Toronto’s Housing Sales Bubble Bursts as Bank of Canada Raises Rates

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Canada’s Central Bank, the Bank of Canada, recently raised its lending rate to 1.25%, matching the US Federal Reserve rate.

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And Toronto just experienced a sales burst (downwards) of epic proportions.

TORONTO, September 6, 2017 — Toronto Real Estate Board President Tim Syrianos announced that Greater Toronto Area REALTORS® reported 6,357 home sales through TREB’s MLS® System in August 2017. This result was down by 34.8 per cent compared to August 2016.

The number of new listings entered into TREB’s MLS® System, at 11,523, was down by 6.7 per cent year-over-year and was at the lowest level for August since 2010.

“Recent reports suggest that economic conditions remain strong in the GTA. Positive economic news coupled with the slower pace of price growth we are now experiencing could prompt an improvement in the demand for ownership housing, over and above the regular seasonal bump, as we move through the fall,” continued Mr. Syrianos.

The average selling price for all home types combined was $732,292 – up by three per cent compared to August 2016. This growth was driven by the semi-detached, townhouse and condominium apartment market segments that continued to experience high single-digit or double digit year-over-year average price increases.

Detached home sales were the worst hit at around 42% decline in sales, even though average sales price rose slightly (0.3%).

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To cool a similar housing bubble in Vancouver, the government of British Columbia had passed a year ago similar legislation with a 15% nonresident foreign speculator tax.  But worried about an outright implosion of the bubble, it has since been subsidizing with taxpayer money down-payments aimed at first-time buyers and condos, which has inflated the condo bubble and condo speculation to new heights.

Bank of Canada’s Governor, Stephen Poloz, has definitely gone bold with BoC’s latest rate increase.

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