On the heels of another white-hot month, the appetite for low-rise housing in Toronto’s suburbs might be on the precipice of decline.
In February, the average price of a detached home in the 905 increased by a whopping 27.8% to $1,300,853, according to the Toronto Regional Real Estate Board (TRREB), while the average semi-detached home rose by 25.6% to $932,551.
“People are buying at the peak, so it’s not sustainable,” said Davelle Morrison, a broker with Bosley Real Estate. “Those numbers are so drastic that, a few years from now, I’m not sure buyers will get their money back. That’s why I’m more afraid for the suburbs than Toronto.”
In many ways, the regional housing market is reverting to 2016-17 when unsustainable valuation rises brought the party to a screeching halt. Last month, detached homes in Durham, Halton, York and Peel Regions rose on a year-over-year basis by 28.92%, 25.51%, 20.23%, and 19.16%, respectively.
History doesn’t repeat, but it sure rhymes.
“In 2017 and early 2018, the houses in the suburbs north of Steeles Ave. weren’t selling because they were priced around $1.2-1.3 million, especially in Markham and Richmond Hill, and the market just stopped in York Region,” said Morrison, “because people recognized that, if they were going to spend that amount of money, they might as well live in Toronto rather than the suburbs.”
Townhouses in the 905 also increased substantially, surging by 20.3% year-over-year in February to $845,518, and while that may still be somewhat digestible, the scarcity of townhouses suggests their purchase price will rise quickly. The average price of a condominium in Toronto’s suburbs only climbed by 5.4% last month from a year earlier to $563,587—a wholly reasonable number.
However, in a statement, TRREB pointed out that inventory levels remain low—doubtless a consequence of COVID-19—and that home price growth in 2021 is anticipated to be in the double digits. Moreover, if condo sales keep outpacing new listings, even that segment of the market, which endured a difficult 2020, will see significant price increases.
Additionally, TRREB argues that full demand has not yet returned to the housing market and that, when it does, there will be nowhere to go but up.
“The pandemic has not stunted GTA residents’ appetite for owning a home. Once the economy opens further and immigration into the GTA resumes, there will be an even greater need for housing supply,” TRREB CEO John DiMichele said in a statement. “Understandably, COVID-19 has been front and centre for policymakers. However, it will be important to build upon the proactive work already started by local and provincial governments to promote the development of a more diverse and affordable housing supply in our region.”
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