Toronto Home Sales Surge Most in Eight Months With Prices Falling – Financial Post

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(Bloomberg) — Toronto’s housing market sprung to life in December with sales surging the most in eight months as lower prices and borrowing costs lured back buyers.

The number of homes changing hands in Canada’s largest city rose 21% to more than 6,000 transactions on a seasonally adjusted basis last month, the biggest monthly increase since April, according to data released Thursday by the Toronto Regional Real Estate Board. 

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But a buildup of inventory meant that prices fell for the fifth straight month. The benchmark price of a home in Toronto dropped 1.3% in December to C$1.09 million ($816,000) — ending the year almost unchanged from where it began. 

The unexpected boost in buyer activity during December comes as some financial pressures begin to ease. Long-term borrowing costs in the bond market have fallen and traders are expecting the Bank of Canada will begin cutting its policy interest rate this year. 

That stands to bring down rates on mortgages, helping more buyers afford homes. Royal Bank of Canada, the country’s largest lender, is again posting five-year, fixed-rate mortgages below 6%. 

And home prices in Toronto are now the lowest since March, when buyer activity last started to pick up.

“Buyers who were active in the market benefited from more choice throughout 2023,” said Jason Mercer, the Toronto real estate board’s chief market analyst. “This allowed many of these buyers to negotiate lower selling prices, alleviating some of the impact of higher borrowing costs.”

Toronto’s imposition of a higher land transfer tax on homes valued at more than C$3 million dollars may have also contributed to the surge in sales last month, as buyers may have sought to close deals before the higher rate went into effect Jan. 1.

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Still, the prevalence of higher interest rates throughout 2023 made it an unusually slow year for Toronto’s housing market. Just under 66,000 homes traded hands in 2023, the lowest annual total since 2000, according to real estate board data.

Last month’s continued downward pressure on house prices is also influenced by an earlier jump in listings. The number of homes on the market was nearly 20% higher in December than a year earlier, the data show. 

But there are signs that the wave of potential sellers is slowing down. In December, new listings fell from a year earlier.

(Updates with land transfer tax details in eighth paragraph and historical data in ninth paragraph.)

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