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 economists have been expecting.
The Greater Toronto Realtors Association said Thursday the number of pre-owned homes sold by its members last month was down 13 per cent in the city and 5.4 per cent in the Greater Toronto Area 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 said Vancouver shows where Toronto is headed. He suggested 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 condominium 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 technicalities. 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 effectiveness of low interest rates is diminishing "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."
Republished from the Winnipeg Free Press print edition July 6, 2012 B8
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