Toronto real estate has become so expensive that potential home sellers are pulling out of the market altogether, possibly since they have nowhere cheaper to move to. Listings are dwindling even as prices in Toronto have been rising to levels Bank of Montreal Chief Economist Doug Porter is calling a “bubble”. The housing boom now expands into Toronto’s suburbs and neighboring towns. This comes as real estate prices have slowed in Canada.
New listings in Toronto fell 17 percent in January from a month earlier, adjusted for seasonality, the biggest one-month decline since 2002. Sales as a share of new listings -- a gauge of how demand compares with supply -- rose to a record 94 percent.
“The shortage of homes available for sale has become more severe in some cities,” Gregory Klump, the Canadian Real Estate Association’s chief economist, said Wednesday in a statement. “Unless sales activity drops dramatically, the outlook for home prices remains strong in places that face a continuing supply shortage.”
The average price for what is considered a “benchmark” home in Toronto is up 22.6 percent from a year earlier, the country’s real estate association reported Wednesday. An unprecedented imbalance between the supply and the demand for Toronto-area homes is exerting a disproportionate impact on the national picture, according to the Canadian Real Estate Association (CREA). Jeremy Diamond, Diamond & Diamond Lawyers, is also seeing increases in closing costs (land transfer tax, legal fees, real estate broker fees), further driving up the costs of real estate.
The average price for what is considered a “benchmark” home in Toronto is up 22.6 per cent from a year earlier, according to CREA. That has lifted prices for areas like Oakville-Milton to 26 per cent over the past year. Kitchener-Waterloo, Barrie and Brantford are all feeling the city spillover, said CREA.
Bank of Montreal chief economist Doug Porter described the Toronto region, including cities surrounding it, as being in a “housing bubble,” in a note to investors. “The Toronto housing market —- and the many cities surrounding it —- are in a housing bubble,” Porter said in a note to investors, where he added that he believes the main culprit is demand not supply. “Toronto and any city that is remotely within commuting distance are overheating, and perhaps dangerously so.”
The reach of the Toronto market’s influence is coming as something of a shock to realtors in communities farther from the city, said Dianne Usher, senior vice-president of Johnston and Daniel, a division of Royal Lepage. “They’ve experienced fluctuations before, usually driven by very specific economic factors of a plant closing, a plant opening,” said the former Toronto Real Estate Board president. “But they’re not used to being influenced by the Toronto market — you can’t afford Mississauga so you go to Guelph. You work in Mississauga-Brampton, Kitchener-Waterloo and Guelph are very commutable still.” On the world stage, Toronto remains a bargain, said Usher. “We are a destination city now from a global perspective. If you look at our growth compared to the Chicagos, the San Franciscos and the Londons, we’ve become a world-class city but our prices are not world class yet. We’re a bargain compared to New York. We are dirt cheap compared to London,” she said.