All Quiet in Toronto Real Estate Market, Says Canada Mortgage and Housing Corp.

The Toronto real estate market has been cooling down since April 2017: the average home price was 15% lower at $776,000 in September from its historic high of $918,000 posted in April. When compared to the similar month in 2016, house prices have been consistently higher throughout 2017, although the premium has dropped to a mere 2.6% in September. Market activity has dropped off substantially: the overall number of sales fell by 35% in September 2017 compared to September 2016, while the number of detached houses sold dropped the most, by 40%.

Despite this slow-down, Canada Mortgage and Housing Corp. (CMHC) believes that the Toronto market, along with four other key Canadian real estate markets, still has a “high degree of vulnerability” to further price corrections. The major risk factor in Toronto is overvaluation in house prices, suggesting that prices are not fully supported by fundamental drivers, which include: household income, mortgage rates and population growth. 

CMHC expects that in 2017-2018, real estate sales in Toronto will stabilize as a result of anticipated higher interest rates and tighter borrowing conditions. Because of the slower growth of listings and the growing confidence on the part of buyers, home prices could still rise, but by a reasonable rate - more in line with inflation. 

This is a middle-of-the-road forecast, which, even in its extreme scenarios, does not include any shocks from higher interest rates or other fundamental factors which could threaten both the GTA real estate market and the wider economy.

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