GTA Housing Market Was “Canada’s Least Healthy”

Anyone shopping for or looking to sell a house knows that the Greater Toronto Area housing market is nothing if not exciting.

This past year, home prices rose astronomically before falling incrementally in the spring and summer months. The Bank of Canada also announced that it's about to raise interest rates. With housing affordability being top of mind for many, GTA homebuyers might be wondering what to expect from the market going forward.

According to recently released Royal LePage House Price Survey and Market Survey Forecast, the GTA market was characterized as "Canada's least healthy" in the first quarter.

That said, the second quarter wasn't quite so bad.

The survey points out that, overall, Canada’s residential real estate market posted strong home price gains in the second quarter of 2017, with the majority of metropolitan markets across Canada displaying "expansionary trends."

The GTA/905 market—which has witnessed phenomenal year-over-year price growth—has been experiencing much slower sales activity (so although bidding wars can happen, the days of houses selling for hundreds of thousands of dollars over-asking within a day or two appear to be ending). This slowdown has a lot to do with eroding affordability and government legislation (namely the 15 per cent tax on foreign buyers and speculators). Although this seems concerning, the survey points out that these changes are bringing balance to the country’s largest market and slowing home price appreciation within the region.

As far house prices across the country go, it's interesting to compare the numbers.

The Royal LePage National House Price Composite, compiled from proprietary property data in 53 of the nation’s largest real estate markets, showed that the price of a home in Canada increased 13.8 per cent year-over-year to $609,144 in the second quarter.

When broken down by housing type, the price of a two-storey home rose 14.6 per cent year-over-year to $725,391, while the price of a bungalow increased by 10.7 per cent to $511,965. During the same period, the price of a condominium climbed 13.4 per cent to $397,826. Looking ahead to the remainder of the year, Royal LePage forecasts that the national aggregate price of a home will increase by 9.5 per cent in 2017 to $617,773 when compared to year-end, 2016.

Following a period of unprecedented regional disparity in activity and price appreciation, we are now seeing a return to healthy growth in the majority of Canadian housing markets,” said Phil Soper, president and CEO, Royal LePage. “The white-hot markets are moderating to very warm; the depressed markets are beginning to grow again. Canadian housing is in great shape - a statement that I certainly did not make last quarter.”

Despite the lingering "unhealthiness," it does appear that buyers are experiencing some much-appreciated relief (small though it may be).

"In the quarter, sanity began to return to the GTA, where a slowing of both price appreciation and sales activity was evident," the survey reads.

The rate of national house price appreciation that we experienced in the second quarter continues to be above what we would consider a normal range, driven primarily by very strong year-over-year price growth across much of Ontario,” continued Soper. “Yet the GTA’s recent drop in sales activity may well signal calmer waters ahead for the province. The 20 to 30 per cent year-over-year increases in home values that characterized Toronto and its adjoining areas in recent months are not, in our view, sustainable or healthy. Now, as inventory inches higher and demand slows to a more orderly pace, some much needed balance has been returned to the market. For the first time in years, buyers are able to include reasonable conditions in their offers and multiple bid situations are somewhat less frequent.”

Although Canadians do carry a great deal of household debt, the future still looks bright for the country's economic future (hence the Bank of Canada's move to up interest rates to 0.75 per cent).

The survey says that within the last two years, Canadians spent more on mortgage principal payments than mortgage interest payments for the first time since Statistics Canada began compiling its data in 1990.

"While the ratio of debt to disposable income is relatively high, it dropped down in the first quarter of the year to 166.9 per cent, and Canadians’ interest-only debt service ratio was a record low 6.1 per cent. According to the Canada Mortgage and Housing Corporation, mortgage delinquency rates in the country’s hottest markets, Toronto (12 basis points) and Vancouver (15 basis points), were less than half of the national average (34 basis points).

And while houses prices are cooling month-over-month, they're still quite high. In Oakville alone two-storey houses increased in price from $942,711 to $1,164,386 (a 23.5 per cent increase).

As far as bungalows go, those increased from $756,622 to $919,134 (an increase of 21.5 per cent) Overall, home prices increased from $879,770 to $1,088,420 (a whopping 23.7 per cent increase).

In Milton, detached houses rose from $630,783 to $783,179 (24.2 per cent increase. For bungalows, prices increased from $594,743 to $683,810 (a 15 per cent increase). Condos increased from $341,855 to $369,874 (a slight 8.2 per cent climb). Overall , prices shot up from $612,886 to $755,116 (an increase of 23.2 per cent).

"Southern Ontario saw the highest home price gains in the country," the survey reads. "In the second quarter, the aggregate price of a home in the Greater Toronto Area rose 24.0 per cent to $837,232, while the price of a home in the City of Toronto jumped 22.8 per cent year-over-year to $843,590. In surrounding suburbs, year-over-year price gains also remained strongly visible within Vaughan, Oshawa, Richmond Hill, Markham, Mississauga and Oakville.

So while the market is still hot, it's showing signs of moderating. It'll be interesting to see how the new Ontario government rules and interest rate hike affect homebuyers going forward.

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