Whatever cobwebs remained on the Toronto housing market from early-year weakness appear to have been firmly shaken off following a robust fall homebuying period. Home prices in the city just saw their biggest jump observed all year in November, with the MLS Home Price Index logging a 6.8 percent increase while the average selling price in the GTA spiked by 7.1 percent to $843,637.
Meantime, Toronto home sales also continued their upward march, jumping more than 14 percent in November compared to the same period in 2018, according to data released this week by the Toronto Real Estate Board (TREB).
The renewed strength in prices and sales, which follows a weak stretch through 2018 and early 2019, can be chalked up to the combined effects of strong population growth, a rock solid labour market, lower mortgage rates and the waning impact of the stricter mortgage stress test.
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While these factors propelled the market skyward, TREB did flag a concerning trend that could lead to worsening housing affordability for the region. New and active listings both saw double-digit declines in November, meaning supply is declining as demand is clearly rising. If this trend continues, we may see further significant price spikes in an already expensive market.
“The Greater Toronto Area needs flexible housing market policies that will help sustain balanced market conditions over the long term. All levels of government in Canada plus reputable international bodies have acknowledged that we have a housing supply problem,” said John DiMichele, TREB’s CEO, in a media release accompanying the data.
“In 2020, policy makers need to translate their acknowledgment of supply issues into concrete solutions to bring a greater array of ownership and rental housing online,” he continued.
DiMichele is far from the only commentator to flag supply issues and their impact on market affordability. Earlier this fall, RBC senior economist Robert Hogue said Toronto was saddled with the worst rental supply deficit in the entire country. In October, BMO senior economist Robert Kavcic was already calling the market “drum tight” and mused on the question of how far the market could run from here, with mortgage rates low and demographic demand remaining strong.
Jason Mercer, TREB’s chief market analyst, said these same trends are persisting late into the year.
“Strong population growth in the GTA coupled with declining negotiated mortgage rates resulted in sales accounting for a greater share of listings in November and throughout the second half of 2019,” said Mercer in the media release.
“Increased competition between buyers has resulted in an acceleration in price growth. Expect the rate of price growth to increase further if we see no relief on the listings supply front,” he continued.