Toronto area home prices ended 2017 virtually flat after a year of turmoil marked by an early boom followed by a sharp correction in the wake of government policy intervention.
The Toronto Real Estate Board reported home prices in the Greater Toronto Area averaged $735,021 in December, up just 0.7 per cent from $730,124 in December, 2016. The volume of sales fell 7 per cent in December, but the decline is the lowest year-over-year drop in sales since Toronto's market began to turn downward in May.
Detached houses remained the weakest market segment as sales fell almost 14 per cent in December compared with a year earlier, and prices dipped 2.5 per cent to an average of $989,870 in the month.
The condominium sector continued to boom, however, as short supply and strong demand led to bidding wars in key neighbourhoods and prices rose more than 14 per cent on an annual basis to an average of $503,968 in December.
Real estate agent John Pasalis, president of Realosophy Realty Inc., said sales in December were spurred by buyers trying to lock in deals before new mortgage stress-testing rules took effect on Jan. 1.
"I don't know if that's going to continue into January of this year," he said. "I think we did see a bit of a rush of people trying to get in before the rules change."
Realtor Tom Storey, a Royal LePage agent in central Toronto, said business was surprisingly busy through the Christmas season as buyers pushed to finalize deals before the new rules took effect. Mr. Storey said many buyers wanted to lock in a deal so the purchase can close before their preapproved mortgage rates expire, avoiding the need to reapply for a mortgage under the new federal rules.
Mr. Storey said he saw numerous bidding wars for condominiums in central Toronto last month – with one seller getting 12 offers – because there is little inventory available and strong demand from buyers who still cannot afford detached houses despite weakness in the category.
"Condos have been resilient this year, and they're really the only segment of the market that hasn't seen a large decrease. The demand is still very high," he said.
There is currently 1 1/2 months of inventory in the condo sector at the current sales pace – a level Mr. Storey says "is sitting between hot and extreme" – while there is 3.2 months of detached-house inventory. That means buyers shopping for detached homes have much more supply available, which could also make it a good time to trade up from a condo, he argues.
"If you're in a situation where you're trying to move right now, it's not a bad time because there's more demand for condos than for detached homes, so it would be a good time to jump up," Mr. Storey said.
TREB said the average price for all homes sold over the course of 2017 was $822,681, a gain of 12.7 per cent compared with the average price of $729,837 for homes sold during all of 2016. That healthy gain was attributable to a boom in the first four months of 2017, which saw Toronto home prices climb to record levels.
By April, prices were 25-per-cent higher than the same month in 2016. But prices began falling in May after the Ontario government announced a package of measures to cool the housing market, including a new provincial 15-per-cent foreign-buyers tax. At their lowest in August, average GTA home prices were down 20.5 per cent from April's peak.
Since August, the GTA has seen a shaky recovery. Average prices rose in September and October on a monthly basis, but dipped in November on a monthly basis and fell again in December, dropping 3.5 per cent over November's average.
Even the hot condo sector saw the volume of sales drop 9.5 per cent in December compared with a year ago, but much of the decline was attributed to a lack of available supply rather than weak demand, Mr. Pasalis said.
He said condo prices did not rise as much in December on a year-over-year basis as some prior months, which could be an early sign that buyers are starting to find the condo market overpriced compared with other options. The average townhouse in the GTA, for example, sold for $592,761 in December, which is not far above the average condo sales price of $503,968. The average semi-detached house sold for $730,726 in December.
As condos continue to rise and other housing categories see little or no price growth, some buyers will consider other options, Mr. Pasalis said.
"I don't think anyone expects low-rise houses to go up very much at all, and in York Region they might fall still, so that means prices for condos just can't keep going up," Mr. Pasalis said. "At some point, people are looking at houses and it's cheaper to buy a home than a condo."
Mr. Storey, however, thinks the condo boom is far from over, and anticipates more strong growth in prices in 2018.
"I think condos still have room here because the price gap is still too large and they are essentially the only affordable option for many buyers," he said.
In addition to reporting average sales prices, TREB also reports its MLS Home Price Index, which corrects for the changing mix of homes sold each month. It showed December prices were up 7.2 per cent from December, 2016.
Among the major regions in the GTA, average prices climbed most in the City of Toronto in 2017, up 11.7 per cent in December compared with a year earlier, based on the MLS Home Price Index. Much of Toronto's gain was driven by a 23-per-cent increase in condominium prices, TREB said.
York Region north of Toronto was hardest hit in 2017, with prices down 0.04 per cent in December compared with the same month in 2016, based on the MLS Home Price Index.
Prices were up 7.7 per cent in Peel Region west of Toronto, 6.7 per cent in Halton Region and 6.7 per cent in Durham Region east of Toronto on a year-over-year basis.