LOW SUPPLY, STRONG PRICE GROWTH CONTINUES

A total of 8,014 resale transactions were recorded in the GTA in February, up by a sound 5.7% versus the 7,583 units sold in February 2016. Once again, volume growth was spearheaded by the condo apartment segment – which recorded a 15.9% increase in volume versus last year. The low rise segments showed more modest growth rates or even declines, as per the following; townhomes (+6.5%); detached homes (+3.0%); and semi-detached homes (-9.5%). Sales volume continues to be constrained by woefully weak supply levels throughout the entire market. The number of active listings in the market at the end of February declined by a staggering 50.5% versus last year (5,400 units versus 10,902 units in February 2016).

This level of inventory is alarmingly low by all historical standards (lowest in a decade-and- a-half) and is creating both a “perfect storm” for potential sellers and unprecedented level of stress for potential buyers. Given this inventory situation, it is not surprising that the February MLS® Home Price Index (HPI) Composite Benchmark Price was up by a whopping 23.8% versus last year. This index factors out sales mix changes of the various housing types and is therefore the best indicator of the true rise in prices. The average selling price in February was $875,983 – up by an even more dramatic 27.7% versus the $685,738 average price in February 2016. All major home types experienced massive double-digit average price gains versus last year: detached homes (+32.5%); semi-detached homes (+29.4%); townhomes (+28.0%) and condo apartments (+19.2%). Unless inventory improves substantially in the months ahead, expect prices to continue their gravity-defying trend. Hopefully policy-makers will turn their attention toward improving supply rather than dampening demand in order to “cool” the market.