The 2019 housing market has kicked off with modest gains, though analysts from the Toronto Real Estate Board say the stage has been set for a strong spring market, as buyers returned with renewed ambitions, and braved stormy conditions to do so.
A total of 4,009 homes were sold in the Greater Toronto Area over the course of the month, a 0.6% increase from the same time in 2018, and up 3.4% from December levels.
The average GTA home price rose 1.7% year over year to $748,328, $777,614 within the City of Toronto, and $732,197 throughout the 905 region.
“It is encouraging to see the slight increase in January transactions on a year-over-year basis, even with the inclement weather experienced in the GTA region during the last week of the month,” stated TREB President Garry Bhaura. “The fact that the number of transactions edged upwards is in line with TREB’s forecast for higher sales in calendar 2019.”
Affordable Home Types Lead the Market
The MLS Home Price Index – the measure of the value of homes sold – rose 2.7%, with condos continuing to lead the market in terms of price growth in the GTA; while sales for multi-family homes fell 2.4% to 1,238 units, prices were up 7.9% to an average of $548,176. The increase was even more pronounced within the 416, up 8.8% to $591,444, and up 8.2% in the 905 to $456,857. The demand for more affordable housing was also evident in the townhouse segment, which saw sales up 2.5% in the GTA with 685 units sold, and the average price rising 4.6% to $641,028. Values also rose 12.3% to $797,528 in the 416, and 2.1% to $600,465 in the 905.
Detached houses for sale in Toronto saw the greatest increase in activity at 3.5% with 1,703 sold, though the average price softened by 2.8% in the GTA to an average of $941,488. That decline was even steeper in the 416 by -8.8%, though still over the million-mark at $1,174,134, and 905 house prices were relatively flat, up 0.9% to $883,027. Semi-detached home sales fell 5.3% while the average home price rose 3.6% to $742,738. Attached home prices saw the strongest growth in the 416, up 6.1% to $993,465, followed by 1.8% growth in the 905 to an average of $650,737.
Too-Few Listings Will Remain a Challenge
A shortage of MLS listings in Toronto will continue to challenge market affordability and will keep buying conditions tight throughout 2019 says Jason Mercer, TREB’s director of market analysis, which will continue to drive demand for the lowest-priced housing.
“Market conditions in January, as represented by the relationship between sales and listings, continued to support moderate year-over-year price increases, regardless of the price measure considered,” he stated. “Given housing affordability concerns in the GTA, especially as it relates to mortgage qualification standards, we have seen tighter market conditions and stronger price growth associated with higher density low rise home types and condominium apartments, which have lower average selling prices compared to single detached homes.”
How is 2019 Shaping Up for Home Buyers and Sellers?
TREB also released their fourth annual Market Year in Review and Outlook forecast for the 2019 market, along with survey findings conducted in partnership with Ipsos. The findings reveal that while this year’s activity isn’t on track to smash any records, sales and home values will see sustained improvement over the course of the year. Bhaura points out that demand is set to rise, with the survey results indicating the share of intending home buyers has increased from last year.
However, there continues to be a major negative impact from the mortgage stress test implemented in January 2018. While introduced by the national banking regulator to stem the growth of risky borrowing practices in Canada, it has come under scrutiny from mortgage and housing analysts for having too-aggressive criteria.
Says TREB CEO John DiMichele, “Even though we’re seeing positive government action on a number of key housing files, one area that needs to be revisited is the imposition of the OSFI-mandated two percentage point stress test.”
“While we saw buyers return to the market in the second half of 2018, we have to have an honest discussion on whether or not today’s home buyers are being stress tested against rates that are realistic. Home sales in the GTA, and Canada more broadly, play a huge role in economic growth, job creation and government revenues every year. Looking through this lens, policymakers need to be aware of unintended consequences the stress test could have on the housing market and broader economy.”
In fact, TREB’s findings reveal the average home buyer has had to qualify for monthly mortgage payments that are $700 higher than what they’d actually pay as a result of the stress test, which has further cramped purchasing power, and has redirected demand into the condo segment; the share of buyers intending to purchase a detached home is the lowest since 2015, according to the survey.
The outlook findings also include:
TREB calls for 83,000 sales in 2019, an increase from the 77,375 recorded in 2018.
Population growth, strong employment, and lower fixed mortgage rates will continue to drive demand in the Toronto real estate market.
Market conditions will continue to tighten as supply remains scarce, driving prices higher. The average GTA home price will hit $820,000 – which TREB points out is close to the 2017 peak – up from $787,195 in 2018.
New listings will be in line with usual 2018 levels, between 155,000 – 156,000, staying flat throughout 2019, as seller intentions remain low.
The rental market will remain very tight throughout the year with historically low vacancy rates and limited supply further exacerbated by rent controls; the survey finds two thirds of investor owners are thinking about selling one or more of their units in the next year, according to Ipsos.
Penelope Graham is the Managing Editor at Zoocasa, and has over a decade of experience covering real estate, mortgage, and personal finance topics. Her commentary on the housing market is frequently featured on both national and local media outlets including BNN Bloomberg, CBC, The Toronto Star, National Post, and The Huffington Post. When not keeping an eye on Toronto's hot housing market, she can be found brunching in one of the city's many vibrant neighbourhoods, travelling abroad, or in the dance studio.