And falling interest rates mean homebuyers will likely have more firepower to drive up house prices this spring, observers say.
Home sales in greater Toronto were up 45.6 per cent compared to the same month a year earlier, the Toronto Regional Real Estate Board said Wednesday ― though that compares to a particularly weak month last year, when sales hit a 10-year low.
Watch: Celebrities who’ve snapped up Canadian real estate. Story continues below.
All the same, Toronto’s market is turning more difficult for buyers as the number of home sales is growing faster than the supply of homes coming on the market, TRREB said.
The average selling price for all housing types was up nearly 17 per cent from a year earlier, to $910,290. That’s an increase of more than $130,000. Condo prices saw an 18.6-per-cent spike, to $666,358.
“This is because the temporary effects of the 2017 Ontario Fair Housing Plan and the OSFI mortgage stress test have largely worn off,” TRREB CEO John DiMichele said in a statement.
“However, while these policies were running their course, the well-publicized housing supply problem in the GTA continued unabated. ... [W]e need to very quickly move from policy briefs to shovels in the ground.”
The news of Toronto’s strong housing market came the same day that the Bank of Canada announced a 0.5 percentage point decrease in interest rates, in response to a global slowdown caused by the coronavirus.
Variable-rate mortgages are linked to the Bank of Canada’s key lending rate, and lenders tend to adjust their mortgage rates in step with the BoC’s changes.
Canadian fixed-rate mortgages are more closely linked to interest rates on U.S. government debt. Those rates hit all-time lows in recent days, meaning fixed-rate mortgage borrowers will likely see lower rates as well.
Market experts say that move could accelerate house prices even further, as lower mortgage rates give homebuyers more buying power.
“Everyone knows exactly what happens in the near term if mortgage rates plunge ― that’s just more kerosene on the fire,” Rob McLister, founder of mortgage comparison site Ratespy.com, told BNN Bloomberg.
“All of this is great news for housing and the mortgage market ― until and unless we see a huge spike in coronavirus cases in Canada and/or a big jump in unemployment,” he added.