The Greater Toronto and Greater Vancouver housing markets are growing tighter, and that could mean a return to rapid house price growth, a new report says.
In a report issued Thursday, Capital Economics noted that the supply of homes on the market is shrinking, even as buyers are returning, pointing to stronger house price growth.
“The recent jump in the home sales-to-new listings ratio seems to point to a renewed period of rapid house price gains, which would normally be matched by a pick-up in consumption growth,” senior Canada economist Stephen Brown wrote.
Watch: How Canada’s housing market is impacting jobs. Story continues below.
But Canadians’ high debt loads mean they won’t be spending much more, at least over the next year or so, Brown added, and that will also limit how much house prices will be able to rise.
The Toronto Real Estate Board (TREB) reported Thursday that home sales in the metro area jumped 22 per cent compared to the same month a year earlier, though that is still below the 2016 peak for the month.
Meanwhile, Greater Vancouver saw home sales soar 46.3 per cent, compared to the same month a year earlier, though sales levels were very low last year. The big jump in sales brings things back in line with their historic average, the Real Estate Board of Greater Vancouver (REBGV) said.
“We’re seeing more balanced housing market conditions over the last three months compared to what we saw at this time last year. Home buyers are more willing to make offers today, particularly in the townhome and apartment markets.” the board’s president, Ashley Smith, said in a statement.
In Toronto, the number of new home listings fell by 1.9 per cent, even as sales activity picked up. In the Vancouver area, the market grew much tighter very quickly, with new listings down nearly 30 per cent in September, from a month earlier.
In Toronto, the average selling price for all housing types was up by 5.8 per cent from a year ago, to $843,115. In Vancouver, the benchmark price for all housing tyopes was $990,600, down 7.3 per cent in a year. But price declines have slowed, with the benchmark price down just 0.3 per cent in the past month.
Toronto Real Estate Board CEO John DiMichele gave credit to accelerated population growth for the market’s bounce.
“The demand for all types of housing in the GTA ― rental and ownership ― will remain strong. This fact underpins the need for immediate and sustained action on housing supply,” he said in a statement.
But indebted consumers don’t have much room to spend more, Brown noted.
“Households’ finances still look fragile, so we expect spending to continue to lag incomes for the next 18 months,” he wrote, adding house price growth will likely be limited to 3 per cent nationwide over the next year.
“That would still mean that housing wealth gains are far lower than in recent years.”