Toronto’s housing market, long the target of warnings of overbuilding and excessive price spikes, just experienced its best month ever.
Home sales jumped 11.4 per cent in May, compared to the same month last year, giving the city’s housing market its strongest performance ever, the Toronto Real Estate Board (TREB) reported Wednesday.
Overall home prices jumped 8.3 per cent, to $585,204, and condos cracked the $400,000 mark, with the average condo selling for $401,809. Sales in the Toronto area grew 8.4 per cent year on year.
The one surprise was the average price for a single-family home, which actually dropped by about $20,000 from the month before, to $943,000. (By some other measures, single-family homes in Toronto have already passed the $1-million mark.)
In the 905 region surrounding Toronto, a single-family home now averages $648,439.
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Despite years of warnings of overbuilding in Toronto, particularly in condos, the big story in May appeared to be a growing shortage of homes for sale.
“The listings situation in the GTA did not improve this past May. With listings down and sales up compared to last year, competition between buyers increased. The result was price growth well above the rate of inflation, especially for singles, semis and townhomes,” TREB senior analyst Jason Mercer said.
These price hikes are eating into affordability. With mortgage rates at or near record lows for years, mortgages have been relatively affordable. But according to a recent study by RBC, affordability has declined for three of the past four quarters.
Mortgage lenders started off the spring selling season with another mortgage rate war, but the lower rates aren’t enough to offset the large price spikes seen in many cities, RBC said.
But with developers cutting back on housing starts, the real estate business is starting to be a drag on the economy. The Conference Board of Canada's latest report identifies commodity prices as the main factor holding up Canada's economy. Housing and the seemingly perpetually struggling manufacturing sector are now both drags on growth, the Conference Board said.
Some economists, such as Scotiabank's Adrienne Warren, are warning Canada's real estate juggernaut is coming to an end. Warren says the impact of the slowdown will be felt "broadly," as Canada has come to be more dependent on real estate-related jobs and investment than it has been in the past.