Toronto Market Remains Strong in June

For the first time this year, both sales and selling prices in the GTA were higher than the same month in 2017, ending six months of ‘lower than  last year’ comparisons. This is because the market has been steadily improving throughout this year, while the market fell steeply from May, 2017 onward, after the Ontario government pricked the bubble in April with their 16-point “Fair Housing Plan”. A glance at the graph below will tell you that the gap between 2018 and 2017 will probably continue to widen over the coming months. As we have reported previously, the bubble that began to inflate in 2016 and then burst in 2017 was a temporary distortion, and we have now returned to the trend line that was established over the previous 5+ years. If anything, prices are higher now than they would have been had the bubble never happened.

This isn’t to say, however, that things haven’t changed. The most obvious change is the surge in the condo market, driven by declining affordability: ever-higher prices for freehold properties; gradually increasing interest rates; and the federal government’s new (as of January 1, 2018) mortgage qualification rules. All of these, together, have caused many buyers to settle for condos rather than houses, leading to a massive increase in demand for condos. As shown in the charts below, condo prices barely felt the correction that was experienced by the overall market last year, and  condo prices are now higher than they were at the peak of the bubble… and heading even higher. This is a complete reversal of the situation a few years ago, when  condo prices were flat and inventory was high, while freehold prices were increasing steadily while inventory declined. A further effect of the decline in affordability is that the rental market is also on fire, with demand significantly boosted by would-be buyers who can’t  afford to buy.

Inventory levels have been stable throughout this year, remaining under 3 month’s supply and solidly in ‘sellers’ market territory’ after being whipsawed during the bubble and burst last year.

All in all, it seems like we can look forward to a period of relative calm, stability and predictability in the GTA market for at least the next several months.