After an overheated performance for much of 2016 and 2017 which saw most homes selling at sky high prices, often well over list, and with multiple offers, the Greater Toronto Area real estate market is returning to balance as the summer closes.
Don’t believe what’s in the newspapers and media reports that Toronto’s real estate market is reaching a point where the bubble is going to burst. It’s not supported by the facts.
The Toronto Real Estate Board reports in its latest figures, for the month of August, that sales of all homes recorded on MLS across the GTA were 6,357, down 34.8% year on year and that the average price only increased 3.0% to $732,292.
However, averages don’t tell the whole story, and there are pockets of real strength, particularly condominiums, where although sales were down 28.0% (mostly due to lack of supply), prices averaged 21.4% higher across the Greater Toronto Area.
Economic indicators are also pointing to fundamental strength, with real growth in the economy up 4.5% in the second quarter of 2017 and employment growth in the Greater Toronto Area of 1.3% during the month of July. The impact of the recent (generally expected) Bank of Canada interest rate increases have yet to play out, but it's possible that they will not have a significant lasting impact on buyer sentiment, as the extreme “heat” that was being felt in the market has cooled somewhat as it returns to a more healthy balance of supply and demand.
Also, prior to the introduction of the Ontario Government’s Foreign Buyers tax last April, housing inventories in the Greater Toronto Area were running at some of their lowest levels in history, at or below 1 month’s supply, and this was reflected in the lofty month on month price increases experienced in what was truly a “sellers” market.
With the introduction of the new tax measures in April, active listings have begun to rise while sales have tapered off. As a result, supply of homes has increased to a more healthy balance of 2.6 month’s supply in August, although down slightly from 3.1 month’s supply in July.
Typically though, during the summer months many sellers as well as purchasers are on the sidelines and activity wanes, while people are on vacation and out enjoying the good weather. With summer drawing to a close, there is some optimism building, now the Greater Toronto Area real estate market has returned to a more healthy balance, that activity will pick up once again in the Autumn months.
When compared with other major Canadian cities, the Greater Toronto Area still has the lowest monthly inventory of homes, well below Montreal (7.8 months), Edmonton (5.5 months) and Calgary (4.1 months), and slightly lower than Vancouver (2.9 months), meaning the Greater Toronto Area is still the strongest housing market in Canada.
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