Toronto’s Splendid Housing Bubble Turns to Bust
Toronto’s Splendid Housing Bubble Turns to Bust by Wolf Richter – Wolf Street
Market freezes up at the top. Average price of detached house plunges C$175,000 in 12 months.
Home sales in the Greater Toronto Area (GTA), Canada’s largest housing market, and among the most inflated in the world, plunged 32% in April, compared to a year ago, to 7,792 homes, according to the Toronto Real Estate Board (TREB), a real estate lobbying group. The sales plunge affected all types of homes, even the once red-hot condos:
- Detached houses -38.4%
- Semi-detached houses -29.3%
- Townhouses -22.1%
- Condos -26.0%.
The sales slowdown was particularly harsh at the higher end: Sales of homes costing C$2 million or more collapsed by 64%. The market is freezing up at the top.
Prices follow volume. Both types of prices the TREB publishes – the average price and its proprietary MLS Home Price Index based on a “composite benchmark home” – fell from April last year. This is a confusing experience for the real estate industry, sellers, and buyers, since prices have ballooned for 18 years, interrupted by only one brief dip during the Financial Crisis, and the rule has been that prices will always go up and that you cannot lose money in real estate.
The average price in April for the Greater Toronto Area (GTA) plunged 12.3% year-over-year to C$804,584. A drop of C$113,600. By market:
- In Toronto itself: -8.2% (-C$76,860) to C$865,817.
- In the rest of the GTA without Toronto: -15.2% (-C$137,070) to C$767,359.
Detached houses – which are generally more expensive than other home types – got hit the hardest:
- Detached houses -14.4% to C$1,030,103 (down by C$175,000)
- Semi-detached houses -6.4% to C$792,385
- Townhouses -7.8% to C$645,172
- Condos +3.2% to C$559,343
While Condo prices still gained 3.2%, that gain was down from a 6.1% gain in March, and down from double-digit gains earlier.
The average price was impacted by two factors, the TREB said: by “changes in market conditions,” and by the sales collapse at the higher end of the market, which changed the mix of sales, and therefore affected the average price.