Home sales fell across a broad swath of communities around the Greater Toronto Area in May after Ontario's new housing measures reduced real estate speculation in the region, the Canadian Real Estate Association said.
CREA said national home sales in Canada fell 6.2 per cent in May compared to April on a seasonally adjusted basis, due largely to a 25-per-cent drop in sales in the GTA and significant declines in other communities in the so-called Greater Golden Horseshoe region including Oakville, Hamilton and Barrie.
In the Oakville-Milton area, for example, the number of homes sold in May fell 36 per cent compared to April on a seasonally adjusted basis, while sales in Barrie fell 29 per cent and Hamilton-Burlington sales fell 13 per cent. Sales in Kitchener-Waterloo dropped 8.6 per cent in May, although the Peterborough and the Kawarthas area east of the GTA bucked the regional trend and recorded a 9-per-cent increase in sales in May.
The rapid sales decline came after the Ontario government announced a 15-per-cent tax on foreign buyers in April as part of a package of reforms aimed at cooling Toronto's overheated real estate market.
CREA chief economist Gregory Klump said the May sales reflect the first full month of data since the new rules took effect, and provide clear evidence that the changes have made housing markets "more balanced."
"This suggests the changes have squelched speculative home purchases," he said in a statement.
Royal Bank of Canada economist Robert Hogue also credits the province's changes for the market shift, but believes the measures themselves are not having a major direct impact. Instead, he credits a growing market sentiment that the province is determined to cool the market, which is causing buyers to step back "en masse" to reassess.
"I've got to admit the reaction has been a bit more swift and strong than I expected at the announcement time, but I think it's probably a welcome rebalancing of the market," he said.
Mr. Hogue said some cities around Toronto have not seen as large a drop in sales, but he believes the impact will spread outward if Toronto continues to weaken.
"If we see this cooling in the Toronto area being sustained, I'd be hard pressed to see the other parts of southern Ontario resisting it," he said.
However, Hamilton realtor Joe Ferrante said the Hamilton market has remained more buoyant than Toronto's because buyers still get more value for their money in the city, where prices never rose to Toronto heights.
"There's a lot of value – I don't think we've reached our peak," he said.
Mr. Ferrante, who is president of Royal LePage State Realty with over 300 realtors in three offices in Hamilton, said homes are still selling quickly and there has not been an average drop in sales prices.
"It is hot – we're still seeing multiple offers, we're still seeing stuff sell within two or three days of listing," he said. "I think the frenzy has worn off a bit, but we haven't seen a slowdown."
While the average sale price of homes in the GTA fell 7.3 per cent in May over April on a seasonally adjusted basis, CREA said the MLS Home Price Index (HPI) benchmark price rose 1.24 per cent. While the numbers appear to signal opposite pricing trends, the HPI benchmark reflects prices for similar types of homes each period, while the average sale price depends on the mix of homes sold in the period. That means, for example, that the average price could drop because fewer luxury homes were sold in May.
Across Canada, the index benchmark sale price of homes rose 1.29 per cent in May compared to April to $613,800 nationally. Prices in the Greater Vancouver Region climbed 2.8 per cent to $967,500, continuing Vancouver's status as Canada's most expensive housing market.
Bank of Montreal economist Sal Guatieri said cooling in the Toronto region may not last long if Vancouver is any guide, where slumping home sales heated up this spring to hit record highs in May.
Mr. Guatieri said the Toronto region has merely returned "to some semblance of normalcy after a manic winter," but the supply of houses available for sale is still tight.
"Given the strong economic, demographic and financial backdrop, don't expect the GTA market to stay down for the count," he said in a research note. "Policy tinkering will do little to cool demand on a sustained basis."