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The Market Toronto’s housing market: Sustained chill or Vancouver-style rebound?

The Toronto housing market has taken a breather after the Ontario government unveiled a raft of measures aimed at cooling torrid activity.

The average sale price in the Greater Toronto Area was $863,910 in May, a 6.2-per-cent drop from the previous month, according to new figures from the Toronto Real Estate Board. The overall number of homes sold fell 12.3 per cent from April.

Going forward, a major question is whether Toronto will experience a sustained chill, or whether it will follow the lead of Vancouver, which less than a year after the B.C. government unveiled rules on foreign home-buyers is back to breaking records.

In May, average sale prices for detached homes, condos and townhouses in the Vancouver area hit record highs, figures released Friday by the Real Estate Board of Greater Vancouver show.

If Toronto follows Vancouver's lead, how quickly will prices fully rebound? In eight months, according to one calculation.

The chart above, published last month by BMO Nesbitt Burns, shows the MLS Home Price Index for both the Toronto and Vancouver areas. Vancouver is indexed to 100 for its peak in August of last year, which is when a foreign-buyer's tax went into effect; Toronto is indexed to 100 for April of this year, the month Ontario's housing measures were announced. Vancouver is shown with an eight-month lag, so that its August figure is aligned with Toronto's April reading, the most recent available.

As you can see, it took Vancouver eight months to overtake its previous high. Thus, if Toronto follows Vancouver's trend – and admittedly, that's a big if – prices will have fully rebounded by December.

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