Facts have just been released by the Toronto Real Estate Board showing what everybody in the trenches knew was happening - the roller coaster ride to the top has dropped.
The amount of sales across the Greater Toronto Area this May from one year ago fell by over 25%. This sag in the amount of sales was not for lack of inventory. In fact, inventory grew year-over-year with an increase of close to 49%. It has been a culmination of different factors.
The opening of the year has been quite dramatic to say the least. Home prices rose incredibly quickly from one month to the next. A home that was selling for just over $900,000 was selling for over $1.1M in the span of one month.
This flurry of activity was spurned by the effects of that rare foreign investor buying well and above the value of the property. Since the value of one home is only as good as the next one closest to it in likeness and proximity, this created a domino effect for the entire community and market as a whole. This frantic buying has been alleviated by China introducing stricter capital controls at the beginning of 2017 by making purchasing real estate abroad incredibly difficult for their citizens.
Although Toronto doesn't yet gather statistics on the amount of real estate purchased by foreigners in the city, Vancouver does. When news broke out of the impending tax for foreign purchasers there, foreign buyers made up almost 15% of all sales in the weeks leading up to implementation, according to The Globe and Mail. It can be reasonably said that Toronto was the next best option.
Prices spiked. News headlines abounded with percentages and dollar amounts. This went on until the Government of Ontario, on April 20th, introduced its own rules including those for foreign purchasers by slapping them with a 15% sales tax. A little too late as China had already closed that door.
That brings us to today. Buyers aren't buying and Sellers aren't dropping their prices. Bidding wars only seem to attract crickets. Buyers who bought at the peak a few months back are walking away from hundreds of thousands of dollars of deposit money. Many of whom are finding themselves facing their Sellers in court being sued for damages. Speculators are rubbing their hands together. The market is in gridlock.