Canada Home Prices Fall Most Since 2008 Recession on Toronto

(Bloomberg) -- Canada’s benchmark home price fell by the most in nearly a decade last month as Toronto led a fourth straight decline in sales.

The nationwide benchmark home price declined 1.5 percent to C$607,100 ($476,000) from June, the Canadian Real Estate Association said Tuesday, the largest drop since the previous recession. In Toronto, the country’s largest city, the price fell 4.7 percent on the month.

The steam is coming out of Toronto’s housing market after Ontario’s provincial government introduced measures in April that included a foreign buyer’s tax to cool what officials called unsustainable price gains. Mortgage costs have also started moving up from the lowest in decades after the central bank raised its benchmark interest rate last month for the first time in seven years.

Sales of existing homes in Toronto fell 5.4 percent in July from a month earlier. That accounted for a major portion of the 2.1 percent national decline. Total resales nationwide are down 15 percent after reaching a record in March.

The benchmark price, which smooths distortions in average prices by accounting for different types of housing, was still up 13 percent in July from a year earlier. In Toronto, the benchmark price climbed 18 percent on the year. Policy makers acted to cool the market after annual price gains exceeded 30 percent earlier this year.

Tuesday’s figures may also signal the worst of the recent slowdown is over. Average prices in Toronto were little changed from June, and the nationwide sales decline in July was much smaller than in May and June, which each saw drops exceeding 6 percent.

Vancouver’s experience may provide a precedent for Toronto, after the British Columbia government imposed a foreign buyer tax last summer. After stalling briefly, benchmark prices in the Pacific Coast city reached a record in July, meaning a typical dwelling in the west coast city will set you back about C$1 million.

Like Vancouver, Toronto’s market is characterized by a big pool of local and global buyers, a strong job market and speculation new supply isn’t keeping up with demand.

“Hitting sales with tighter rules doesn’t address how market conditions remain quite tight with little supply and so the goal of improving affordability is not yet being materially achieved,” said Derek Holt, head of capital markets economics in Toronto at Bank of Nova Scotia.

To contact the reporters on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net, Erik Hertzberg in Ottawa at eschmitzhert@bloomberg.net.

To contact the editors responsible for this story: Theophilos Argitis at targitis@bloomberg.net, Chris Fournier, Stephen Wicary