Toronto Homes Hit $1 Million, and a Housing Gap Emerges

Home prices in the GTA hit a major milestone last week that every economist and real estate analyst buzzing, and it’s all stemming from monthly figures recently released by the Toronto Real Estate Board.

The report, revealed that the GTA saw home sales increase by 11% from the same time a year ago, what Jason Mercer, an economist for TREB, called a sign of “the robust demand for ownership housing in the GTA.” But the figure that caught everyone’s attention is the average selling price of a detached home in the City of Toronto, which had eclipsed the $1 million mark, reaching an average of $1,040,018, up 8.9% from the same month a year earlier. The prices for all types of homes, including condos and semi-detached homes, were up 7.8% in February, bringing the average overall sales price for a home in Toronto to $596,193. The sale of detached homes went up as well, up 16.9% in Toronto and 13.9% across the GTA.

Paul Etherington, president of the Toronto Real Estate Board, said in a press release:

“Even with the record low temperatures last month, we still saw an increase in the number of people purchasing homes in the GTA. This speaks to the importance households place on home ownership and the fact that buyers continue to view ownership housing as a quality long-term investment in which they can live.”

As Susan Pigg of The Toronto Star reminds us, the average sale price for a detached in Toronto briefly touched on $1 million last April, but had dropped near the end of the month to $965,670, and stayed around there for the past 10 months.

The TREB report revealed something else of interest. The average price of a condo in the 416 region, surprisingly, went down 0.9% year-over-year to $369,655 in February, despite the fact that condo sales went up 12.4% from a year earlier. Daniel Tencer of The Huffington Post refers to this differential as Toronto’s new housing gap: Toronto’s condo prices continue to drop while single-family home prices escalate. Tencer makes a compelling and logical argument to account for this gap. He notes that, even though demand for condos appears to be rising, supply continues to increase at a far more accelerate pace, with the number of unsold condos in Toronto hitting a 21-year record high in January, with an additional 10,368 new condos hitting the market that month. But the market for single-family homes is entirely different story, with a complete lack of new developments near commuter routes. Developers instead have been opting to build more concentrated housing complexes to maximize on the available space.

Michael Babd of The Globe and Mail refers to this shortage as a “relative scarcity” of detached homes, a term he borrows from senior economist Robert Kavcic of BMO Nesbitt Burns. According to Kavcic, detached homes only accounted for a third of new constructions completed in Toronto in 2014. According to Kavcic:

“While the share of detached completions has begun to edge up, it hasn’t matched the increase in demand, and development restrictions will only compound the scarcity as growth in this population group accelerates further through the end of the decade.”