Once again, Toronto’s real estate market may be cooling down.
After initial reports that Toronto might soon be a buyer’s market, economists continue weighing in on the subject, saying that the housing market appears on the verge of a downturn.
This, according to Capital Economics’ David Madani’s recent report.
Madani says that Toronto’s housing market has gone from bad to worse, and forecasts a correction in housing prices soon.
Despite The Bank of Canada’s semi-annual Financial System Review warning of strong housing demands, limited supply, and rising prices in Toronto, Madani said that the Bank neglected to include the latest housing data.
“Toronto’s home sales fell sharply last month and new listings rose even higher. In contrast to the Bank’s assessment, we think that a significant housing correction is now a high probability event,” said Madani.
In the report, Madani states that the latest incoming data over the past several weeks provides further evidence that the housing market is on the verge of a potentially severe downturn.
With newly established provincial legislations regarding rent control and the new 15% foreign buyer tax, Madani predicts these have “spooked” prospective buyers, since sales dropped in the last month.
“Toronto’s housing market is poised for a correction in house prices,” wrote Madani. “The slump in the home sales-to-new listings ratio suggests that house prices could decline outright before year end.”
But it’s not all good news.
While the housing market is heading on the brink of a downturn, Madani says this is a bad sign for GDP growth prospects, and estimates housing growth could be as weak as 1% annualized.
“But even if growth turns out somewhat better than this, the economic outlook for this year and next appears to be worsening,” he said.