BUSINESS

No Autumn Rebound As Toronto Home Sales Tank Again

And the “worst may be yet to come.”

10/02/2017 17:19 EDT | Updated 10/03/2017 11:15 EDT

Realtors hoping for a rebound in Toronto's housing market this fall will likely be disappointed by September's numbers, which show that the city's market continued to put in a weak performance.

Preliminary data for the city shows sales fell between 38 and 45 per cent compared to a year earlier, depending on the location, according to an analysis of data from real estate site Zoocasa.

That's the fifth straight month of declining sales in a city that was known, until recently, for relentless house price hikes and soaring sales numbers. The market turned downwards in May, the first full month after Ontario introduced a slew of new housing rules for Toronto and surrounding areas, incuding a 15-per-cent foreign buyers' tax.

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In the aggregate, Toronto's market has gone from being a seller's market to being a balanced market, but the situation varies greatly from neighbourhood to neighbourhood, and at various price points, said Lauren Haw, CEO of Zoocasa.

Homes around the $500,000 mark are "on fire and selling very quickly," Haw told HuffPost Canada by phone. "We're still seeing multiple bids on some properties."

Things are slower at higher price ranges in certain parts of the city, Haw said. Overall, the market is at a "stalemate" where sellers are trying to maintain elevated house prices while buyers are looking more aggressively for bargains.

Haw suggested sellers will need to be more practical about how they market their homes. Six months ago, any property would sell quickly, but today sellers will need to put more effort into staging their home, she said.

"If you miss the mark with your initial pricing, your house will go stale," Haw said.

Worst yet to come?

Zoocasa's Haw predicts that the next six months will be slow in the Toronto real estate market, but she sees no price collapse on the horizon. (Unlike Swiss bank UBS, which recently pegged Toronto as the world city with the highest risk of a housing bubble bursting.)

Instead, Haw sees prices stabilizing, not unlike what happened in Vancouver after British Columbia imposed a foreign buyers' tax on the metro area.

But other analysts see more pressure on Toronto's and other Canadian housing markets. One source of pressure is rising interest rates; the Bank of Canada raised its key lending rate twice this summer, and mortgage lenders have followed suit, raising borrowing costs.

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The other is a new round of mortgage rule tightening, proposed by OSFI, Canada's federal banking regulator. Under the proposed rule, borrowers of conventional mortgages, with 20 per cent down or more, would have to pass a "stress test" to see if they can afford their mortgage if interest rates were to rise two percentage points.

If put into place, the rule would reduce buying power for homebuyers by 21 per cent, according to an estimate from mortgage portal Ratehub. OSFI is expected to make a decision on the rule this fall.

"Toronto is especially vulnerable to Ottawa's next round of tightening," Rob McLister, founder of RateSpy.com, told BNN.

"If you're a lender active in the Greater Toronto Area, the worst may be yet to come."

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