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

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‍By CGTN’s Karina Huber

Canada's red hot housing market had a significant drop in 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.

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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.

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