GTA home prices are expected to rise 4%

Market has geared back up as economy reopens following virus-related shutdown

Royal LePage is forecasting a four per cent annual rise in Toronto area home prices in 2020, up from the 1.5 per cent gain it was projecting at the end of the first quarter.

The new forecast is based on the 10 per cent year over year growth in aggregate GTA home prices in the second quarter of this year, which have seen sharper than anticipated gains, said CEO Phil Soper.

The region was on track to double-digit price growth at the start of the year and, although COVID-19, halted sales for a few weeks, the market has geared back up as the economy reopens.

Believing there are bargains to be had and bearing in mind historically low interest rates, consumers have jumped back in. But the surge won’t last, he said. “This release of pent-up demand will result in the market overstepping itself, in prices surging on a very short-term basis. That demand will be satisfied and we’ll need to settle into the new nearnormal,” said Soper.

Until there is a vaccine for COVID-19, he doesn’t expect the economy will return to the pace of last year.

Sellers have been slower to return to the real estate market. That has reduced supply in a region that was already facing a housing shortage, pushing prices up, he said. But those sellers are coming back online and that will likely slow price appreciation in the second half of the year.

“This first-time buyer group was expecting bargains that never appeared. They weren’t expecting prices to get worse, so some will leave the market this summer. But they will return in September and October when things have cooled down,” said Soper.

“At that time there will be fewer multiple offers. We’ll be talking about flat prices as opposed to double-digit price increases,” he said.

On Tuesday, the Toronto Region Real Estate Board said it was still possible that GTA home prices will rise up to 10 per cent this year, based on growing employment and low interest rates. The board cautioned, however, that a second wave of COVID-19 or trade impacts from the pandemic could stunt that projected growth.

Soper doesn’t agree that the upward trajectory of the second quarter will necessarily hold. But he also doesn’t support the grim forecast by Canada Mortgage and Housing Corp. (CMHC), which has said home prices could drop seven to 18 per cent before the market recovers in late 2022.

“The only way an extreme scenario like that would come about would be if people started unloading their houses and there wasn’t the demand there to purchase them and I just can’t see that happening,” said Soper.

Royal LePage’s House Price Survey on Thursday, showed two-storey home prices climbed 10.7 per cent in the second quarter to a median of $1.05 million. Bungalows rose 6.4 per cent to $852,260. Condos also continued to appreciate with a median price rise of 9.3 per cent year over year to $599,235.

The biggest aggregate home price jump was in Mississauga where the median price rose 13.5 per cent in the second quarter to $851,858. Prices climbed 11.9 per cent in Markham and 10.2 per cent in Toronto in that period. Barrie, Burlington and Whitby all saw price gains under six per cent.

Nationally, home prices rose 6.8 per cent in the second quarter to $673,072. Royal LePage is forecasting a 2.3 per cent increase in home prices by the end of the fourth quarter. It’s forecast is based on proprietary data.