Photo: James Bombales

After months of year-over-year drops, GTA home prices started to inch upwards in May.

So will the market finally start to heat up this summer? The answer isn’t quite so simple, according to Ryerson Centre for Urban Research and Land Development senior researcher Diana Petramala.

“The reason [housing affordability has improved in the GTA in 2018] is twofold,” she tells Livabl. “Prices have come down somewhat this year, while interest rates have gone up somewhat, creating a balanced market.”

Hitting that point may mean that affordability begins to deteriorate in coming months, as prices start to move upwards.

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“The last two quarters have seen a decline in prices [in the GTA market],” RBC senior economist Robert Hogue tells Livabl. “Mostly due to a drop in prices in the higher priced segments of the market, which has improved affordability somewhat.”

Hogue describes the last two quarters as a “reprieve” after years of rising prices. But that reprieve will likely end in the coming months.

“We’ve seen prices stabilizing on a month-over-month basis, inching up a little higher,” he says. “I think that will likely continue into the second half of the year.”

The GTA may have hit an “affordability wall” according to Petramala, who says that regulations aimed at keeping prices down, such as a new mortgage stress test introduced earlier this year, have largely transient effects.

“The only way you can hold prices down long term is through [the creation of more housing supply,]” she says.

Petramala and Hogue’s predictions were backed up by TD economist Rishi Sondhi, in a recent note.

“Typically, impacts on demand from policy changes tend to be rapid, but also transitory,” he writes. “History appears to be repeating itself with the May figures pointing to stabilization…Going forward, we expect activity to find support and begin to recover very gradually in the second half of the year.”

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