Toronto home sales tumble in June as buyers move to sidelines

OTTAWA (Reuters) - Home sales in the red-hot Toronto market fell for the third consecutive month in June, while more owners put their properties up for sale as they worried a rapid acceleration in prices had peaked, data showed on Thursday.

FILE PHOTO - A "For Sale" sign stands in front of a home that has been sold in Toronto, Canada, June 29, 2015. REUTERS/Mark Blinch

Sales in Canada’s largest city fell 37.3 percent last month from a year ago, the Toronto Real Estate Board (TREB) said.

New listings rose 15.9 percent from last year, though that was slower than the hefty 48.9 percent annual increase in May.

The Ontario government introduced a number of measures in late April, including a foreign buyers tax, to try to cool the Toronto housing market amid fears of a bubble.

While potential buyers are waiting on the sidelines to gauge the impact of the government’s measures, existing owners are listing their homes because they believe price increases may have peaked, TREB’s president Tim Syrianos said.

The slowdown comes as the Bank of Canada has set the stage for interest rate hikes that could come as soon as next week. Some have blamed low rates for encouraging consumers to take on too much debt and fueling the housing market.

Higher rates would likely exaggerate the impact of the Ontario measures on the Toronto market, said Robert Kavcic, senior economist at BMO Capital Markets.

“If we do get 50 basis points of rate hikes over the course of the rest of the year, that chips away at affordability a little bit and probably extends the downturn a bit, especially at the higher end of the market,” Kavcic said.

Separate data showing Canadian exports and imports hit record highs in May helped reinforce expectations of hikes on the horizon. The central bank cut rates twice in 2015 during the oil price downturn and has held at 0.50 percent since.

The long housing boom in Canada has raised concerns the country could see a painful correction but policymakers have said the ingredients for a U.S.-style crash are not there.

The financial regulator said on Thursday it plans to ban some bundled residential mortgages to clamp down on risky lending.

The average Toronto home price was C$793,915 ($611,880), up just 6.3 percent from last year, compared with a 14.9 percent annual increase in May.

Given Ontario’s moves and the possibility of higher rates, TREB forecast 2017 sales at between 89,000 and 100,000 homes, down from 2016’s record 113,044 homes.

Reporting by Leah Schnurr; Editing by Meredith Mazzilli and Phil Berlowitz