Are you planning to sell your apartment in Toronto, Canada fast? Toronto has been marked by runaway increases in property prices in recent years. But it does seem that the housing bubble in the city is on the verge of bursting.
There has been a sharp reversal of home prices in Toronto, which has thrown the housing market here into a chaotic situation. There are now a number of investors who want to buy a house in Toronto, Canada online at the new prices, not at the old ones.
The issue is that paying over the top for a property for sale in Toronto, Canada looked reasonable a few months back, but not anymore. Lenders have been tightening credit to a great extent and property appraisers have been lowering their valuations.
Tim Syrianos, president of the Toronto Real Estate Board, explains that that the current decline in buying and selling activity does not have much to do with foreign buyers but more with homebuyers waiting to find out how the market plays out.
“Clearly, the year-over-year decline we experienced in July had more to do with psychology, with would-be home buyers on the sidelines waiting to see how market conditions evolve,” Mr. Syrianos said.
BMO chief economist Douglas Porter added, “Toronto’s market will likely follow the Vancouver playbook: a sharp drop in sales and big upward spike in listings, with a moderate cool-down in prices followed by more subdued appreciation compared with the pre-tax mania.”
Fact is home prices in Toronto have been down by 19 percent since April this year. Resales have been down by 40 percent, according to the Toronto Real Estate Board.
Property appraisers say that they find themselves having to break the bad news to buyers time and time again, about how the property they paid said much for is worth so much less now. Buyers feel trapped as they invested when the market was on a high. Lenders too are getting more conservative.
Parroting a famous quote from Monty Python, Mr. Porter said about the housing bubble in Toronto, “It has ceased. It has expired and gone to meet its maker. This is a late bubble. Bereft of life, it rests in peace.”
Robert Hogue, senior economist at RBC Capital Markets added, “Housing market developments in July are consistent with our view that Canada’s market is in the process of moderating to a more sustainable level of activity.”
“Much of the ongoing cooling is taking place in Ontario where recent policy changes by the provincial government have contributed to a welcome shift in market psychology toward more caution. We expect any further increase to be modest in the short term as the market stays close to balanced conditions,” Mr. Hogue said.
A lot of sellers are now desperate to close deals before the property prices drop any further. Buyers are waiting it out, waiting for the prices to fall further. This has created a chicken and egg scenario, with each side waiting for the other to make the first move.