Toronto housing market slowing

As most people expected, the housing market in Toronto has slowed down by 29% compared to the same time last year. This was inevitable since Canada, which saw a similar drop nationally, did not have the same tumble that the U.S. housing market had at the beginning of the recession. In addition, the new HST tax that Ontarians have been forced to pay has contributed to the slow down.

Experts say that many people are trying to sell their home for the same prices as they could have before this new tax came in to effect on July 1, 2010. However, the market is not willing to pay as much as before because of the tax and because they feel that prices are set to drop very soon. This may very well be true. If that does happen then it doesn’t mean we will see the same death drop that the U.S. economy saw in 2008. Gradual rises over years with occasional drops are normal and have some positives in them. They allow some people to enter the housing market that have been on the sidelines before because the prices were too high for them. It can also force people to think a little more realistically about their finances which can put them in better economic shape afterwards.

The timing of this drop is not great because the world is currently worried about a potential “double dip” recession, which may or may not happen. When the HST tax in Ontario (and British Columbia) was announced, most people knew that the timing would be┬ábad. Although, there really isn’t ever a good time for a tax increase and especially not for a dumb one like this HST. Regardless, the housing market in Toronto and the rest of Canada does indeed look like it might drop a little.

As long as the drop in home prices does not spread to drops in other sectors of the economy, then this will be better for the country moving forward or at least not very harmful. However, because people are already on edge about the general economy, bad news like home prices dropping in Toronto can trigger drops in other, unrelated economic indicators like consumer confidence and others. The result can be a recession for Canada. I don’t believe that this alone can cause a recession in Canada because this is a country that relies heavily on exports and external news, but these are not normal times yet so not everything works out as it usually does these days.