The Toronto housing market is experiencing a rapid increase in the number of sales at the end of the summer. According to the figures from Greater Toronto Area REALTORS®, the TorontoMLS system recorded 7,569 residential transactions in August 2013, representing a 21 per cent increase compared with August 2012, when 6,249 homes changed hands.
Toronto downtown Gardiner Express traffic at noon by George Socka
We saw the strongest growth in Toronto’s detached houses sector, which went up by 24.2 per cent year over year, followed by condo apartments, which recorded an increase of 20.1 per cent compared to August 2012. The increasing numbers suggest that Toronto home sales are recovering from last year’s downturn caused by tight mortgage lending rules. Toronto Real Estate Board president Dianne Usher said,
"Sales were up strongly this August for all major home types compared to last year. Many households have accounted for the added costs brought on by stricter mortgage lending guidelines and have reactivated their search for a home. These households have found that a diversity of affordable ownership options exist through the GTA."
Toronto City Hall by Arturo Lee
The sales surge was also affected by a huge number of buyers with pre-approved fixed mortgage rates who entered the market because of increasing mortgage rates. The fact that the government of Canada bond yields grew strongly in the past few months forced banks to raise mortgage rates. These increasing rates are pushing people into the market, but according to Toronto-Dominion (TD) Bank chief economist Craig Alexander, rising rates will eventually slow the market and sales will remain flat for a long period, dragging price increases. He added,
"Flat is ultimately the best outcome we could have in the market. It’s not terrible for sellers, but it’s also good for buyers. And the fact that prices should rise more slowly than incomes should ultimately reduce some of the overvaluation that is present in some of the markets."
Condo Market Avoiding Crash
We can see that the confidence of Canadian homebuyers is growing even though there's a huge number of skeptics. Nevertheless, the Canadian real estate market is holding up far better than most economists and policy-makers expected. There were many warnings that the Toronto condo market is overpriced and overbuilt, and there's a very high chance of the condo bubble bursting.
Colourful viewpoint by MSVG
A report published by the Conference Board of Canada on August 28 suggested that there's no need to worry, as population growth and improving employment are helping to increase the demand for condos and decrease the probability of a condo sector burst. Robert Wiebe, senior economist at the Centre for Municipal Studies at The Conference Board of Canada, pointed out,
"As condo starts near past averages and inventories edge closer to demand, we are seeing the condo market stabilize both in terms of the price of existing units and the volume of new construction. Softer prices and positive economic factors continue to make condos and affordable way for Canadians to achieve home ownership."
Condos remain a popular choice in Canada, including Toronto, and condo prices are likely to stay relatively flat for the next few years.
Prices Continue to Rise
The average price of a home sold in Toronto in August 2013 was $503,094, which is almost 5.5 per cent more than the August 2012 average. The MLS® Home Price Index (HPI) composite benchmark, which adjusts for changes in the types of houses that are selling, went up by 3.7 per cent year over year. We saw the highest increase in prices in the semi-detached houses sector, with growth of 5.8 per cent, followed by detached houses, which climbed 4.9 per cent. Prices for townhouses and condo apartments rose by 4.5 and 3.7 per cent, respectively.
Oxford Street by Canuckistan
TREB expects house prices to maintain an increasing trend in the GTA as well, as it predicts further growth in sales despite rising mortgage costs and high household debt levels. Jason Mercer, TREB’s senior manager of market analysis, remarked,
"Despite an increase in borrowing costs during the spring and summer, an average priced home in the GTA has remained affordable for a household earning an average income. With this in mind, tight market conditions are expected to promote continued price growth through the remainder of 2013."
Nevertheless, we should consider that August’s year-over-year figures are so high because of last summer’s plunge, after Finance Minister Jim Flaherty introduced stricter mortgage lending rules. Moreover, this year’s peak spring market was a bit weaker because of bad weather, pushing sales into late summer.