Canadian housing market comes in for a soft landing as prices continue to rise

While talk of a Canadian housing bubble was creeping back into some headlines, the market actually came in for a soft landing, according to a recent report from BMO Capital Markets. 

Home values dropped in four of the last five quarters, bringing mortgage growth down to its lowest level in almost 35 years. But, sales and home values are on the rise as more buyers are coming in off the sidelines after adjusting to recent policy changes like the mortgage stress test. 

In the Greater Toronto Area’s resale housing market, sales increased more than 24% year-over-year in July 2019. Looking at just semi-detached homes, sales increased 42% year-over-year, while detached home sales increased 30%. Condo sales went up more than 14%, and had strong price growth. 

In the GTA’s new home market, single-family home sales increased a whopping 127% year-over-year in June 2019, while new condo sales increased 14%. Clearly, both single-family housing and condos are selling well in the GTA in both the new and resale markets. 

While sales return to normal activity levels in the Toronto area, BMO says the market is positioned for moderate price growth, which means affordability will continue to be an issue. According to BMO, a bungalow in Toronto would eat up nearly half the median family income (30% of a household’s income put towards shelter costs is considered affordable). 

The average price of a new single-family home in the GTA was just over $1 million in June 2019. The average price of a resale detached home was just under $1 million in July. The interesting thing is that sales are increasing despite the high prices, so affordability is obviously an issue, but not for everyone.   

When new regulations are introduced, market reaction is usually temporary. When buyers take a minute to see how new policy impacts the market, it in turn has an effect on the market, but after a few months, those buyers step off the sidelines to get back into the action. The stress test slowed price growth, but now that it’s evident that prices will continue to grow at a moderate pace, investing in residential real estate is now a safer bet for many Canadians.  

With interest rates remaining low at the moment, we expect the typically busy fall to be highly active! We’re looking forward to seeing how the coming months shape up.