Real estate experts predict a return to normal for slumping GTA housing prices
Wednesday Jul 11th, 2018Share
The slowdown in the Toronto region’s housing market that began last year continued through the first half of 2018, but two big industry players suggest that buyers and sellers are ready to shake off the malaise with a return to normal later this year.
Although 2018 “was a spring market that never blossomed,” Royal LePage CEO Phil Soper says he sees change on the near horizon after 14 months of government intervention, higher interest rates and new mortgage rules.
“On a week by week basis we’re seeing an uptick in prices. It doesn’t show up in the quarterly numbers, but it shows up in the weekly numbers,” he said in advance of the company’s second-quarter report on Tuesday.
It shows that Toronto region housing, which has slumped since the introduction of the Fair Housing Policy in April 2017, is following the same pattern as Vancouver after it was subjected to a foreign buyers’ tax. Nearly two years later, there are signs that detached homes on the west coast are starting to rise again — which may happen in Toronto too.
Sotheby’s CEO Brad Henderson said he expects home prices will rise by the end of the year in Toronto, although sales volumes will likely remain flat.
“There’s going to continue to be upward pressure on prices in the single digits. It will probably be in the 5 percentage range,” he said. “Costs continue to rise — there continues to be more demand than there is supply.”
His optimism extends to the luxury market where Sotheby’s admits the year over year sales volumes looked bleak in the first half. Homes costing $1 million or more fell 49 per cent year over year. In the over-$4-million category, they were down 52 per cent.
But compared to the first half of 2015 — the last year before Toronto-area prices surged — there were 52 per cent more sales of $1-million-plus homes and 72 per cent more in the $4-million-plus category.
Although people are concerned about the news surrounding Canadian free trade and tariffs, the underlying conditions for a strong Toronto area housing market remain, said Henderson. The trade rumblings so far haven’t translated into employment losses.
“If you listen to a lot of employers, they are desperate to find people, let alone good people. That will put upward pressure on wages,” he said. Rising wages would in turn fuel housing demand and prices.
According to Sotheby’s Mid-year Top Tier Report published Tuesday, Montreal was the only major Canadian city to see year-over-year growth in the number of $1-million-plus homes sold in the first half of 2018, with sales up 24 per cent. That performance is expected to ease somewhat in the second half of 2018, however.
Royal LePage’s second quarter report showed a year over year aggregate house price increase of 1.9 per cent in the Toronto region to $821,632. It’s forecasting a 2.1 per cent increase in GTA home prices between the second and third quarters to $838,984.
But some sub-markets continue to struggle. Values dropped 12.4 per cent in Richmond Hill and 8.8 per cent in Markham.
Those markets will likely recover as Toronto prices start to climb in the third quarter and accelerate in the fourth, said Soper.
“When you see home prices rising north of (Highway) 401 you know the bottom has been reached. You’ll see people that were potentially looking at the 416 for a condo for their family say, ‘You know what, prices have been down in the 905, we may look for a detached home,’” said Soper.
Condos appreciated 3.9 per cent between the first and second quarter, according to Royal LePage. Two-storey homes and bungalows increased 0.7 per cent and 0.3 per cent respectively.
Another trend may be disproportionately affecting some 905 areas, added Soper. His company attributes the heat in some secondary Ontario cities to a migration by price-weary Toronto buyers to smaller centres.
Communities on the Niagara Peninsula, those east of Toronto in Kingston and Belleville, and in the west, Windsor, are seeing prices move up as first-time buyers and move-up consumers look to get more for their money in less expensive markets.
As prices fell or remained flat in the first half of the year in the GTA, London and the Kitchener area saw double and high single-digit year over year increases, said the report.