GTA market correction has ended says RE/MAX

The impact of the mortgage stress test is easing and the Greater Toronto Area’s housing market is showing growth – signalling the end of the market correction.

That’s the assessment from RE/MAX INTEGRA, Ontario-Atlantic Canada Region which says that demand for single-family homes is on the upswing and average prices are starting to rebound.

“The worst is now behind us. Pent-up demand will be a factor in the coming months, as homebuyers – many of whom delayed their purchasing plans – are entering the market,” says Christopher Alexander, the firm’s EVP and Regional Director.

He adds that momentum is expected to build towards the traditional fall market and remain buoyant for the rest of the year.

First-time buyers are leading the charge
Notable in the market is the participation of first-time homebuyers in the single-family detached $600K-900K sector.

There has been a 22% rise in buyers of these homes since June (4,086) but inventory is low in the 416 and may see more buyers searching in the 905 area where inventory is greater.

Luxury homes are also seeing growth with a 16% year-over-year rise in sales of single-family homes over $2 million.

Rollercoaster for market
“It’s been a real roller coaster for single-detached properties in the GTA over the past 32-month period,” explains Alexander. After reaching peak levels in early 2017, market-cooling tactics such as Ontario’s Fair Housing Plan in April, the federal government’s mortgage stress test expansion in October of 2017, and the Bank of Canada’s interest rate hike in January of 2018 created a great deal of uncertainty in the market.”

Although the stress test for high-ratio mortgages, introduced in 2016, had little impact on the market, Alexander says the subsequent interventions certainly did.

But he adds that the policy changes were needed to cool the increasingly hot market.

“The pace was simply unsustainable,” says Alexander. “While government intervention appeared heavy- handed at the time, in retrospect, the measures put in place served to cool down a wildly overheated market.”

Floodgates are open
Alexander says the future is bright for the GTA’s economy with population and employment gains helping to boost the housing market.

“After an extended period of housing market inertia, the floodgates are breaking open,” he says. “Upward movement in detached housing values and the threat of additional interest rate hikes in the future are prompting homebuyers to get off the fence and into the market. Rising consumer confidence, job security and an economy firing on all cylinders should continue to support healthy home-buying activity in the GTA for the remainder of the year and into 2019.”