Toronto’s housing market hit new record highs in August, with sales and prices spiking, as low mortgage rates fuelled competition for homes despite economic uncertainty brought on by the novel coronavirus pandemic.
Last month, 10,775 homes sold in the Toronto region, a 40-per-cent increase over August, 2019, driven by especially strong demand in the suburbs, according to the local real estate board. Although the volume was slightly lower than in July, last month was the strongest August on record and the third straight month of frenetic activity.
The average selling price across all types of homes reached $951,404, according to the Toronto Regional Real Estate Board (TRREB). Average prices for detached houses and semi-detached houses in the City of Toronto spiked just more than 20 per cent to $1,505,100 and $1,166,226, respectively.
“Competition between buyers was especially strong for low-rise home types,” Jason Mercer, the board’s chief market analyst, said in a statement accompanying the results.
The TRREB home price index, which corrects for distortions in the average selling price, also reached a record high of $890,400, an increase of 11 per cent over August of last year.
With mortgage rates at record lows, it has become cheaper for home buyers to borrow. The popular five-year fixed-rate mortgage rate is below 2 per cent, which allows homeowners to put more of their payments toward the principal debt instead of the interest.
Before the pandemic slowed activity for about eight weeks across March, April and May, the Toronto region’s housing market was overheating with properties starting to fetch multiple offers.
But now, there is heightened interest in the suburbs and cities outside of Toronto, with buyers placing a premium on bigger properties and outdoor spaces. The home price index for every region outside of the City of Toronto recorded a steeper increase than the city’s 9-per-cent gain. Durham region’s index, east of Toronto, was up 15 per cent year over year.
Realtors in the suburbs have reported properties selling within days of being listed. The softest part of the housing market last month was condos, as more buildings are developed and demand weakens in part because of the slowdown in immigration and desire for larger properties and outdoor space.
Over all, the shortage of properties has increased competition. Last month, the number of new listings rose 57 per cent and the total volume of properties for sale was up incrementally over last year. It is unknown how the end of the mortgage deferrals that banks have granted customers and other government aid will affect the housing market when they begin to be phased out this fall.
Economist Mohamed El-Erian says that the coronavirus shutdown will create a buyer's market for real estate, offset by reduced incomes putting stress on the whole sector. El-Erian was in conversation with Rudyard Griffiths from the Munk Debates.
The Globe and Mail
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