˙ Feb 12, 2018

New report shows the extent of home value gains in Ontario

New report shows the extent of home value gains in Ontario

If you've lived in Ontario for more than a decade and had your house on the market at any point since then, chances are you made a great deal more than your original purchase price, new numbers from real estate firm Re/Max suggest.

Stretching back to 2007, Ontario's six largest housing markets have seen home values soar, in the high double to even triple digits, according to recent figures from the report. For example, in the Hamilton-Burlington region, properties that in 2007 were priced at approximately $274,800 have since climbed to more than $576,400 by 2017 - a 110 percent increase. Meanwhile, in the Greater Toronto Area, the percentage jump has been even more substantial, up an impressive 119 percent to $822,681 from $376,236 a decade earlier.

Christopher Alexander, executive vice president and regional director for Re/Max' Ontario-Atlantic division, chalked up the dramatic upsurge to affordable mortgage rates.

"Lower borrowing costs helped to jumpstart the province's real estate engine, creating one of the most dynamic housing markets in recent history," Alexander explained. "For existing homeowners, especially those who purchased early in the decade, the equity gains realized have exceeded all expectations."

Five months and counting of home sales growth
The frenetic pace at which houses have been snapped up is perhaps the most salient takeaway from Canada's real estate scene over the past several years. National home sales rose five of the year's last six months, according to the Canadian Real Estate Association, up 4.1 percent in December on a year-over-year, unadjusted basis. Combined with dwindling inventory, asking prices have remained robust, up more than 7.5 percent in the GTA and in excess of 13 percent in Guelph.

Re/Max' Decade in Review report helps illustrate just how many properties have been purchased in recent years, particularly in Canada's most-populated province. Unit sales in Hamilton-Burlington totaled 16,000 in the 2016 calendar year, and in the nation's capital city, home sales totaled 17,000 in 2017, the data shows. Leaving both cities in the dust was Toronto, where between 2015 and 2016, more than 100,000 houses were snatched up by area residents.

Many Toronto buyers looking elsewhere due to cost concerns
Although the appreciable uptick has no doubt been an encouraging development for sellers, it's presented a predicament for buyers on a budget, particularly those who are in the market for the first time. Alexander noted many city dwellers have headed to more rural areas for price relief, only to find fewer options than they had hoped.

"Limited inventory was reported in Hamilton-Burlington, Kitchener-Waterloo, London-St. Thomas, Windsor and Ottawa, as first-time buyers, especially those interested in single-detached homes, ventured outside of the Greater Toronto Area," Alexander said. "At one point, one in every four buyers in Hamilton-Burlington was from the GTA."

Not only have would-be buyers had other residents to compete with, they're also up against investors, looking to take advantage of the unprecedented price growth, the report detailed. Combined with low interest rates and a rising population, it's led to a perfect storm of home values in Ontario.

The question is whether these gains will continue. In Alexander's estimation, they will, but at a more measured pace.

"More stringent lending criteria and the new government stress test will present some challenges in the short-term, but we believe homeownership will continue to be top of mind with Canadians in the long run," Alexander predicted.

A surge in construction activity has the potential to ease home value growth further, but starts have gotten off to a rather slow beginning this year. Builders broke ground on roughly 224,865 units in January on seasonally adjusted annual rate basis, according to the Canada Mortgage and Housing Corporation. That's down slightly from a trend measure of 226,346 in December.