Recovery Underway in the Greater Toronto Area Real Estate Market
October 12, 2017
TORONTO, October 12, 2017 – The Royal LePage House Price Survey released today showed double-digit growth in year-over-year home prices across the Greater Toronto Area (GTA) in the third quarter of 2017, due in part to the strong gains witnessed within the region at the beginning of the year. While appreciation slowed within the GTA on a quarter-over-quarter basis to 1.5 per cent, market characteristics favouring the seller began to trend upward towards the end of the three-month period, as sales activity, a leading indicator of price trajectory, strengthened across many housing segments. In the third quarter of 2017, the aggregate price of a home in the region surged 21.7 per cent year-over-year to $860,295.
When broken out by housing type, home prices across all segments saw strong year-over-year gains. In the third quarter of 2017, the median price of a standard two-storey home in the GTA climbed 22.5 per cent to $1,014,131, while the median price of a bungalow increased 17.0 per cent to $835,157. During the same period, the median price of a condominium within the region also saw a significant price increase, rising 22.0 per cent to $471,932.
Within the quarter, real estate in the Greater Toronto Area began to show signs of a recovery, transitioning to a more balanced market as price movement and consumer confidence stabilized. The market-cooling effects stemming from the introduction of the Ontario Fair Housing Plan have begun to wear off, leading to a burst of demand being witnessed as many prospective homebuyers re-entered the market with the expectation that home values will only increase from here on out. This trend has placed a slight strain on healthier-than-normal inventory levels, especially as sellers continue to take their homes off of the market upon realizing that they can no longer capitalize on overheated conditions.
“The recovery is on in the Greater Toronto Area, with the housing market turning the corner in the latter half of the third quarter,” said Kevin Somers, chief operating officer, Royal LePage Real Estate Services Limited. “Though it is true that appreciation may continue to stagnate at the higher-end of the market due to affordability issues, strengthening consumer confidence has once again rekindled demand across the Greater Toronto Area, leading to the end of a very short-lived and measured softening within the region.”
Aggregate prices are calculated using a weighted average of the median values of all housing types collected. Data is provided by RPS Real Property Solutions.
During the quarter, prices remained resilient in the entry-level segment of the Greater Toronto Area real estate market, as many purchasers and prospective first-time homeowners competed for properties. Condominiums, and the majority of properties properly priced under $500,000, continued to witness multiple offers due to their relative affordability, especially as the new mortgage regulations introduced in October of last year further limited consumers’ purchasing power. With the threat of an increased interest rate environment looming, many prospective homeowners have sought out 90-day pre-approved mortgage rates, which will continue to spur activity and cause much of the inventory in the lower-priced housing segment to be absorbed.
“While home price appreciation across the GTA has sputtered somewhat since April, lower- priced homes, and in particular, condominiums have remained extremely attractive to purchasers due to their relative affordability,” added Somers. “As detached property prices remain out of reach for many purchasers, especially when nearing the city core, many homebuyers continue to readjust their expectations and look upwards or outwards to condominiums or suburban markets that offer attractive properties for an affordable price point.”
Greater Toronto Area Market Summaries
The median price of a home in the City of Toronto rose by 21.8 per cent year-over-year to $861,397 in the third quarter of 2017, as many continued to flock to the world-class city for its associated lifestyle. During the quarter, a lack of inventory and a resurgence of activity brought on by prospective homeowners coming back into the market caused price appreciation to trend upwards and sales activity to find its floor.
Inventory began to build in Scarborough, as many potential homebuyers elected to continue to sit on the sidelines in the hopes that home values begin to decline. With an increase in available inventory, prospective homeowners had more selection to choose from, giving them ample time to mull over a potential purchase. However, when compared to the third quarter of last year, price appreciation was strong, with the median home value in the region rising 15.6 per cent to $679,363, as many sellers continued to attempt to capitalize on the strong appreciation that occurred at the beginning of the year in order to move further east to cities like Peterborough, Belleville and Kingston where property is more affordable.
Price appreciation in York Region’s condominium market continued to shine during the third quarter of 2017, as many purchasers within the area looked to the lower-end of the market for its relative affordability. Meanwhile, home values in the detached market continued to soften slightly during the quarter, with high inventory levels causing the segment to transition to a market that favours buyers. In the third quarter, the median price of a home in Richmond Hill and Vaughan grew by 17.5 per cent and 26.5 per cent year-over-year to $1,288,411 and $1,099,899, respectively.
Markham continued to experience a lull in sales activity, as the region’s high priced real estate kept many purchasers at bay. While prices fell slightly on a quarter-over-quarter basis, largegains witnessed during the spring caused the region’s aggregate home price to surge when compared to the same time last year, rising 22.2 per cent to $1,108,943.
The residential real estate market in Brampton seemingly rebounded from its bottom in the latter half of the third quarter of 2017, with increased levels of demand stemming from new local job opportunities driving many to the area and helping to put a dent into the region’s surplus of inventory. While the region’s real estate market favoured purchasers at the beginning of the quarter, the area transitioned to a more balanced market towards the end of the three-month period, with the aggregate home price rising 25.1 per cent year-over-year to $731,544.
In the third quarter of 2017, artificially high inventory levels gave purchasers in Mississauga and Oakville the illusion of choice, as sellers tested the waters in the hopes of receiving a spectacular offer. Though both regions have transitioned to a buyer’s market, sellers aren’t giving in as easily to current conditions. Many choosing to put their homes up for sale are now either electing to relist their properties or take their homes off of the market entirely upon receiving offers that accurately reflect current values, but do not match the high-priced environment experienced at the beginning of this year. During the quarter the aggregate price of a home in Mississauga and Oakville increased by 20.9 per cent and 21.9 per cent year-over-year to $758,750 and $1,145,644, respectively.
The aggregate price of a home in Milton climbed 26.0 per cent this year over last to $788,634. Rising home values and the new mortgage regulations have driven many potential purchasers into the lower-end of the market, placing significant strain on this segment’s inventory levels and causing many to compete for condominiums and bungalows.
Sales activity in the Durham Region began to pick up in the third quarter of 2017, as buyers shook off the effects of the new mortgage regulations by adjusting their expectations and looking to the entry-level market. Now, anything on the more affordable end of the spectrum is experiencing a great deal of competition, with many looking to snap up property before interest rates rise further. During the quarter, Oshawa and Ajax experienced the largest aggregate home price increases of any area within the Durham Region, surging 26.8 per cent and 23.4 per cent year-over-year to $572,177 and $723,601, respectively. Pickering also saw a significant increase in price, with its aggregate home value rising 20.9 per cent this year over last to $754,371, while home values in Whitby grew by 19.9 per cent to $712,914 over the same period.