The Toronto Real Estate Board (TREB) is warning the City of Toronto to diminish its reliance on land transfer tax to fund city services in the wake of a distinctly chilly January in home sales across the region.
The average Toronto area home price dropped 4.1 per cent year over year last month to $ 736,783. The number of sales in the Toronto region also fell 22 per cent compared to last January.
Most of the price drop occurred on the back of detached houses. Those homes sold for 9.1 per cent less year over year region-wide, with an average cost of $ 970,823.
The biggest price hit occurred in the 905 areas where detached home prices fell 12 per cent compared to January 2017, selling for $ 897,048 on average.
But even in Toronto, detached homes cost 3.9 per cent less than a year ago — selling for $ 1.3 million on average.
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Condo prices continued to climb, however, averaging $ 507,492 in the Toronto region, 14.6 per cent higher than January 2017. The average selling price of a condo in the City of Toronto was more than $ 100,000 higher than in the 905 areas outside — $ 543,279 in the 416 area versus $ 421,927 in the 905.
The drop in the number of sales year over year is a wake-up call to Toronto City Council, said TREB president Tim Syrianos.
The city is considering a proposed $ 11 billion operating budget that includes $ 808 million in land transfer tax.
“The amount of revenue the city generates from this tax goes up and down with the real estate market,” he said, noting that city manager Peter Wallace has warned that the city is vulnerable to an over-reliance on land transfer revenue.
Toronto is the only Ontario municipality to charge its own land transfer fee on top of the provincial tax.
In its annual forecast last week, TREB predicted a flat first half to 2018 in contrast to the feverish real estate activity across the Toronto region in the first months of last year.
But the board expects sales and prices will climb again in the latter half of the year as the market shakes off the dampening effect of the Ontario Liberal government’s Fair Housing Plan of last April, including a foreign buyers tax, and it absorbs new policies such as the mortgage stress test rules that took effect Jan. 1, along with higher interest rates.
Given the extreme price growth of last year, it isn’t surprising that the correction that began last spring is still working through the system, said TREB director of market analysis Jason Mercer in a press release Tuesday.
“At this time last year, we were in the midst of a housing price spike driven by exceptionally low inventory in the marketplace,” he said.
“It is likely that market conditions will support a return to positive price growth for many home types in the second half of 2018.”
Sales and prices are forecast to be stronger in the second half of 2018, Mercer said.
Last month saw an influx of new listings on the board’s Multiple Listings Service (MLS) system. There were 8,585 homes listings, a 17.4 per cent increase over last year.
But that level is still the second lowest number of new listings for a January in the last decade, said TREB.
People who bought a year ago when prices were heading toward the April peak shouldn’t panic, said Christopher Alexander, executive vice-president and regional director of Re/MAX Integra.
“Everybody will agree the first quarter of 2017 was not normal. A fairer comparison would be to go back to 2016,” he said.
Last January, prices were up 22 per cent over the same period in 2016 and even then, they had risen 11.2 per cent over January 2015.
But with no red flags on the economic horizon, Alexander said he is urging buyers to be patient.
“Unless there’s an unforeseen event I don’t see the market continuing to go in a negative direction,” he said.
The rise and fall of Toronto area housing prices
Average home price in January 2017
Average home price in April when the market peaked
Average home price in December
Average home price in 2017
Source: Toronto Real Estate Board