Greater Toronto real estate prices are seeing high growth accelerate even faster. Toronto Regional Real Estate Board (TRREB) data shows a new record high for home prices in April. Detached home prices are now up six-digits from last year. The big story is condo apartments though. The segment had been lagging the general market over the past year. After the Government said falling prices are unacceptable, condos saw 3x the rate of monthly growth of detached homes. FOMO has now spread across all market segments.
Greater Toronto Home Prices Are Up Over 17%
Greater Toronto real estate prices ripped higher, with growth further accelerating. The composite benchmark hit $1,025,200 in April, up 1.75% ($17,600) from a month before. Compared to the same month last year, this is 17.83% ($155,100) higher. Yes, home prices could grow faster, even at these levels.
Greater Toronto Benchmark Price
The price of a “typical” composite home across Greater Toronto.
Source: TRREB. Better Dwelling.Composite home prices are growing at the fastest rate since the non-resident “mini-bubble.” The 17.83% annual growth in April is the highest since July 2017. It also happens to be the 33rd consecutive month of annual price growth.
You may have noticed composite price growth made a sudden acceleration after January. This would be right after the Bank of Canada indicated the growth was welcome. Price support was followed by the Federal government vowing to backstop prices. If you consider homebuyers exuberant, it isn’t a conclusion they made themselves. It was actively encouraged by the central bank and Government.
Toronto Detached Home Prices Are $245,000 Higher Than Last Year
Greater Toronto detached homes are quickly becoming just a fantasy for young adults. The detached benchmark reached $1,259,500 in April, up 1.01% ($12,600) from a month before. Compared to the same month last year, prices are now 24.22% ($245,600) higher. Yes, detached homes made more than the median family… more than twice, actually.
Greater Toronto Benchmark Price Change
The annual percent change of TRREB’s benchmark price for all home types.
Source: TRREB. Better Dwelling.The annual rate of price growth is also the highest in years, but finally showing an arc. The 24.55% annual gain in April is the highest rate since June 2018. If you look at the chart, you can see the top of the growth rate beginning to form a hook, or arcing. This could potentially indicate a deceleration on the horizon. Although a lot of deceleration would be needed to bring prices lower.
Only five months of growth in the past decade have exceeded this level. However, price growth can be cut in half, and would only fall to the same level the U.S. is seeing. The U.S. is currently considered bubbly at its current level. If that’s bubbly, I’m not sure what American analysts would consider Canada’s rate of growth.
Toronto Condos See Monthly Price Growth 3x Detached Homes
The real story here is condo apartment prices, which made a monster move over the past month. The condo apartment benchmark price hit $627,600 in April, up 3.31% ($20,100) from a month before. Compared to a year ago, home prices are now 4.83% ($28,900) higher. The annual rate may seem small, but it’s quite substantial. It only seems small in contrast to price growth across Canada these days. That’s how skewed prices are.
The annual rate of price growth was decelerating towards zero until February. After that point, buyers were likely emboldened by the BoC and Federal government. The price trend abruptly reverses for condos, and jumps 3x that of detached homes. April’s increase alone is 69.5% the size of the annual increase. This also happened after the Federal government said they would consider any price drop to be unacceptable. Must be a coincidence.
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Condos or detached homes are mispriced. Pick one, because the gap between the two can’t persist for very long.
Maybe both? You can rent a $2 million house for half the mortgage payments. I don’t know why some landlords are subsidizing rents at such a high rate, but they need a lot of growth for these kinds of subsidies to make sense.
The only explanation is irrational expectations of future price appreciation. Eventually the free ride will be over. We don’t live in a world where you can sustainably make more money sleeping in your bed than working a job. That’s not how housing works. It’s dead money, and will be priced like dead money again at some point.
Adam Vaughan might be the top of the mountain call. He said prices won’t drop in 2017, right before they puked all over the market.
Even if prices fall from here though, most people still can’t buy. If you’re looking at condos, also consider how ridiculous some of the maintenance fees are, and make sure you double-check the reserve notes.
You don’t want to get hit with a special assessment, because a building filled with AirBNB hosts decided to defer maintenance until large replacements were needed.
“You don’t want to get hit with a special assessment, because a building filled with AirBNB hosts decided to defer maintenance until large replacements were needed.”
Yep. And good luck trying to sell such a place if you can’t afford the special assessment. You’ll take a haircut at least equal to the assessment if not greater. And if you just bought the place with 5% down? You could be tens of thousands short of paying off your mortgage. Effectively bankrupt.
People in Toronto are buying property and living with their parents, and then keeping the property empty because they’ll be able to collect higher rents later if they apply more pressure.
If they don’t raise rates, Toronto and Vancouver are done.
https://torontolife.com/city/i-saw-a-one-bed-plus-den-in-liberty-village-for-575000-and-i-scooped-it-up-why-this-insurance-advisor-bought-an-investment-property-downtown/
Not only that, but essentially with the way prices are appreciating running a negative cap investment property has made sense. This is where the government policy has fallen apart – by taking risk out of the system you have made real estate a risk-free asset class that will give you a guaranteed return. No need to run the financials to see if it makes sense; policy over the last 10+ years shows you that the BOC/Government will bail property owners out at all costs.
Any other mass subsidized industry in Canada attracts massive amounts of negative sentiment, but when 60%+ percent of the population owns homes you lose votes by bringing house price down. I fear that we are destined to be a nation that’s entire economy is based on buying and selling houses to each other.
Ireland tried that in the early ’00s. I can’t remember how it turned out for them.
Look, I hate to be the guy who said I told you so. But the truth is, if the government didn’t allow housing prices to drop last year they will not do it now.
However I was expecting them to put in some cooling measures and use controlled inflation to bring down relative prices of home over the long run. Even I think its insane to pump the market right now. If they want go do anything they should tax people with more than 3 residential properties to even out the distribution of real estate wealth.
1. They are not dropping the prices
2. Inflation is coming
What are you going to do? This is our reality now. Should have dropped prices last year….
Imagine waking up every day. Opening your computer. Going to Better Dwelling. And then writing the same thing. Every. Single. Day.
Get a hobby bro.
I agree, they will try not to let it. But I think you vastly overestimate our government’s power. Even the mighty soviet union could not stave off collapse infinitely.
As for what am I going to do? Leave.
Globalization works both ways & Canada is a country with many immigrants for whom the dread and pain of getting up and leaving has already been overcome once, and so the barrier to do so again is not that big.
Who will buy, and with what? The $15/h Walmart worker?
As you point out, inflation is coming. Prices are relative. They don’t need to drop in absolute terms. But, the corollary to that is that you may find a lot of people will leave to escape the inflation. have you ever lived in a country where 1 year you were transacting in 100,000 units of currency and the next year in 1,000,000 units for the same item, with no appreciable wage boost? People tend not to like to stay in those countries, which more often than not has an immense negative social effect.
Economics is all good and well, but it often forgets the human side of things. The quality people will leave, and we’ll be left with the dumbdumbs who couldn’t. Do you think dumbdumbs are good at policy and ethics? It’s a compounding problem that our government hasn’t thought about too much because it’s become artificially secure in the thinking that Canada could not possibly experience what many post-Soviet countries did.
I’m looking for jobs overseas as well. Why would I stay here? There are no jobs in my field, unnecessary lockdowns, awful political leadership, excessive PC nonsense, a lacklustre culture, high taxes, etc, etc, etc. Turns out that the health care system we take so much pride in sucks as well… it couldn’t handle a basic shock.
Your options are Toronto or Vancouver, both completely unaffordable. Alternatively, why would I want to live in some small city in the middle of nowhere where nothing happens?
It’s just not adding up and it doesn’t make sense to stay here, at all.
Just from Wikipedia. Nowhere scholarly. But still.
The economy of the Republic of Ireland expanded rapidly during the Celtic Tiger years (1995–2007) due to a low corporate tax rate, low ECB interest rates, and other systemic factors (such as soft surveillance of banking supervision including against observance of Basel Core Principles, underdeveloped public financial management and anti-corruption systems and adoption of poor policies including a corporate tax system that fostered non-tradable goods and services through the construction industry).
Remind you of anywhere?