Toronto real estate prices have continued their rapid upward price trajectory – and the federal government is officially concerned.
The Toronto Real Estate Board’s March report finds home prices have accelerated by a whopping 33.2% year over year in the GTA, now fetching an average of $916,567 in the 416 and 905 combined.
The revelation has prompted federal finance minister Bill Morneau to reach out to both Toronto mayor John Tory and provincial finance minister Charles Sousa to brainstorm ways to improve affordability for home buyers in the region.
In two separate letters to Tory and Sousa, Morneau writes he’d like to “consider how we can collectively make progress to ensure that housing in the GTA is both affordable and accessible for the long term.”
“I believe we must take a closer look at these evolving market conditions and take stock of (the) implications for our largest urban area,” he states.
He also cited concerns that record low interest rates have encouraged households to take on large amounts of debt to afford homeownership, which leaves them vulnerable in the event of an economic downturn, referring to the red warnings issued by the Canada Mortgage and Housing Corporation this January and October of last year.
Growing Concern for Toronto’s Real Estate Market
His calls for collaboration follow intense scrutiny of affordability in the GTA; last week, Tory engaged in a housing roundtable with experts – including Ontario Real Estate Board CEO Tim Hudak – and announced an empty homes tax may be up for consideration.
Sousa has also been a key part of the conversation, first appealing to Morneau to take action against speculators in the federal budget, and then announcing the province has measures of its own to come in the spring budget.
Related Read: Sousa Urges Feds to Hike Capital Gains Tax on Home Sales
However, TREB President Larry Cerqua warns that government intervention, while well-intentioned, could further exacerbate supply and demand imbalances. “… Policymakers must remember that it is the interplay between the demand for and supply of listings that influences price growth,” he said.
Suburb Surge Continues
TREB’s numbers reflect a market straining at the edges as rampant sales and price growth continued in Toronto’s surrounding 905 regions. It’s clear buyers are still flocking to the ‘burbs for their greater supply of detached houses; 4,672 were sold in the region, compared to just 1,215 in the 416, at an average of $1,124,088. In fact, more higher-priced homes exchanging hands pushed the average overall home price in the 905 higher than in the city proper, at $925,888 and $899,452, respectively.
Within city limits, condo sales remained king, with 2,324 units sold at an average price of $550,299.
Spring Listings No Match for Sales Demand
While the market did enjoy a surge of listings in March – typical of the seasonal spring market uptick – sales still outpaced new inventory, leading to even tighter market conditions. “Annual rates of price growth continued to accelerate in March as growth in sales outstripped growth in listings,” stated Jason Mercer, TREB’s director of market analysis.
“A substantial period of months in which listings growth is greater than sales growth will be required to bring the GTA housing market back into balance. As policymakers seek to achieve this balance, it is important that an evidence-based approach is followed.”