Toronto’s housing market has been showing some alarming behaviour of late, as figures from the Toronto Real Estate Board reveal that the average cost of a home in the area fell $173,000 between April and July.
However, although this 18.8% fall might be causing panic and confusion for some, the descent in house prices isn’t actually as surprising as it might first appear.
The annual comparison
Whilst an average price drop from $919,499 to $746,216 seems scary, it must be noted that Toronto’s house prices rose at an equally alarming rate previous to this, and as a result house prices are still up 5% from July last year even with this new figure.
Supply and demand
With a significant amount of uncertainty about how long this 23% rise in house prices would last, listings surged in the previous month by 65.3%.
However, whilst supply has increased, demand has dropped, as the Ontario government implemented measures to prevent a continual rapid house price rise in Toronto, including a 15% tax on foreign buyers.
These things combined explain why there has been a 41.7% drop in housing sales in the Toronto Area in July, and with this the return of house prices to a more normal level.