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From 30 per cent drops to 12 per cent jumps — why some GTA real estate markets are hot while others not

In May, home prices in the GTA showed which areas are hot and which are not.

Across the board, although home prices rose 9.4 per cent on an annual basis, May was the third consecutive month-over-month drop, down around three per cent from April, according to the latest report from the Toronto Regional Real Estate Board (TRREB ).

But even within the boundaries of the city of Toronto, some areas were seeing large increases while others slumped.

The Bridle Path, a tony area in North York, saw a 12 per cent jump in its average home price from April to May, while West Midtown — from St. Clair Avenue West to Eglinton Avenue West, and Dufferin Street to Yonge Street — saw at 30 percent drop.

A significant reason for the variability in home prices across the GTA is that some homebuyers are more reliant on higher mortgages than others. If a homeowner takes out a larger loan from the bank, they’re more sensitive to interest rate hikes, real estate experts say.

Typically homeowners in luxury areas such as the Bridle Path which saw average home prices hover around $3.5 million aren’t leveraged by the lender as highly as some other neighborhoods such as West Midtown which saw average home prices around $1.7 million.

Interest rate hikes pushed down the average sale price of all houses and condos to $1.21 million, a $121,000-drop from the February market peak of $1.33 million.

“The Toronto or GTA market is a heterogeneous mix, which is why you’re seeing such a difference from region to region,” said Brendan Powell, broker of record at Bspoke Realty Inc.

Other regions saw tremendous price gains from fall 2021 to February and March of 2022 but then rapidly fell from the peak. “The pendulum swung too far and now we’re seeing a rebalancing,” Powell said.

The pandemic also resulted in more people moving further out of the city to buy bigger property with more green space, which artificially ratcheted up prices, he said. For example, the average price of a detached house in the 905 region dropped by almost $94,000 between April and May compared to the city of Toronto, which saw those homes decline roughly by $33,000.

“Houses in Durham were averaging to $1.3 million a few months ago, so why buy a home so far out of the city when you could afford something similar in the city?” Powell said.

“Many of the artificial pressures that drove up prices outside of the city are now winding down.”

Rosedale-Moore Park and St. Andrews-Bridle Path-York Mills

In St. Andrews-Bridle Path-York Mills area, TRREB reported a 12.71 per cent increase in average home price from April to May, from $3.03 million to more than $3.4 million.

Rosedale-Moore Park saw a similar increase in the average home going from $2.3 million in April to close to $2.6 million in May for an 11.48 per cent increase.

Karen Yolevski, Royal LePage’s chief operating officer, corporate brokerages, said these luxury markets are more immune to interest rate hikes and in some cases cash deals are being conducted, meaning, “Interest rates don’t have a bearing on that.”

Those markets are also less reliant on institutional money, said Danielle Demerino, a Toronto-based real estate agent.

“In Rosedale, the homeowner is using more of their own money, so if the home costs $4 million, around $1 million is mortgaged,” she said. “They’re not as heavily leveraged by the bank or lender.”

The average income for a household in Rosedale is $650,000 with the average detached four-bedroom home costing around $4.5 million, meaning the income can support more expensive properties and are less likely to decrease in value, she said.

Bradford West Gwillimbury

The average home price increased by 12 per cent from April to May with home prices going from $1.16 million to more than $1.3 million.

The region has significant infrastructure growth with the Ontario government providing more than $2.5 million in local infrastructure in conjuncture with the Bradford Bypass — a proposed 16.2-kilometre controlled-access freeway connecting Highway 400 and Highway 404.

“These infrastructure projects will allow the region to see continued growth as there will be better access to the GTA with the bypass,” Yolevski said.

West Toronto Lakeshore and West Midtown

West Toronto Lakeshore which includes Roncesvalle-High Park-Swansea area saw a significant decrease of 21.36 per cent in the average home price from $1.7 million in April to more than $1.3 million in May.

West Midtown saw an even bigger drop by 31.15 per cent for the average home price from $2.6 million in April to just over $1.77 million in May.

The main factor for the decrease is in these neighborhoods homebuyers are more reliant on institutional money, said Demerino.

“They’re more affordable neighborhoods than Rosedale or Forest Hill. You get the same kind of hidden without spending $4 million on a home,” she said. “But as mortgage rates rise, the cost goes up, it’s less affordable and prices fall to accommodate it.”

Prices in the area also rose by almost 20 per cent from the fall of 2021 to February 2022. The home prices weren’t sustainable and quickly came down from the peak, she added.

Burlington

The average home price in Burlington dropped by 14.75 per cent with the $1.3 million in April to more than $1.1 million in May.

Conrad Zurini, a realtor with Re/Max Escarpment Realty Inc. who works in Burlington, said the city’s northeast, which hugs a border with Oakville, and the city’s southeast, which is higher-end, have both done “extremely well.”

However, the rest of Burlington — and as it goes closer to Hamilton — has more inventory and saw a drop in sales. The smaller semi-detached homes, which have one or two stories and townhouses haven’t done as well as first-time homebuyers or newer prospective buyers wait to see how the market settles.

“Those entry-level type properties aren’t doing as well, but the higher-end market isn’t seeing an issue,” Zurini said.

People from Oakville also migrate to Burlington, as it’s more affordable, helping home prices in the northeast part of the city.

But year-over-year, average home prices rose 14.48 per cent from May 2021 to May 2022, according to TRREB.

Zurini said he expects to see a leveling out of prices in Burlington over the summer as the market stabilizes.

“One-third of the market in Burlington is still a seller’s market,” he said. “It’s cheaper to buy today than it was in February and the home will still appreciate significantly in value when looking at it year-over-year.”

With files from Tess Kalinowski.

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