OTTAWA (Reuters) - Home sales in Toronto fell 22 percent in January from a year earlier as rising interest rates and tighter mortgage rules weighed on demand, but prices have stabilized as stubborn sellers and tight supply kept the correction in check.
While sales were sharply lower than the record levels notched at the start of 2017, the nine-month old housing slump in Canada’s largest city has slowed, with rising condominium prices taking some sting out of the overall price decline.
According to a report from the Toronto Real Estate Board, the average price for a Toronto home was 4.1 percent lower than in January 2017, as a 9.1 percent drop in the price of a detached home was partly offset by a 14.6 percent increase in the average price of a condo.
“It isn’t as bad as it could’ve been, given the headwinds,” said Toronto realtor Scott Ingram, a chartered accountant who crunches the TREB data looking for trends.
“It’ll be mixed bag for the forseeable future, depending a lot on consumer confidence,” Ingram said, noting that while slow sales are a safe bet, prices are anyone’s guess.
The average price of Toronto homes was C$736,783 ($589,002) in January, little changed from C$735,088 in December, and 19.8 percent lower than the market peak in April 2017.
Toronto’s housing market swooned in May 2017 after the provincial government stepped in with a foreign buyers tax, among other measures, amid fears of a housing bubble.
While the market regained some strength late in 2017 as buyers pushed ahead with deals before tougher mortgage rules took effect on Jan. 1, realtors are braced for a quiet start to 2018 as buyers and sellers alike wait to see whether the long housing boom can struggle back to life.
John Pasalis, president of the Realosophy real estate brokerage in Toronto, said that while he expects rising interest rates and new mortgage stress tests to hurt sales, sellers are still reluctant to lower prices.
“Sales are probably going to get worse for the next three months, because we’re comparing to a record first quarter last year. But we’re actually seeing some stability (in prices) now,” said Pasalis.
A suite of so-called B-20 rules on mortgage lending that require stress tests on uninsured mortgages took effect Jan. 1, and are expected to make it harder for many buyers to qualify for a mortgage.
($1 = 1.2509 Canadian dollars)
Reporting by Andrea Hopkins; Editing by Sandra Maler and Chizu Nomiyama