Toronto Home Prices Dip as New Listings Close Gap With Sales

(Bloomberg) -- The average price of a Toronto home dipped in March as the market cools from the historic pace of sales set last year.

The selling price of homes in Canada's largest city fell 2.6% from the month before to just under C$1.3 million ($1 million), according to unadjusted data released Tuesday by the Toronto Regional Real Estate Board. 

The number of sales dropped 30% from last year, while the number of new property listings declined 12%, bringing some balance to what has been a historically tight market, the data showed.

“We did experience more balance in the first quarter of 2022 compared to last year,” Jason Mercer, the Toronto real estate board's chief market analyst, said in a statement. “If this trend continues, it is possible that the pace of price growth could moderate as we move through the year.”

The historic run-up in house prices Canada has seen the last two years is facing a crucial test heading into the traditional spring selling season as rising interest rates, and other efforts by policymakers to cool demand, provide more hurdles for buyers already stretched by record prices. The province of Ontario, home to Toronto, raised its tax on foreign home buyers last month, the municipal government plans to tax empty homes, and Prime Minister Justin Trudeau has indicated the federal budget coming Thursday will make housing affordability a focus.

All this comes with the Bank of Canada widely expected to begin one of the most aggressive efforts to raise interest rates in its history in a bid to tame inflation that's running at three-decade highs. All six of Canada's major private banks now expect officials to double the benchmark rate at a policy meeting next week, with more increases to follow later in the year.

But Toronto's housing market remains historically tight. Last month was still the third-most-active March on record and the benchmark home price -- calculated separately from the average to account for changes in the composition of home sales -- rose 35% from the previous year. 

“We're likely to see acceleration in that tightening cycle so obviously that impacts affordability,” Mercer said in an interview on BNN Bloomberg television. “As borrowing costs increase you often see some households temporarily move to the sidelines.”

The average length of time it took for a property to sell in Toronto fell to 11 days from 13 in March of last year. This has led many in the real estate industry to diagnose the problem as a dearth of supply rather than excess demand.

“We need adequate housing supply and choice,” Kevin Crigger, the Toronto real estate board's president, said in the statement. “This needs to be the focus of policy makers rather than short-term and ineffective measures to artificially suppress demand.”

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