Homeowners in several communities around Toronto – including the Greater Toronto Area itself – put a record number of homes up for sale in April as they rushed to cash in on soaring prices before the market peaked.
The Canadian Real Estate Association said the Greater Toronto and Barrie areas set records for new listings for any month on a non-seasonally adjusted basis. The Peterborough and the Kawarthas region saw new listings rise 32 per cent in April over March, while Kitchener-Waterloo recorded an 18-per-cent increase in new listings.
The listings spiked in the same month the Ontario government imposed a suite of new measures to cool the overheated housing market in the so-called Greater Golden Horseshoe Area, which covers a broad crescent of the province surrounding Toronto. One measure announced April 20 is a new 15-per-cent tax on foreign buyers who purchase homes in the Golden Horseshoe region.
While the new tax was only in place for the later part of April, it was widely debated and anticipated throughout April, and economists believe many home buyers moved to list their houses before new measures could cool off house prices, which rose by more than 30 per cent in the GTA in March compared with last year.
Bank of Montreal economist Robert Kavcic said it is still too early to get a full picture of the impact of Ontario's new housing measures, but it is "quite clear" they have already had a cooling effect, perhaps because sellers sensed a "looming correction" could be coming.
"While that might put peak price growth behind us, the question is how much the market will cool from the unsustainable 30-per-cent-plus pace, and how long the adjustment will persist," he said in a statement.
"If Vancouver is any guide, the answers appear to be 'somewhat' and 'not too long,' at least while interest rates are pegged at current levels."
CREA chief economist Gregory Klump said both buyers and sellers reacted to the new policy announcement in April, helping rebuild the inventory of houses available for sale after a severe supply shortage.
"With only 10 days to go between the [April 20] announcement and the end of the month, sales in each of these markets were down from the previous month," he said. "It suggests these housing markets have started to cool."
There were 21,630 new listings in April in the Greater Toronto Area on a non-seasonally adjusted basis, which was up 33 per cent compared with April last year, and represented an all-time record number of listings for any month since CREA began recording data, the association said.
Within the GTA, listings climbed 42 per cent in Durham region east of Toronto – which includes cities such as Oshawa and Pickering – in April compared with March. Listings were up 36 per cent in Mississauga to the west of Toronto, and a whopping 45 per cent in the town of Orangeville, which is northwest of Toronto.
CREA said the Oakville-Milton area also set an all-time record for new listings, climbing 22 per cent in April compared with a year earlier, while listings climbed 23 per cent in Barrie, which was a monthly record on a non-seasonally adjusted basis.
Toronto-Dominion Bank economist Diana Petramala said April sales figures were also affected by the federal government's reforms to mortgage rules announced last October, which included tougher criteria to qualify for mortgages. Because of lags in implementing the rules and in the preapproval process for getting a new mortgage, however, she said April was the month when the full impact of the rules really took effect.
Ms. Petramala said the results of all the federal and provincial rule changes will likely be temporary as markets eventually adjust, but TD is forecasting higher interest rates by the end of 2018, with most of it passed along in the form of higher mortgage rates. That should help ensure a more balanced pace of growth in house prices.
"Over all, we expect that housing policy changes have kick-started a soft landing, while higher mortgage rates should help solidify it," she said in a statement.