OTTAWA (Reuters) - Toronto’s red-hot housing market cooled in May as sellers cashed in on high prices and buyers moved to the sidelines in the wake of new housing rules aimed at dampening demand in Canada’s largest city, data showed on Monday.
Average home price rose 14.9 percent in May from a year earlier, well below the pace of gains seen in recent months, while new listings jumped 48.9 percent and sales fell 20.3 percent, the Toronto Real Estate Board (TREB) said.
The sharp shift in the Toronto market comes after a 15 percent tax on property purchases by foreign buyers was introduced in April as part of 16 measures designed to cool the market due to fears of a bubble.
Real estate brokers and economists alike hailed the softening as just what the market needed.
But executives at two of Canada’s largest real estate companies said sellers have been cancelling listings when they don’t get their price they wanted and re-listing at a higher price in a phenomenon that could be distorting the data by having them counted twice.
“The listing shows up as a brand new listing but just in reality it is canceled and relisted. TREB can’t really track that, it is very, very prevalent,” said Dianne Usher, senior vice president of Johnston and Daniel, a division of Royal Lepage.
A spokeswoman for TREB did not immediately comment on whether TREB tracks re-listing data. In a statement accompanying the data, the real estate board said the surge in new listings may reflect profit-taking by sellers.
TREB data showed the average sale price was C$863,910 ($640,788) in May, with detached homes in Toronto proper fetching an average of C$1.5 million. Toronto prices have more than doubled since 2009.
Usher said the slowdown had already begun before the new housing rules, and she believes the market will bounce back.
The slowdown in sales in May is similar to the pullback seen in Vancouver after a foreign buyers’ tax was imposed in 2016, said Benjamin Tal, senior economist at CIBC Capital Markets.
“We have little doubt that the next few months will see the Toronto market continuing to soften, and prices will face additional downward pressure,” Tal said in a research note.
“We view that trajectory as a very positive development, but given the lack of external shock as a trigger, we believe that this adjustment will be relatively short-lived, not unlike the situation in Vancouver where activity is already rebounding,” he added.
Data released on Friday showed home sales in the Vancouver region fell year-on-year in May, but prices rose on a monthly basis as the market continued to rebound.
Reporting by Andrea Hopkins; Editing by James Dalgleish and W Simon