Ontario Housing Market Report

Home prices in Ontario were flat month-over-month as the housing market continued to cool down for the summer season. Home sales were down by more than 20% from the March peak in most markets in Ontario, signalling a pause to the past few quarters of real estate exuberance. However, the drop in activity has not had a significant impact on home prices as average prices in the province remained strong with only a slight 4% decline since March highs. They are still up by 25% compared to the same time last year.

Housing markets in Ontario are likely to remain negative-to-neutral for the next few months until the real estate season begins later in Fall 2021.

From a city-level comparison, most housing markets in Ontario have seen the same general patterns over the past year. Home sales quickly rose after the initial COVID-19 impact to reach new highs in Fall 2020, paused during Winter 2020, and peaked again in Spring 2021. Home prices for all property types have generally seen significant increases compared to pre-COVID levels with larger property types (i.e. detached and semi-detached properties) seeing 20+% annual price appreciation. Condos have generally fared worse with price appreciation of less than 10% in most markets. The housing markets in Ottawa and Hamilton have been exceptions to this rule with 21% and 32% year-over-year price growth for condos, respectively.

Home prices in the City of Toronto have remained more neutral compared to the prices in the adjacent suburban regions such as Mississauga, Brampton, or Markham. This is likely due to the movement of demand to larger properties outside the city as well as the larger market share of lower-priced and lower-demand condos.

The expansion of the CMHC First-Time Home Buyer Incentive in the Toronto CMA, which spans most of the Golden Horseshoe Region, is likely to provide a small boost to housing demand for sub-$700K properties. In addition, the CMHC recently adjusted their standards for mortgage insurance, broadening the eligibility to allow more levered and lower credit applications. While insured mortgages are becoming a smaller proportion of total mortgage origination volume, this is still likely to help marginal buyers enter the market.

Counteracting these changes, the Office of the Superintendent of Financial Institutions (OSFI) and the Ministry of Finance recently raised the benchmark rate for the mortgage stress test. This is expected to limit the affordability of both insured and uninsured borrowers.