The property cooling measures introduced by the Ontario government is starting to take a toll on the market, which saw home prices and sales drop in May, reported The Globe and Mail.
Data from Toronto Real Estate Board (TREB) showed that average home prices in the Greater Toronto Area fell 6.2 percent while home sales dropped 12 percent in May from the previous month.
This comes after the Ontario government unveiled a new 15 percent tax on foreign property buyers on 20 April, while giving Toronto powers to tax vacant properties.
Describing the market in Q1 as not normal, Re/Max regional director for Ontario and Atlantic Canada Christopher Alexander said the extremely high prices during the period was fuelled by panic, speculation and low inventory.
“Now things are a bit more normal – we have lots more inventory, buyers have more to choose from, and they don’t have to compete with 10 people to buy something, which is really nice because it gives them some breathing room.”
But while the Toronto property market appears to be correcting from a significant price growth earlier in the year, there are no signs of the market sliding into a crash.
In fact, Bejamin Tal, economist at Canadian Imperial Bank of Commerce, said the Toronto property market is slowing “under its own gravity”.
“I think that is exactly what the doctor prescribed – what we need is a slowdown that is not triggered by anything.”
However, Tal expects the price drop to be short-lived before the market stabilises, which could take six months or one year.
“I don’t think we have the trigger – namely a recession or higher interest rates – to get something crazy like a crash,” he said. “This is a very healthy adjustment.”
This article was edited by Denise Djong.