Is this the year that a mortgage in Toronto will become more affordable? When comparing sales figures from last year to this year, it seems that it might just be.
Compared with June of last year, sales in the big city dropped 13 per cent in June 2012, according to the Toronto Real Estate Board. And while this is surprising news, what may be even more surprising is the fact that condo sales – which have been booming and showed no signs of stopping previously – have dropped a whopping 18 per cent from year to year. And single detached homes, ones that are becoming the Holy Grail for Toronto real estate buyers, also slipped 9 per cent in June 2012 when compared to June 2011.
But why have the sales numbers dropped so much? And do they mean that the Toronto housing market will cool in 2012?
There’s an argument that it’s the land transfer tax that’s so incredibly high in the city, and pushing people out to the suburbs, where tax (and values) are much higher. Whether or not the land transfer tax can be blamed for the drop in sales in this month is debatable. As the Torontoist says, “It’s an interesting theory, given that the land transfer tax took effect February 1, 2008 – quite the delayed reaction, it would seem.”
Craig Alexander of TD Bank on the other hand, says that the condo statistics don’t include all of the condos that are currently in development. And Mr. Alexander thinks that once those developments are built and put onto the market, Toronto will experience an even greater overflow of condo inventory than they already have; and sales in this sector will plummet in sales. He’s also not the only one who thinks so; Toronto mortgage brokers and real estate agents happen to agree with him. And even though sales may be down, there won’t really be a correction until this drop in sales that Mr. Alexander predicts, actually happens.
Benjamin Tal, CIBC deputy chief economist, doesn’t only agree with Mr. Alexander that prices will fall, he even gives a time frame for when he expects it to happen.
“We know that prices tend to follow sales by about three to five months,” Mr. Tal told the Canadian Press. And if that happens, it won’t only be a drop in sales we see; but the Toronto housing market could begin to correct itself as early as the fall of 2012.
