July 5, 2012 / 8:30 PM / 5 years ago

Home sales drop in Toronto and Vancouver, prices up

TORONTO (Reuters) - Home sales in two of Canada’s biggest markets slowed sharply in June from the year before, offering more evidence that the country’s lengthy real estate boom is softening.

Sales in Toronto, Canada’s largest city, slumped 13 percent from June 2011, the Toronto Real Estate Board said on Thursday.

That decline paled in comparison to the 27 percent plunge in sales in Greater Vancouver, the country’s priciest real estate market, where sales hit a 10-year low.

“Overall conditions have trended in favor of buyers in our marketplace in recent months,” said Eugen Klein, president of the Real Estate Board of Greater Vancouver, which released the sales data on Wednesday.

Canada’s housing market avoided a U.S.-style crash, and has continued to strengthen since 2008 on the back of low interest rates.

Signs of softness in Vancouver emerged last year, but Toronto has continued to push ahead. Analysts worry that the two markets, where new condominium towers crowd the skylines, could represent the leading edge of a severe correction.

“I think what we’re seeing in Vancouver will be coming to Toronto,” said CIBC World Markets analyst Benjamin Tal.

Year-over-year prices rose in both markets - up 1.7 percent in Vancouver and up 8.3 percent in Toronto. The average price in Toronto was C$554,077 ($546,500). The Vancouver board did not provide an average price.

But Tal said prices may soon weaken too.

“Prices tend to lag sales by four to six months, so what we’re seeing now is really an indication of prices starting to fall in the next quarter or two,” he said.

There were 3,520 sales in Toronto in June, down from 4,053 a year earlier. In the Greater Toronto Area, which includes surrounding cities and towns, sales dropped 5.4 percent to 9,422 from 9,959.

Greater Vancouver sales totaled 2,363 in June, down from 3,262 a year earlier.

Canadian Finance Minister Jim Flaherty has tightened mortgage rules four times in an effort to slow the market and avoid a sharp correction or crash.

Most recently, Flaherty announced in June the government would cut the maximum length for government-backed mortgages to 25 years from 30 years.

Reporting By Cameron French; Editing by Peter Galloway

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