Toronto’s housing market continues to rebound from a series of new housing measures that led to a steep price correction last year.
The latest data from the Toronto Real Estate Board (TREB) shows that both sales and prices increased in August. There were 6,839 homes sold in the Greater Toronto Area last month, an 8.5% increase from August 2017. Meanwhile, the average selling price rose to $765,270, which represents a 4.7% increase from last year.
But the average home in Toronto is still selling for way less than it did last year. Last April, when house prices hit a peak in the city, the average selling price for all home types was $918,184. More than a year later, prices remain 16.66% down.
Regardless of that unnerving number, TREB says that recent numbers have been trending in an encouraging direction.
“The comparison of this year’s sales and price figures to last year’s record peak masks the fact that market conditions should support moderate increases in home prices as we move through the second half of the year, particularly for condominium apartments and higher density low-rise
home types,” said Jason Mercer, TREB’s Director of Market Analysis.
“Once we are past the current policy-based volatility, home owners should expect to see the resumption of a moderate and sustained pace of price growth in line with a strong local economy and steady population growth," he added.
“Policy volatility” refers to the B-20 rules from the Office of the Superintendent of Financial Institutions (OSFI), which were introduced on Jan. 1. The rules require all homebuyers to undergo a stress test to ensure that they can afford their mortgage if interest rates increase.
The B-20 rules followed on the heels of Ontario’s Fair Housing Plan, which was announced last April and is responsible for the large decline in prices seen in the summer of 2017. It included a tax on foreign buyers and new rent controls.
Prices for single-detached homes took the biggest hit after the rules were announced, declining more than 20% in the aftermath. They have yet to recover the peak prices seen last year.
The average price for a detached home in Toronto was $1.244 million in August, which is a 4.9% increase from last year. However, the year-over-year increase masks the fact that prices have begun declining again: in April, the price for a house was $1.354 million, which means prices have declined $110,000 in the past four months. The situation is little better in the 905 region, which includes cities such as Mississauga and Brampton, where prices are up only 0.3% year-over-year. The average house there sold for $907,780 in August, compared to an average of $929,092 in April — a 2.3% decline.
Condos, on the other hand, have helped prop up prices in the market. In Toronto, the price of a condo increased to an average of $585,355 — up 8.3% when compared to August 2017.
Prices in the 905 rose 5.9%, bringing the average to $440,748.
Experts have noted the B-20 rules, which significantly reduced purchasing power for prospective homeowners, is likely pushing many people who want a detached house into the condo market instead.
It’s clear that housing prices right now are being propped up by the condo market, where supply is tight at a time of increased demand. Whether that will eventually end and result in housing prices falling even farther remains to be seen.
While there are plenty of housing bears calling for a crash in the Toronto market, those calls have been made for the better part of a decade.