The real estate boards of both Vancouver and Toronto released their home sales data this week, and they look like a repeat of August: Vancouver home sales are still plunging, and Toronto home sales are still rising.

Toronto Real Estate Board (TREB) reported 9,902 sales in September 2016, which is up by 21.5 per cent compared to September 2015. In the Greater Toronto Area (GTA), the average home price rose 20.4 per cent from September last year to $755,755 and the number of transactions in the GTA also rose 21.5 per cent. Although there was a lack of supply in Toronto itself, TREB said the GTA saw strong growth in sales transactions for all major home types.

“The Toronto Real Estate Board will be closely monitoring how the recent changes to federal mortgage lending guidelines and capital gains tax exemption rules impact the housing market in the Greater Toronto Area,” Jason Mercer, the board's director of market analysis, said in a statement Wednesday.

In Vancouver, however, September home sales dropped 32.6 per cent compared to September 2015, which follows a 26 per cent year-over-year decline in August and a dip of about 19 per cent the previous month. Home prices continued to rise, although experts are uncertain as to whether or not that will continue.

“This looks like the top of the hump,” said Tom Davidoff, an economist at the University of British Columbia's Sauder School of Business. “Typically, before prices fall transaction volumes fall. It looks like that's the direction in which we're heading.”

Davidoff predicts housing prices will sink at least 10 per cent over the coming year. He attributed the drop in large part to the provincial government’s 15 per cent tax on foreign buyers that came into effect in August, and said that decreasing demand from foreign buyers will also give locals less of an incentive to buy.

"The only reason you’d [buy] is because you expect prices to grow. Well, if you think the foreign buyer’s gone, that’s off the table. So where's the demand now?” Davidoff asked.

There were 2,253 homes sold last month recorded by the Greater Vancouver Real Estate Board, a steep dip from the 3,345 home sales recorded in September 2015. This decline in sales was the largest among detached homes, where sales declined 47.6 per cent when compared to the same period last year. Sales of attached homes decreased 32.2 per cent, while condo sales slipped 20.3 per cent.

September was the second month the 15 per cent tax applied to non-residents purchasing property in the city, but Marc Pinsonneault, a senior economist at the National Bank of Canada, said the impact of the 15 per cent tax is overstated. He pointed out that when seasonally adjusted, home sales have been dropping every month since February, months before the tax was introduced.

“How can you say that there’s a large portion of that decline over a year ago that comes from the tax?” Pinsonneault said.

Regardless of the reason, he agrees with Davidoff that home prices in Vancouver will decline 10 per cent over the coming year, adding that the price decline will be most pronounced at the top end of the market and less so with condominiums and townhouses.

Andrey Pavlov, a business professor at Simon Fraser University in Vancouver, said the most interesting element of the Greater Vancouver Real Estate Board’s report was that the number of sales dropped at the same time as the number of listings rose.

“This is the first time this has happened,” he said. “If this trend holds up we’re going to have increasing listings, decreasing sales and prices are going to start adjusting.”

In addition to B.C.’s foreign-buyers tax, Pavlov said the real estate market is being influenced by Vancouver’s proposed vacancy tax, as well as measures announced Monday by the federal government that will tighten up mortgage qualification rules as well as close tax loopholes for foreign buyers.

“When you have that kind of situation people say, ‘Well, clearly the government is putting a cap on real estate and I’d be better off to wait a little and see how this thing resolves,” he said.

There’s also been anecdotal evidence that some foreign buyers have shifted their focus from Vancouver to other cities, including Toronto.

The average sale price for detached houses in Toronto proper rose to $1.29 million, up 23 per cent from a year earlier. The comparable price for detached houses in surrounding areas was $928,414, up 26.6 per cent. The real estate board’s benchmark price index was up 18 per cent from September 2015, after adjusting to various types of housing. Condo prices in Toronto grew 6.5 per cent to $446,729, while condo prices in other parts of the GTA were up 19.4 per cent to $367,260.

“While these changes are pointed at the demand for ownership housing, it is important to note that much of the upward pressure on home prices in the GTA has been based on the declining inventory of homes available for sale,” Mercer said.

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