Toronto real estate prices are the most overvalued in decades, but not all markets are equal. Toronto real estate is overvalued, prices were 41.2% overvalued in Q1 2022, a finding consistent with data we shared from Moody’s Analytics (43.6%). Most of the region is overvalued, but the bulk of this froth is located in Toronto’s suburban areas.
Canadian real estate has made an unusual deviation from the trend, making it clear this has been a bubble. Since 1980, BMO estimates home prices have increased 3% per year in real terms. The bank says this roughly reflects real (inflation-adjusted) wage growth and interest rates. That changed recently.
Over the past two years, home prices have climbed 38% above trend, noted the bank to investors. Prices have jumped over a third in the past two years, going waaay past the baseline trend. Deviations from the trend are better known as overvaluation, and tend not to stick around too long. Canada has never seen such a large gap above the trend — at least in the past 40 years.
It’s not just the downtown core, either, with peripheral markets in the province continuing to see prices skyrocket to unseen levels, and homes in even small-town Ontario now on par with L.A. and other larger and far more desirable cities.
Though it’s obvious the region’s real estate is not actually worth as much as it’s going for these days, the extent to which it is overvalued at this point is quite shocking.
Canadian real estate estimated as 38% overvalued on average. In some GTA regions, up to 60-70% overvalued. If you bought a house in the last year or two in Canada, you’re screwed.
New figures from BMO (via Better Dwelling) show that while Canadian homes in general are about 38 per cent overvalued, the issue is the worst in Ontario, where home prices are about 55.4 per cent overvalued as of the first few months of this year.
What’s most interesting is that in Toronto specifically, this number is lower than the province as a whole — at 41 per cent — while in the surrounding suburbs, it’s far higher.
Cottage country areas like Muskoka, the Kawarthas, and Haliburton are approximately 64 per cent overvalued, the bank says, while the suburbs just outside of the GTA have the highest levels of overvaluation.
Properties in “exurb” areas like London, Barrie, Niagara, Guelph and Kitchener-Waterloo — that is, not the suburbs directly around the city, but just beyond — are now around 74 per cent more expensive than what they’re worth.
While B.C., Quebec and Atlantic Canada all join Ontario in having substantially overvalued housing markets, prospective Canadian buyers can still get some bang for their buck if they’re willing to move to Alberta or Saskatchewan, which are considered undervalued.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
Is Toronto real estate overvalued?
