Fresh numbers on the Toronto real estate sector painted a picture of a market on overdrive, with the latest edition of the Teranet
Composite House Price Index showing that home prices in the city increased by 20.9 per cent year-over-year in January, and the Canadian Real Estate Association (CREA) stating that average home resale prices in Toronto saw a 22.6 per cent annual increase last month.
BMO Capital Markets chief economist Doug Porter issued a strong warning in the wake of these figures.
“Let's drop the pretense. The Toronto housing market - and the many cities surrounding it - are in a housing bubble,” Porter wrote in a research note last week. “Toronto and any city that is remotely within commuting distance are overheating, and perhaps dangerously so.”
“A random sample of homes that sold this month alone shows a median selling price of 25 per cent over asking, with not one staying on the market longer than eight days. Even pigs are flying in this hurricane of a market,” the economist added recently, as quoted by The Globe and Mail.
Meanwhile, Capital Economics senior Canada economist David Madani noted that contrary to the assumptions underlying recent federal-level changes to mortgage rules, Toronto Real Estate Board numbers revealed that younger buyers aren’t to blame for Toronto’s consistent price growth.
“[First-time] home buyers aren’t the ones driving the biggest gains in Toronto house prices, based on the simple logic that they simply don’t have high enough incomes to afford them, by any mortgage lenders' standard,” Madani said.
“Existing homeowners, by leveraging their considerable housing equity to buy newer, bigger or more beautiful homes, are the primary driving force now boosting house prices in Toronto,” he added. “If that’s the case, then it also stands to reason that there cannot be a major shortage of houses for people to live in.”
5 highlights from CREA’s first release
Blazing Toronto real estate market inflating national average home price