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Average prices have now declined just over 12 per cent from the peak but Craig Alexander, chief economist of the Conference Board of Canada, said it might not be the measures themselves that have cooled the market as much as the perception of their impact.

“I don’t think that many buyers have been pushed out of the market,” said the economist. “One of the biggest effects of tighter government regulations is that it creates a psychological response by potential sellers and potential buyers. It ends up like a wait and see approach. If everybody waits and sees what happens, you get a significant pullback.”

Economists and realtors have reported a similar response in the Greater Vancouver market last year when the provincial government there brought in a 15 per cent tax on foreign buyers. Sales were in decline before the changes but picked up speed, although prices did not drop as dramatically as what is happening in the GTA right now.

Vancouver’s tax was effective August 2016 and reports now indicate the market is starting to recover to a degree. The British Columbia Real Estate Association said this week it expects prices to decline 3.6 per cent this year in Greater Vancouver, but rise by 4.2 per cent in 2018.

Alexander said the GTA might follow a similar path in terms of recovery. “You can’t say (the decline in sales) is warranted by applying a tax on non-residents,” he said. “The government hit the pause button on real estate. Changes to regulations, generally speaking, have an impact for about six months and after that the market seems to figure out like a new normal and gets back to traditional prior behaviour.”