An economist with one of Canada’s biggest banks predicted yesterday that prices for homes on the resale market could start rising faster in Toronto than in Vancouver as early as 2017.
But when it comes to new home sales, this is already a reality, according to Statistics Canada’s latest New Housing Price Index, released this week.
In July, new home prices rose 7 per cent in the combined metro region of Toronto and Oshawa — the latter is part of the GTA but is a separate census metro area — compared to where they stood a year ago, according to the index.
That’s the largest year-over-year increase of all 21 census metro areas the index tracks, and the region’s biggest annual rise since June 2004.
Excluding that month’s figure, Toronto new home prices haven’t appreciated this rapidly in 26 years, or just before the market crashed in the late-’80s, according to Bank of Montreal analysis published this morning.
Sal Guatieri, a senior economist at BMO, points out a difference between then and now.
“The current rate of increase pales against the frothy 30-per-cent-plus rates of the late 1980s, when speculators ran amok,” he writes in BMO’s research note from this morning.
“Today, there is a laundry list of factors driving Toronto’s house prices, with speculation probably near the bottom,” he continues.
Observers have cited the GTA’s strong labour market, population growth, and scarcity of detached homes among the factors supporting soaring resale prices in the area, which saw the average existing home price surge 17.7 per cent year-over-year in August.
But if prices continue to surge on the resale side of the market and non-resident investors look outside Vancouver in the wake of the foreign-buyer tax, which the BC government implemented August 2nd, speculation could move up higher on that laundry list, Guatieri warns.
“The price data in coming months should be eyed closely for signs of further acceleration,” writes Guatieri. “That would spell T-R-O-U-B-L-E.”
Vancouver trailed with new home prices climbing 5.5 per cent year-over-year in July, as did St. Catharines-Niagara, where prices rose 5.1 per cent, and Victoria, which saw prices appreciate 3.6 per cent, says Statistics Canada.
The Toronto-Oshawa region has been leading the country in year-over-year gains every month this year, according to the national statistics agency’s previous monthly releases.
Prices declined year-over-year in seven markets, although declines in six clocked in at less than 1 per cent. Saskatoon was hit hardest, with July prices 3.2 per cent lower than the same time a year ago. Five markets were flat.
On a month-over-month basis, the Toronto-Oshawa region was also ahead of all other Canadian markets included, according to the index, which is based on a survey of contractors, who report selling prices for detached and semi-detached homes, townhouses and row homes.
July prices in the region were up 1 per cent from the previous month. It has also led in monthly increases since February, when it overtook Vancouver.
Meantime, prices in Victoria increased 0.8 per cent month-over-month, with Hamilton and Vancouver trailing at 0.7 per cent and 0.6 per cent, respectively.
“Builders reported market conditions and new list prices as reasons for the increase,” says Statistics Canada of Toronto-Oshawa’s country-leading gains.
The average asking price of a new low-rise home in the Greater Toronto Area pushed past the $900,000 mark for the first time ever this July, according to data from Altus Group, a real estate consulting firm.