Toronto home sales tank 40 per cent, prices down nearly $175,000 since April

Home sales in the Greater Toronto Area tanked last month and prices continued to recede, the city's real estate board said Thursday, further evidence that provincial measures aimed at cooling one of the hottest housing markets in North America may be working.

The number of transactions fell 40.4 per cent in July compared to the same month last year, driven by fewer sales of detached homes in Toronto and its surrounding areas.

The average selling price of all homes in the Greater Toronto Area was $746,218, up five per cent from a year ago.

However, it's the third consecutive monthly decline and the average price down nearly $175,000 since April, when the Ontario government introduced more than a dozen changes — including a 15 per cent tax on foreign buyers — in an effort to stabilize prices that were spiralling out of reach for many homebuyers.

Tim Syrianos, president of the Toronto Real Estate Board, said the decline in activity has less to do with foreign buyers and more to do with potential homebuyers waiting to see 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," Syrianos said in a statement.

While the number of listings were up 5.1 per cent from a year ago, the board said housing supply remains an issue.

"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," said BMO chief economist Douglas Porter in an analyst note.

A year ago, a similar tax was levied against foreign buyers in Vancouver, after which there was a precipitous decline in the number of homes sold.