JUNE 2016 STILL STRONG

June 3, 2016 -- Toronto Real Estate Board President Mark McLean announced that there were 12,870 home sales reported through TREB's MLS® System in May 2016. This result represented a new record for the month of May and a 10.6 per cent increase over the same period last year. In contrast, the number of new listings was down over the same time frame by 6.4 per cent. The decline in listings was experienced in both the low-rise and condominium apartment market segments.

"Whether we're talking about existing homeowners or people looking to purchase for the first time, there is no shortage of buyers in the marketplace today. So, while the record number of home sales through the first five months of 2016 is not necessarily surprising, it does sometimes mask the larger story in the GTA: the shortage of listings, which has resulted in strong upward pressure on home prices," said Mr. McLean.

The MLS® Home Price Index Composite Benchmark was up by 15 per cent year-overyear in May 2016. Similarly, the average selling price for all home types combined was up by 15.7 per cent over the same period. Low-rise home types, which remained in short supply in many GTA neighbourhoods, experienced the strongest price growth.

"Widespread competition between buyers of singles, semis and townhouses across the GTA has underpinned the robust annual rates of price growth experienced so far this year. With this said, however, it is also important to understand that tighter market conditions for condominium apartments have resulted in price growth well above the rate of inflation in this market segment as well," said Jason Mercer, TREB's Director of Market Analysis.

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In Toronto areas, rapidly rising house prices and strong mortgage credit growth are increasing the share of highly indebted households. In these two markets, it is unlikely that economic fundamentals will justify continued strong price increases.

“This suggests that prospective homebuyers and their lenders should not extrapolate recent real estate performance into the future when contemplating a transaction,” said Governor Stephen S. Poloz.

The vulnerabilities described in the FSR could propagate shocks throughout the financial system if a major event were to trigger one of the identified risks. The most important continues to be a severe recession and an ensuing sharp increase in unemployment that impairs debt service and leads to a broad-based correction in house prices. The probability remains low as the economy continues to grow, supported by continued expansion in the United States, and accommodative monetary policy and fiscal stimulus in Canada.

Other key risks identified are a sharp increase in interest rates due to higher global risk premiums, stress emanating from China and other emerging-market economies, and a prolonged weakness in commodity prices.

source Bank of Canada