Canada’s two largest real estate markets saw double-digit annual sales declines in March, but the similar pattern in the two regions could soon diverge, according to a TD economist.
The Toronto Real Estate Board said Tuesday that home sales in the Greater Toronto Area in March were down 39.5 per cent from last year, while the Real Estate Board of Greater Vancouver reported sales in its region dropped by 29.7 per cent. Both were down significantly from last year’s frenzied pace — what some observers consider a market peak —when home prices and sales skyrocketed and bidding wars were the norm.
TREB said March sales figures were down 17.6 per cent from the 10-year average and REGBV said sales in that region were down 23 per cent, but had increased by 14 per cent the month prior.
But the trend in the two markets could differ in the coming months, noted TD Economics senior economist Michael Dolega, in part because B.C.’s latest budget introduced a slew of measures to cool housing, including a speculation tax to target both foreign and domestic buyers not paying tax in the province. However, Ontario’s budget offered no new measures to tamp down the market.
“We are in for some divergence moving forward with the Vancouver market seeing some continued weakness into the year, whereas Toronto will probably see some sideways movement, but more of a pickup later in the year when people trickle back into the market,” he said.
“The worst is behind the Toronto market.”
Ontario’s Liberal government, which faces an election this year, previously announced market stabilizing measures last April that included taxes on vacant properties and a non-resident speculation tax.
Further cooling pressure came from the federal level, including a financial stress test for buyers implemented Jan. 1 for federally-regulated lenders and increases in both variable and fixed-rate mortgage rates as a result of moves by the Bank of Canada and fluctuations in the bond markets.
Toronto’s market has since been “depressed” because buyers are putting off purchases and sellers avoiding putting their homes on the market in hopes that they can get a better price in the future months, Dolega said.
In Vancouver, he said “affordability is so stretched,” making the market even more “sensitive” to recent interest rate hikes.
Also tumbling in both cities was the number of new listings. Toronto’s totalled 14,866, a drop of three per cent in comparison to the 10-year average, but a 12.4 per cent decrease from last March. Vancouver’s reached 4,450, a 6.6 per cent decrease compared with March 2017. It marked the region’s lowest total of first-quarter new listings since 2013.
BMO Capital Markets economist Robert Kavcic said he thinks “fundamentally both markets are both very solid” and that “housing demand is still very strong.”
However, he said he didn’t consider March’s numbers a sign of a rebound yet.
“Looking at Toronto sales, they are starting to stabilize, but they are stabilizing at low levels,” he said. “You are looking at some of the weakest sales activity since the last sales recession.”
Tuesday’s numbers revealed that when compared to last March, the average price of a home in the GTA was down 14.2 per cent to $784,558 last month, a decrease from the average of $915,126 in the same month last year. Year-over-year sales of detached properties and apartments sunk by 37 per cent and 26.7 per cent respectively in the Vancouver area.
Kavcic said he considered it stabilization of prices and a reflection of listings from the start of the year starting to be absorbed.
He said he thinks conditions will improve in both markets, a sentiment echoed by TREB’s director of market analysis Jason Mercer, who predicted home sales will be up relative to 2017 in the second half of this year.
“Right now, when we are comparing home prices, we are comparing two starkly different periods of time,” said Mercer.
Mercer said there was less than a month of inventory last year versus two and three months this year.
“It makes sense that we haven’t seen prices climb back to last year’s peak,” Mercer said. “However, in the second half of the year, expect to see the annual rate of price growth improve compared to Q1, as sales increase relative to the below-average level of listings.”