It seems there is no imminent slowdown for Toronto’s property market, with experts suggesting the city is now catching up with the high levels of Vancouver. Both cities, the two most expensive in Canada, continue to excel, fuelling arguments that intervention is required. However, in the meantime, nothing seems to be preventing the property value gains.
Vancouver continues to shatter records, with the overall index price across the city now 25.3 per cent higher in April than a year earlier. This has eclipsed March’s year-on-year gains of 23.2 per cent and means the average detached property in Vancouver’s metro area now sells at $1,817,027.
In Toronto, there is now evidence that house prices are spilling over from the city to boost values in the suburbs. In fact, rises attributed to the city are even reaching municipalities such as Waterloo and Guelph. During April, the average price for a detached home was $1,257,958, rising from the $1,056,114 noted a year ago.
Altus Group Chief Economist and Vice-president Peter Norman said: ‘I do not think governments should be doing anything to try and curtail demand right now. If anything, government should be trying to reduce the barriers to building, whether it is land development to encourage more supply to come forward.’
There are already plans in place for this, Norman suggests, with a number of low-rise projects having already made it through the planning process.
‘Where we do have foreign investment in the GTA [Greater Toronto Area] and Vancouver, it is driving supply. Most of the discussion is foreigners are buying product and not using it. That’s a small part of the question. Most of the foreign money is financing new construction,’ he said.
There have already been a number of measures brought in by the government to try and cool the market. The latest was the Liberal initiative, brought in during February. For any property priced over $500,000, a down payment of ten per cent is now required, double that of the amount previously required. However, the rule only applies to any insured mortgages backed by the government, which are limited to $1 million maximum. For properties over this mark, a 20 per cent down payment is needed.
Bank of Montreal Chief Economist Douglas Porter said: ‘I think it is now safe to say that the measures Ottawa introduced late last year did nothing to cool Vancouver or Toronto, or indeed any of the regions surrounding those cities.
‘There has been relatively strong job growth in both Vancouver and Toronto over the past year, and interest rates are lower than a year ago – but enough to explain this strength? No. The risk here is what had been a previously robust market is clearly now in danger of entering speculative land, which ultimately is good for no one.’
The lack of new homes is difficult to address because of extensive planning processes required to develop new land. In addition, baby boomers continue to live longer and have a lower interest in selling their long-time family homes. For investors, however, the market shows no signs of stumbling and could continue making dividends for a long time to come.