TORONTO - Home sales in two of Canada's hottest housing markets, Toronto and Vancouver, are showing signs of a cooling trend in what could be the beginning of a long-awaited contraction that economists have been expecting.

The Greater Toronto Realtors Association said Thursday that the number of pre-owned homes sold by its members last month was down 13 per cent in the city proper and off 5.4 per cent in the broader GTA region compared with the same time last year.

Those numbers came on the heels of a report Wednesday that showed Vancouver home sales hit their lowest level in more than a decade in June, falling 17.2 per cent from May.

CIBC deputy chief economist Benjamin Tal says Vancouver shows where Toronto is headed. He suggested that lower sales volumes in those cities will be followed by lower selling prices, sometime in the future.

"The magnitude in Vancouver will be more significant but it is the same forces that really impact the Toronto market: namely we see some softness in investment activity, especially in the condominum market and we see less foreign money entering the city," Tal said.

"We know that prices tend to follow sales by about three to five months, so those declines in sales they reflect much more than techcnicalities. They reflect a real softening in the market — credit market and housing market fatigue — and I think it is exactly what we need before interest rates start rising."

Tal said the effectivness of low interest rates is dimishing "because we've been in this environment for a long period of time."

The lower sales volume, particularly in the condominium segment, is being reported in advance of tightening mortgage and other housing rules coming into effect on Monday.

"So, to me, this is just the beginning of a trend," Tal said. "In fact it will get worse before it gets better."

Overall, there were 9,422 sales in the GTA in June at an average price of $508,622, compared with 9,959 at an average price of $474,223 in June 2011.

The average selling price in Toronto proper last month — the so-called 416 area — was $554,077, up eight per cent from $511,591 in June 2011.

Meanwhile, the average price in the 905 area around Toronto was $481,512, up about seven per cent from $448,579 in the same month last year.

On Wednesday, the Real Estate Board of Greater Vancouver reported 2,362 sales in June, a decline from 2,853 in May and also off 27.6 per cent from a year earlier when there were 3,262 sales.

In fact, June sales were the lowest total for the month in the region since 2000, the board said.

But despite the lower sales numbers, the housing price index for residential properties in Vancouver was still up 1.7 per cent from a year ago, with the price for detached properties was up 3.3 per cent from a year ago at $961,600.

Several studies have said Toronto real estate is overvalued but there's been mixed opinion about whether prices will come down quickly or gradually.

Some of the strongest concern has been focused on the hot condo market

Finance Minister Jim Flaherty moved last month to cool the markets in both Toronto and Vancouver by tightening the rules for borrowers.

The changes don't go into effect until July 9. However, the figures released Thursday show condo apartment sales in the Greater Toronto Area were down a hefty 18 per cent year over year in June at 1,996.

Flaherty's move last month, the fourth time he has tightened the rules in as many years, included cutting the maximum amortization period for government-insured mortgages to 25 years from 30.

That change alone will mean that monthly payments on a 25-year, $350,000 mortgage at three per cent interest will be $184 higher than they would have been on the same mortgage amortized over 30 years.

As well, financial regulators have since told lenders they can only issue home equity loans up to a maximum of 65 per cent of the property's value, down from the previous 80 per cent.

Meanwhile, the government will no longer be in the business of insuring homes that are worth more than $1 million — meaning that buyers will need to put up at least a 20 per cent down payment or seek private insurance.

As well, Ottawa will now insist that prospective buyers have the means to afford mortgage payments, property taxes and heating costs on their home. It will do so by setting cost ratios based on household income — a kind of affordability ratio — of 39 per cent for gross debt service and 44 per cent for total debt service.

"It's a question of trying to moderate behaviour and I hope Canadians will reflect before they jump into a market at the high end,'' Flaherty said at the time.

Also on HuffPost:

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  • 12. Vancouver: $18.9 Million

    <strong>4798 Drummond, Vancouver:</strong> Located in Vancouver's posh Point Grey neighbourhood, this house features 15,000 square feet of living space across eight bedrooms, a circular driveway, fountain and gazebo.

  • 12. Vancouver: $18.9 Million

    The circular grand foyer features marble floors. There is also a pool room (with a steam room and sauna), a media room, game room and recreation room. The garage fits eight vehicles.

  • 11. Toronto: $18.9 Million

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  • 11. Toronto - $18.9 Million

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  • 10. Oakville, Ont.: $18.9 Million

    <strong>2100 Lakeshore East, Oakville:</strong> This six-bedroom house sits on the shores of Lake Ontario in Oakville, near Toronto. Situated on 3.2 acres, it has 185 feet of waterfront and a boat house.

  • 10. Oakville, Ont.: $18.9 Million

    The property features a triple car garage, a foyer of Italian limestone and a two-story living room. Security cameras can be controlled by way of a security panel. And the view from the back-yard pool can't be beat.

  • 10. Oakville, Ont.: $18.9 Million

    Check out this virtual tour.

  • 9. Austin, Quebec: $18.9 Million

    <strong>105 Chemin Fisher, Austin:</strong> The realtor selling this property suggests you may want to build a heliport to get to this 200-acre estate located in a secluded corner of Quebec's eastern townships. There are several houses on this site, the main one being built in 1927. Another building is described as a "three-season chalet" and is located next to the 120-foot dock on Lake Mephramagog.

  • 9. Austin, Quebec: $18.9 Million

    The property features multiple garages, including a 40-foot-long one. The whole place is so ritzy that a <em>barn</em> on the property was declared a historical site.

  • 8. Caledon, Ont.: $19 Million

    <strong>17485 McLaren Rd., Caledon, Ont.:</strong> No fewer than ten bedrooms and seventeen bathrooms in this house in Toronto's cottage country. The terrain features ravines, ponds and rolling farmland. Not to mention a spa, tennis court, pool room and a hobby workshop.

  • 8. Caledon, Ont.: $19 Million

    The realtor boasts that this property has been "in the same family for almost 100 years." One has to wonder whether this was intentional, given how long this estate has been on the market (it was there this time last year as well.) Nevertheless, a fantastic and absolutely classy dining room in this house.

  • 7. Toronto: $19.5 Million

    <strong>346 Riverview, Toronto:</strong> Located in Toronto's prestigious Rosedale district, this six-bedroom, 11-bathroom house sits on a one-acre lot. Fourteen-foot ceilings, a wine cellar and an orangerie are among the features to be found here.

  • 7. Toronto: $19.5 Million

    The modernist interior design is complemented by a basement home theatre, gym and a spa featuring its own sauna and steam rooms.

  • 6. Vancouver: $19.8 Million

    <strong>4880 Drummond, Vancouver:</strong> Yet another house in Vancouver's Point Grey neighbourhood has made this list, this time a 9,000-square-foot mansion featuring seven bedrooms and bathrooms, and a four-car garage.

  • 6. Vancouver: $19.8 Million

    The realtor promises "gorgeous water views" from many parts of the house, including the kitchen. The property features an exercise room and pool room, an extra-large master bedroom suite (also with ocean views), and this home theatre done up in a slightly art-deco style.

  • 5. Vancouver: $19.9 Million

    <strong>5771 Newton, Vancouver:</strong> There aren't too many private homes to be found on the splendidly isolated grounds of the University of British Columbia, but this property near Northwest Marine Drive is one. Seven bedrooms and eight bathrooms in this 12,000-square-foot home.

  • 5. Vancouver: $19.9 Million

    The house features a "bonus wok kitchen," as the realtor describes it, on top of its regular kitchen, and the house in all boasts a games room, professional calibre gym, an indoor pool and granite floors. The patio is big enough to hold a wedding party, according to the realtor.

  • 5. Vancouver: $19.9 Million

    Check out this virtual tour.

  • 4. Toronto: $28 Million

    <strong>1400-155 Cumberland, Toronto:</strong> This condo in Toronto's Yorkville district (the heart of the film festival) is monstrous by apartment standards: 10,000 square feet on two floors. Four bedrooms, five baths and "breathtaking views."

  • 4. Toronto: $28 Million

    All but two of the condo's rooms open on a 5,000-square-foot terrace. The house features a library and a wine cellar, and comes with no fewer than four parking spots -- a heck of a lot by Toronto standards.

  • 4. Toronto: $28 Million

    Check out this virtual tour.

  • 3. Vancouver: $28.8 Million

    <strong>PH01-1011 West Cordova, Vancouver:</strong> This condo may well be located in the most prestigious apartment building in Canada -- no other building has had units featured in HuffPost's "most expensive" lists quite as often as 1011 West Cordova, also known as The Fairmont Pacific Rim.

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    Penthouse 1 is described as the most prestigious condo in the building, and features two levels of living space and multiple patios and rooftop gardens. With only three bedrooms, the condo works out to $9.6 million per bedroom.

  • 2. Vancouver: $31.9 Million

    <strong>3390 The Crescent, Vancouver:</strong> Villa Russe, as this estate is known, is located in Vancouver's Shaugnessy Heights and features six bedrooms (the master bedroom has three dressing rooms), five fireplaces and eight bathrooms.

  • 2. Vancouver: $31.9 Million

    Given how expensive this property is, we're a little surprised the sellers stress walking-distance access to amenities. But in Vancouver, even residents of homes that feature their own greenhouses, heated pools and fish ponds prefer to walk sometimes.

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    <strong>5365 Seaside Place, West Vancouver:</strong> We thought we'd show you the pool house first, just because it looks so cool.

  • 1. Vancouver: $34 Million

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  • 1. Vancouver: $34 Million

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