New data from the Toronto Regional Real Estate Board (TRREB) show that the COVID-19 pandemic hasn’t stopped home prices in the Greater Toronto Area (GTA) from hitting a new all-time high.
According to the newly released numbers, the average price of a home in the GTA in June was $930,869, up 11.9% compared to June 2019. Relative to May 2020, this represented a 7.8% increase.
April 2017 held the previous record average price at $920,791, and that was before more stringent rules for mortgages and restrictions on foreign buyers began temporarily keeping prices in check.
Although all housing types saw price increases last month, detached and semi-detached homes experienced the biggest growth, at 14% and 22%, respectively.
Compared to May 2020, home sales were up 89% but were 1.4% lower than in June 2019. Moreover, supply was tighter relative to a year ago due to active listings being down 28.8%.
Price Increase Factors
In a news release, TRREB president Lisa Patel stated:
“Following the broader movement to reopen the economy in June, we experienced a very positive result in terms of home sales and selling prices. Before the onset of COVID-19, there was a great deal of pent-up demand in the market. This pent-up demand arguably increased further over the past three months.”
Buyers who might have been planning to purchase a home between March and May decided to hold off, as did those who were looking to sell their home. But as things have started opening up again, many people are now interested in resuming day-to-day life. There is more confidence about being able to be in public again safely, and that has translated into more people searching for properties.
In the news release, Jason Mercer, TRREB’s Chief Market Analyst, also noted:
“A gradually improving labour market and historically low mortgage rates are expected to support a recovery in home sales in the second half of 2020, along with sustained year-over-year price growth. Given that home sales result in substantial spin-off expenditure in the regional economy, the housing market will be an important driver of overall economic recovery this year and into 2021.”
Because buyers and sellers have been returning to the market at nearly the same rate, real estate has started becoming competitive again. Additionally, the interest in more expensive properties is part of the reason the average home price in the GTA rose to a new all-time high.
Renewed Interest in the Suburbs
According to the sales data, there appears to be a shift to the suburbs, with the 905 area code seeing a 4.1% increase and the 416 area code experiencing an 11.2% decrease. In June 2019, 905 accounted for 63.9% of TRREB sales, while last month, it accounted for 67.5% of them. A rise was also recorded relative to March 2020, when 65.4% of home sales were in the 905 area code. Based on June’s 8,701 transactions, 311 more people chose to purchase in 905 than they would have compared to a year ago.
The increase in people working from home due to the COVID-19 pandemic may be what’s causing the shift. However, experts caution that potential buyers should think carefully about selling their downtown homes and moving to the suburbs. While it can be a good option for renters who have more mobility and are looking for additional space at a lower price, it may be trickier for homeowners.
Besides the time and energy involved, buyers could incur high transaction costs to purchase suburban homes, only to find that things may go back to normal, or as close to normal as possible, in the near future. That’s why it’s important to give such a move some thought beforehand. After all, central Toronto is expected to retain its appeal in the long run.
Provided there is no resurgence of COVID-19 in Canada, which would negatively impact employment and household wealth, TRREB is expecting prices and sales to continue their forward momentum through the rest of the year.
Source: Yahoo Finance Canada