Toronto Prices Up Four Months In A Row

Toronto area prices increased again in May, the fourth straight increase this year. While prices remain lower than last year, they will likely be on par with 2017 prices by next month, and then higher for the rest of the year. The reason for this is the extreme bubble last spring, which resulted in off-the-chart prices from February through April, followed by steeply falling prices from May through August. Following this correction, prices have returned to the positive trend line established from 2000-2015 and, if anything, are slightly higher than they would have been if the bubble had never happened.

Volume (number of homes sold) is another matter. Sales last month were 24% lower than May, 2017, and year-to-date sales are 32% lower. Partly this is because sales were unusually high during the bubble last year, but even comparing with the 2000-2015 period sales are substantially down. This is mostly due to the government’s new mortgage qualification rules, which have significantly reduced affordability.

Another impact of lower affordability is the shift from freehold properties (detached/semi-detached/townhouse) to condominium apartments. While prices for freehold properties fell to below 2016 levels after the bubble burst last May, and have recovered only slowly, condo prices were very little affected, and are now well above last year’s bubble peak.


Government policy has also created another dichotomy, between York Region (the areas north of the City of Toronto, including Vaughan, Richmond Hill, Markham, Aurora, etc) and the rest of the GTA. One of the items in the Ontario Government’s 16-point housing plan, introduced last April, was a 15% foreign buyer tax. This tax has hammered the York Region real estate market disproportionately, as the chart below shows.

While prices in the City of Toronto have recovered strongly after the bubble burst, and are set to surpass last year within the next 1-2 months, York Region prices have recovered very little, and have been lower than 2016 prices for the past two months. Levels of inventory (months’ supply of homes) for the various regions in the GTA put this in stark relief:

The rule of thumb is that 3 months’ supply (3 active listings for every listing sold) represents a balanced market. By that measure, most of the GTA is in a sellers’s market (especially the City of Toronto, and especially condo apartments), while York Region is most definitely in a buyers’ market. This is a huge change from just a few years ago, when all of the GTA was in a sellers’ market – with York Region leading the way! – and condo apartments were the laggards. Government intervention has certainly put a crimp in the market, but not without some unexpected (and unintended?) consequences.