Photo: James Bombales

GTA home sales continued to fall on a year-over-year basis last month, confirming many industry watchers’ prediction that the housing market is still adjusting to new policies which came into effect in January.

And it’s unlikely that the market will warm up in the near future, according to a recent note from BMO senior economist Robert Kavcic.

“Toronto is still very soggy, but stabilizing,” he writes. “Total sales were down 23 per cent year-over-year in May, improved from a 33 per cent year-over-year drop in the prior month.”

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Kavcic does note that home sales began plunging in May 2017, after the introduction of the province’s Fair Housing Plan, so year-over-year improvements will soon be “inevitable.”

Sales were also up 1.6 per cent on a seasonally adjusted month-over-month basis in May, the first gain this year.

“Hey, it’s progress,” writes Kavcic. “Still, the market balance continues to look soggy, with the sales-to-new listings ratio unchanged well below the 10-year average, and not up much from last year’s lows.”

The balanced market is keeping prices down, particularly in the single-detached segment, where the MLS benchmark price continues to decelerate.

“The broad story on the housing front is consistent with recent data on credit growth and household debt, as one would expect,” writes Kavcic. “That is, recent policy measures and rate hikes have put a lid on activity and price gains.”

But other industry experts, including TD economist Rishi Sondhi, are hopeful that things will start to warm up slightly in the second half of 2018.

“Typically, impacts on demand from policy changes tend to be rapid, but also transitory,” writes Sondhi, in a recent note. “History appears to be repeating itself with the May figures pointing to stabilization…Going forward, we expect activity to find support and begin to recover very gradually in the second half of the year.”

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