The classic Georgian home in Toronto’s posh Forest Hill neighborhood had all the hallmarks of a sought after property that might provoke a bidding war.
The marble foyer, grand living and dining rooms and french doors leading to a stately garden meant that the home fetched $3.5 million this week.
Yet that figure, while not an inconsiderable sum, even for one of the city’s finest neighborhoods, had property watchers wondering whether it is a sign of the declining fortunes of the market. After all, in 2007 it sold for $3.68 million.
“I think this is a reflection of the marketplace, prices have firmed up and are not going any higher. They have topped out,” said Kevin Loberg, a broker with Coldwell Banker Terrequity.
Earlier this year the home at 148 Forest Hill Rd. had been listed at $4,195,000. Even that had come down from the $4,675,000 being asked last year.
Two reports on Thursday provided further evidence that the market has been seriously ratcheting down.
Building permits in June saw a 15.3 per cent drop in June over May as developers cooled their heels on future projects.
And home sales in the Toronto market saw a 34 per cent drop in July compared to a year earlier.
This is the third consecutive month of falling sales, according to figures from the Toronto Real Estate Board.
In June, sales had dipped by 23 per cent. But this has been the steepest drop yet, with sales dipping to 6,564 in July, compared with 9,967 a year earlier.
“The level of July sales remained below the expected long term trend,” said TREB president Bill Johnston. “The market has become more balanced.”
The average price for July transactions was $420,482, representing a six per cent increase over last year. Average prices for the city of Toronto remained higher at $444,459. In the 905 region average prices were $404,935.
Loberg, who sells luxury homes in the central core, said his sales are actually up from last year as more move-up buyers enter the market.
“We are seeing fewer first-time buyers. You can spend a million dollars on a home downtown and it doesn’t buy you much nowadays,” said Loberg.
Sales of homes priced at a million and above were up by more than 30 per cent in the central core compared with last year. But sales have started to fade dramatically in neighborhoods with less blue-chip potential.
Developers, meanwhile, have also started to scale back their building plans.
Building permits in the Toronto area fell thanks to a drop in residential building intentions in both the single detached and high rise segments. Non-residential building such as commercial and industrial projects showed an increase, but not enough to offset the drop in residential permits.
“Looking forward we are likely to see further declines in residential permits in the summer months as housing is expected to take a big hit from the recent monetary tightening from the Bank of Canada, as well as significant dampening from the implementation of the HST,” said Brian Bethune, chief economist for IHS Global Insight.
John Turner, director of mortgages for the Bank of Montrea,l said buyers are more worried about their cash flow after the introduction of the provincial HST tax and higher interest rates.
“They’re more cautious when they purchase because they wonder what the changes mean to their lifestyle when you add it all up,” said Turner.
The Bank of Canada has already raised its key overnight rate by 50 basis points this year, and could add another 25 basis points in September.
Turner said this has some buyers turning to fixed five-year rates to lock in their mortgages. BMO reduced its five-year rate on Wednesday by 10 basis points to 3.89 per cent.
As for the Toronto market, total sales through the first seven months are still up by 12 per cent, thanks to record sales during the first half of the year. And prices are still up over last year.
One reason is that new listings were down by 11 per cent from last year, the lowest level for July since 2002. Lower listings meant more competition for existing homes, which kept prices from declining.
“Vendors now seem to be in a bit of a sit and wait mode because of the recent uncertainty in the economy,” said BMO’s Turner.