Temperatures weren’t the only thing that spiked in July: the latest market data from the Toronto Real Estate Board (TREB) revealed that Toronto home sales also soared last month, while home prices saw a healthy increase.
TREB’s MLS System registered 8,595 sales last month in the Greater Toronto Area (GTA), a year-over-year increase of 24.3%. When viewed from a month-over-month lens, sales were up by 5.1% “after preliminary seasonal adjustment,” TREB said in a release on Tuesday.
Meanwhile, the average selling price for properties in the GTA grew by 3.2% year-over-year, to $806,755.
“While the OSFI mortgage stress test has clearly had an impact on the number of home sales over the last year-and-a-half, for most GTA residents the goal of home ownership has not diminished,” said TREB CEO John DiMichele in a press release.
The stress test, which came into effect on Jan 1., 2018, requires homebuyers to prove they can handle a mortgage at either the Bank of Canada’s five-year posted rate or two percentage points higher than the interest rate their mortgage lender is offering them — whichever happens to be higher. In June, the Bank of Canada dropped the qualifying rate from 5.34% to 5.19%.
Fully detached home sales, TREB said, have been more affected by the stress test than semi-detached ones have. The average price of a fully detached home in the City of Toronto fell 9.1%, to $1.23 million during the month of July, on a year-over-year basis. But the average price of a semi-detached home rose by 5%, to $981,802.
“Broadly speaking, increased competition between buyers for available properties has resulted in relatively strong price growth above the rate of inflation for semi-detached houses, townhouses and condominium apartments,” said Jason Mercer, the real estate board's chief market analyst, in TREB’s release.
And competition is still growing. The number of households in the GTA has been increasing by 40,000 to 50,000 every year, according to TREB, and this just puts more pressure on the city’s already-tight housing supply. This could continue even after homebuyers have adjusted more to the stress test.
“As more and more households come to terms with the stress test and move back into the market in the coming months and years, they could suffer from a chronically under-supplied marketplace and an acceleration of home price growth to unsustainable levels,” said DiMichele.
“Fortunately, policy makers have acknowledged the housing supply issue and are working toward solutions.”
TREB called attention to Toronto Mayor John Tory’s instruction to City staff to “report back on how to develop a greater diversity of housing options in traditional single-family neighbourhoods, including timelines.” The board also noted the provincial government’s More Homes, More Choice Plan, which is aimed at developing different housing types.
“. . . it has certainly been encouraging to see both the City of Toronto and the Ontario Government working on solutions to bring more supply on-line,” said TREB President Michael Collins.