a note to clients.

Benjamin Tal of CIBC Capital Markets said while the “trajectory is exactly what the region needs,” the trend could be short-lived.

“In many ways the situation in Toronto today is similar to what we have seen in Vancouver in 2016 as the market started slowing after a strong 2015 performance, and the uncertainty related to the foreign buyers tax worked to accelerate the process,” Tal said in a note.

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Christopher Alexander, regional director at ReMax Ontario-Atlantic Canada, said he’s hearing from agents that some buyers are taking a wait-and-see approach.

“I don’t think we’ll be able to see the real effects of the new policies until probably mid-July, but there is definitely a sense of buyers saying, ‘Okay, I’m going to wait and see how this plays out,'” Alexander said.

The number of detached homes sold fell by 26.3 per cent in the GTA year-over year as their average selling price rose 15.6 per cent to $1,141,041.

Policy-makers at various levels are watching the city’s housing market closely. There are fears that the fallout from a possible crash in prices could have ramifications for the national economy.

There are signs that Vancouver, Canada’s other real estate market of concern, may be heating up again. That city’s real estate board reported Friday that home sales last month rebounded to near-record levels.

Transactions in Metro Vancouver in May were down 8.5 per cent year-over-year, while the MLS benchmark price for all properties hit $967,500, an increase of 8.8 per cent since May 2016.

Like Ontario, British Columbia introduced several measures, including a tax on foreign buyers in the Vancouver area last August, in an effort to stabilize the housing market.