The housing market is on the path to recovery from the tumultuous policy and mortgage changes introduced last year, reports the Toronto Real Estate Board – so much so, that it’s already prompting concerns of overheating demand.
Overall, improvement has been recorded across the TREB region compared to August 2017; a total of 6,839 homes exchanged hands, an 8.5-per-cent increase, at an average price of $765,270, up 4.7 per cent year over year. The MLS Home Price Index, which tracks the overall value of the market, rose 1.5 per cent, reflecting a greater proportion of higher-priced detached home sales.
A total of 12,166 new MLS listings in Toronto were introduced in August – a decline of 12.2 per cent, which has squeezed the market, while still balanced, closer to sellers’ territory at a sales-to-new-listings ratio of 56 per cent.
However, conditions have remained relatively flat from July, with actual sales and the average price down 1.7 and 2.1 per cents, respectively.
Buyers are Returning to Market
TREB President Garry Bhaura says that stronger year-over-year activity indicates buyers and borrowers have adjusted to the tougher mortgage qualifications introduced in January, as well as the psychological effect of the Ontario Fair Housing Plan brought forth last April. Those who had paused their home searches are now confident enough to return to the market, he says.
“It is encouraging to see a continued resurgence in the demand for ownership housing, he states in TREB’s release. “Many home buyers who had initially moved to the sidelines due to the Ontario Fair Housing Plan and new mortgage lending guidelines have renewed their search for a home and are getting deals done much more so than last year.”
He adds that he anticipates real estate demand will only increase over the next year as home ownership remains a solid long-term investment, and the market is underpinned by strong economic factors.
Fears of Overheating Return
However, that sets the tone for a re-heating market – the very issue the policies introduced in the FHP and Guideline B-20 intended to cool, warns Jason Mercer, TREB’s director of market analysis.
“In August, the annual rate of sales growth outpaced the annual rate of new listings growth,” he states. “We have only slightly more than two-and-a-half months of inventory in the TREB market area as a whole and less than two months of inventory in the City of Toronto.
“The means that despite the fact that sales remain off the record highs from 2016 and 2017, many GTA neighbourhoods continue to suffer from a lack of inventory. This could present a problem if demand continues to accelerate over the next year, which is expected.”
By Home Type:
Detached
There has been a substantial year-over-year improvement in the demand for detached houses for sale, bouncing back from the steep double-digit decline experienced following the FHP. Sales are up 12.3 per cent with 619 homes exchanging hands in the City of Toronto (416), and up 19.2 per cent in the 905 region. As a whole, sales are up 17.7% at 3,001 throughout the total TREB market.
Prices for detached homes are up 4.9 per cent in the 416 and remain above the $1-million mark at an average of $1,244,275. Price growth, however, has been flat in the 905 at 0.3 per cent, to $907,780. The 905 region was hardest hit following last year’s policy changes, though sellers have been hesitant to discount their listings, leading to little change in home values. Overall, prices are up 1.2 per cent at $977,187 throughout the TREB region.
Semi-Detached
Attached homes saw slightly softer conditions with roughly half the improvement seen for detached homes in the 416; a total of 191 homes changed hands, a 6.1-per-cent increase. In the 905 region, sales fell -4.2 per cent to 386, and -1 per cent at 577 homes throughout the total TREB region.
Slower sales are reflected in tepid average price growth, down 0.5 per cent in the 415 to $891,208, up 5 per cent to $667,979 in the 905, and a total of 3.6 per cent to $741,873 as a whole. While semi-detached homes remain a more affordable option than their detached counterparts, they remain outside of the realm of affordability for many would-be move-up buyers, which may be contributing to higher demand for less expensive housing types.
Townhouses
Sales were down in the 416 by 4.7 per cent at 225 units, but saw strong growth throughout the 906, up 8.5 per cent to 918 units., and 5.6 per cent to 1,143 throughout TREB. They’ve also seen moderate price improvement – while flat in the City of Toronto at an average price of $683,160 (0.1 per cent), values rose 4.6 per cent in the 905 to $610,088, and up 3.2 per cent to $624,472 as a whole.
Condos
Multi-family housing continues to lead all home types in terms of price appreciation, though sales have fallen by 5.6 per cent to 1,388 units in the 416. They’re booming, though, throughout the 905, posting an 18.6-per-cent gain at 612 units sold. That evens out to flat activity throughout the TREB market, with 0.7-per-cent improvement to 2,000 units.
Slower sales in the City of Toronto could be attributed to increasingly more expensive units – as condos are traditionally an entry point to the market for first-time buyers in city centres, rising prices could be dissuading such buyers from getting into the ownership market at all, putting greater pressure on the Toronto rental market, which currently has a vacancy rate below 1 per cent, or driving buyers further into surrounding affordable markets throughout the GTA.
Prices are up 8.3 per cent to $585,355 in the 416, 5.9 per cent to $470,748 in the 905, and 6.4 per cent to $541,106 in total.
