TORONTO -- Home sales in the Greater Toronto Area plunged 20.3 per cent last month compared with a year ago, according to the latest data from the country's largest real estate board, a sign that recent efforts to cool the searing market are having the desired effect.
However, some economists and realtors say the impact of the measures, which include a 15 per cent tax on foreign buyers in the rapidly growing Greater Golden Horseshoe region, could be short-lived.
"Certainly there are a lot of people sitting back right now wondering what's happening with the new housing plan and kind of taking a breather just to see how it affects the market," said Brian Elder, a sales representative with Royal LePage Real Estate Services.
"It definitely will pick up again. But to the degree it was before? I don't know. I suspect it won't get quite that heated."
The average selling price for all properties in May was $863,910, up from $752,100 the same month last year, the Toronto Real Estate Board said. But that was down from $919,614 in April, the first month-over-month drop this year.
The move came as listings rose 42.9 per cent from a year ago, when they were at a record low, according to the real estate board.
The number of detached homes sold fell by 26.3 per cent in the GTA year-over year as their average selling price rose 15.6 per cent to $1,141,041.
The data captures the first full month following Ontario's announcement of 16 measures aimed at reining in house prices, including the tax on foreign buyers, expanded rent controls and legislation that would allow Toronto and other cities to tax vacant homes.
The real estate board said Monday that the effects of Ontario's housing changes, which were retroactive to April 21, have yet to be seen, but analysts said the data suggests otherwise.
"There's little doubt the government measures to cool the housing market have had an impact, as foreign buyers have likely pulled back, while domestic buyers appear to have stepped back as well to see how the changes shake out," BMO Capital Markets said in a note to clients.
Benjamin Tal of CIBC Capital Markets said while the "trajectory is exactly what the region needs," the trend could be short-lived.
"In many ways the situation in Toronto today is similar to what we have seen in Vancouver in 2016 as the market started slowing after a strong 2015 performance, and the uncertainty related to the foreign buyers tax worked to accelerate the process," Tal said in a note.
There are signs that the Vancouver market is rebounding after a period of cooling following the introduction of a 15 per cent tax on foreign buyers last August.
Real estate transactions in Vancouver jumped 22.8 per cent in May compared with April, according to the city's real estate board.
Toronto and Vancouver are both being closely monitored in light of fears that the fallout from a possible crash in prices could have ramifications for the national economy.
Christopher Alexander, regional director at ReMax Ontario-Atlantic Canada, said it will likely take until mid-July for the full effects of the Ontario government policies to be felt.
In the meantime, many buyers are moving to the sidelines, Alexander said.
"There is definitely a sense of buyers saying, 'OK, I'm going to wait and see how this plays out,"' Alexander said.
Realtors said the increase in listings has created more choice for buyers and resulted in fewer bidding wars compared with the first quarter of the year.
"I think it's a great opportunity right now for buyers that have been waiting in the wings," Elder said.