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Market Watch – Toronto and Vancouver Home Sales Rush Ahead of The New Mortgage Rules

Home sales climbed in October in both Toronto and Vancouver as buyers moved to lock in purchases in Canada's most expensive cities before new mortgage stress-testing rules take effect in January.

The Toronto Real Estate Board said home sales in the Greater Toronto Area climbed 12% in October, marking the biggest month-over-month growth in sales since Toronto's overheated housing market hit a sales peak in March. October sales were 27% lower than October last year, however, when the GTA had record sales.

TREB said the average GTA home sold for $780,104 in October, up 0.6% from September and 2.3% higher than the same month last year.

Toronto's housing market began a modest recovery in September and continued to grow slowly in October, suggesting the GTA has at least halted the sharp downturn in house prices that began in May after the provincial government announced its Fair Housing Plan changes, including a new foreign-buyer tax.

Greater Vancouver, by contrast, has fully shrugged off last year's market downturn, with the volume of sales climbing 35% in October compared with the same month last year and jumping 7% compared with September. The Real Estate Board of Greater Vancouver said sales in the region were 15% higher than the 10-year average for October.

The benchmark sales price for all homes in Greater Vancouver was $1,042,300 in October, up 12% compared with October last year and an increase of 0.5% over September.

Jason Mercer, TREB's director of market analysis, said the Toronto market is continuing to follow the recovery pattern of the Vancouver region, which saw sales fall after the B.C. government introduced a foreign-buyer tax in August 2016, then begin to recover by January this year.

The latest lending restrictions announced by the Office of the Superintendent of Financial Institutions (OSFI) on Tuesday, could also slow interest rate increases next year if the Bank of Canada pauses to assess the impact of the new borrowing rules, he said.

Under the new rules, even home buyers who don’t require mortgage insurance because they have a 20% downpayment, will have to prove they can make meet their commitment if interest rates rise above the five-year benchmark rate published by the Bank of Canada or 2% higher than their contracted mortgage rate, whichever is higher.

New mortgage rules in effect Jan.1 will have a significant effect on the market. Many real estate offices in Toronto saw home sales climb in October not only compared with September but also compared with October last year. 

The biggest factor driving sales has been the large increase in active home listings in the market, which could also lead to sales growth in November compared with October, TREB reported 18,859 homes were listed for sale in the GTA as of Oct. 31, up 78.5% from 10,563 homes a year ago.

The condominium sector remains the strongest segment of the housing market in both Toronto and Vancouver, while detached home sales have lagged.

In the GTA, condos sold for an average of $523,041 in October, up 0.5% over September and 21.8% higher than October last year. The average detached home sold for $1,008,207 in the GTA in October, a drop of 0.7% compared with September and a decline of 2.5% compared with a year ago.

The price for detached houses in Greater Vancouver averaged $1.8-million last month, up 12.8% from $1.6-million in October 2016. Prices for townhouses in the region averaged $892,349 in October, up 23.2% from a year earlier, while the average price for condos sold reached $687,053 for a 22.2% gain year over year.


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