Toronto Housing Market Implodes: Prices Plunge Most On Record

Until mid 2017, it appeared that nothing could stop the Toronto home price juggernaut:

And yet, In early May we wrote that "The Toronto Housing Market Is About To Collapse", when we showed the flood of new home listings that had hit the market the market, coupled with an extreme lack of affordability, which as we said "means homes will be unattainable to all but the oligarchs seeking safe-haven for their 'hard'-hidden gains, prices will have to adjust rather rapidly."

Exactly three months later we were proven right, because less than a year after Vancouver's housing market disintegrated - if only briefly after the province of British Columbia instituted a 15% foreign buyer tax spooking the hordes of Chinese bidders who promptly returned after a several month hiatus sending prices to new all time highs - just a few months later it's now Toronto's turn.

On Thursday, the Toronto Real Estate Board reported that July home prices in Canada’s largest city suffered their biggest monthly drop on record amid government efforts to cool the market and the near-collapse of Home Capital Group spooked speculators.

The benchmark Toronto property price, while higher 18% Y/Y, plunged 4.6% to C$773,000 ($613,000) from June. That was biggest monthly drop since records for the price index began in 2000, according to Bloomberg calculations, and brought prices down in the metro area to March levels.

More troubling than the price drop, however, was the sudden paralysis in the market as buyers and sellers violently disagreed about fair clearing prices and transactions tumbled 40.4% to 5,921, the biggest year-over-year decline since 2009, led by the detached market segment.

Separately, the average price, which includes all property types, rose 5% to C$746,218 from July 2016, less than a third of the 17% increase at this time last year.

Commenting on the sudden collapse of Toronto's real estate market, Toronto Real Estate Board President Tim Syrianos said that "a recent release from the Ontario government confirmed TREB’s own research which found that foreign buyers represented a small proportion of overall home buying activity in the GTA. Clearly, the year-over-year decline we experienced in July had more to do with psychology, with would-be home buyers on the sidelines waiting to see how market conditions evolve."

As Bloomberg notes, local government introduced housing regulations since October that have pushed out many potential buyers. The measures were seen as necessary to cool prices climbing at an unsustainable pace. Meanwhile, shares of Home Capital Group imploded in the spring after the alternative mortgage lender failed to disclose the extent of fraudulent mortgage activity, leading to a dramatic bank run which nearly left the company insolvent until a last minute bailout by Warren Buffett rescued the company, and - according to some - the Canadian housing sector.

As the top chart shows, Toronto prices were breaking records each month and deals were booming. In March, sales were up 18% and the average home price soared 33% from the prior year to C$916,567. That began to turn the following month when listings jumped 34 percent. Average prices started cooling in May, rising 15% and then up only 6% in June.

To slow down the housing bubble, in April the province of Ontario introduced sweeping rental regulations that included capping rent increases and introducing a foreign investor tax. The move came after the federal government in October put restrictions on insured mortgages, and the nation’s financial regulator also proposed restricting uninsured home loans this year.

So is this the end of Canada's housing bubble? Now that upward price momentum is broken, it will take a long time before the blistering price gains seen in recent months in Toronto resume. What is more concerning is if the downside - either in Toronto or elsewhere - accelerates. With the Bank of Canada finally rising rates after a 7 year hiatus, making mortgages more expensive and adding further downward pressure to home prices, the Toronto home price crash could not have come at a worse time for a country where the housing bubble is a key component to preserving the illionsary "stability" status quo.


froze25 (not verified) Shitonya Serfs Thu, 08/03/2017 - 14:58 Permalink

No big deal. I was just reading how Canada was bringing in Haitian "refugees", surely those highly intelligent, highly skilled people will start up high tech well paying businesses and be able to afford those expensive houses with all the prosperity they bring to the communities they move to. The only other group I can think of that is superior to them maybe the Somalis. Those guys can rub two sticks together and make a nuclear power plant. Its as if physics comes naturally to them. Now don't even get me started on all the inventions that modern society benefits from that they have gifted to the world. They clearly bring far more to the table then they take.

In reply to by Shitonya Serfs

Handful of Dust auricle Thu, 08/03/2017 - 16:21 Permalink

That video of the black teens beating up the man on the Dallas DART reminds me of getting robbed at gunpoint by two blacks outside that Half Priced Bookstore on Northwest Highway by that DART station awhile back. Cut the child tax credit to slow down shitling production would be a start.

In reply to by auricle

The Real Tony BaBaBouy Thu, 08/03/2017 - 20:01 Permalink

Dead wrong the Chinese only buy highest and try to sell even higher. This strategy produces the maximum amount of losses in the shortest period of time. They wouldn't touch any part of Montreal or Quebec with a ten foot pole ever and I mean ever. As you can see the Chinese are all destined to become penniless by becoming the bag holders for every possible investment stategy they dream up. Remember always sell to a stupid Chinaman when you get the chance.

In reply to by BaBaBouy

The Real Tony Dead Canary Fri, 08/04/2017 - 02:02 Permalink

Wait until this September the new party in British Columbia are going to turn the Chinese into roadkill by expanding the foreigners' tax to the entire province and taxing all foreigners who do not file income tax in Canada. You should see a massive increase in Seattle prices towards the end of this year. Like I said before all you have to do is buy all the corner lots (lots with houses on them the bigger the better) closest (as close as possible) to the elementary schools and you'll get very, very wealthy. The knocking on doors and telling the onwers I'll buy your house is the best way to do it. These houses/lots will sell for a King's ransom next year in Seattle.

In reply to by Dead Canary

Sector Catalyst froze25 (not verified) Fri, 08/04/2017 - 01:27 Permalink

What do you mean the Somalis bring no value?  They open up "grocery stores" using liberal business grants and/or public funds and service the needs of the other Somali immigrants, while getting social assistance for their families of 8 that rival the support that Canadian families get by a long shot. :PI met a social worker who mentioned that a family of 5 Syrians were getting $72,000 per year in assistance.  I see these "Syrian refugees" in Costco and malls drressed fairly affluently and buying big ticket items and grocery carts full of stuff. Fucking insane.  Meanwhile, you have real Canadian citizens who are unemployed or underemployed struggling to make ends meet who have put themselves though school with the hopes of job prospects, all the while the Turdeau goverment is opening up the Canadian jobs to a global employment market and incentivizing Canadian companies to hire foreigners for a 1/3 the wages after government subsidies.Welcome to Cuckanada -- a haven for the third world beggers to bolster the population numbers, increase tax revenues, and the liberal voting base.  What a fucking scenario.

In reply to by froze25 (not verified)