'Worrisome' Toronto real estate market drives 'unusually large' national price increase

Foreign buyers tax, expanded rent control coming to Ontario

An "especially worrisome" Toronto housing market helped push Canadian home prices to their largest February increase ever, according to the latest index from Teranet-National Bank.

National home prices jumped 1.0 per cent last month, a gain that was "unusually large for the season," according to the report, and the biggest February increase in the 18-year history of the Teranet-National Bank National Composite House Price Index.

Toronto led the way with 1.9 per cent jump in home prices. Hamilton and Vancouver rose by 1.4 per cent and 0.9 per cent in Ottawa-Gatineau. Home prices declined in the seven other Canadian cities surveyed.

Toronto affordability problem

The index is the latest to raise concern about the Greater Toronto Area's red hot-real estate market.

"The Toronto market is especially worrisome," National Bank senior economist Marc Pinsonneault said in a release.

"In a city where apartments account for only 26 per cent of home sales, affordability of other types of dwellings has become an acute problem," he said.

Last week, Ontario's Finance Minister Charles Sousa publicly mulled the idea of a foreign buyer's tax to cool the GTA real estate market.

The average price of a detached home in Toronto is more than $1.5 million, according to the Toronto Real Estate Board. In surrounding areas, the average price of a detached home has now surpassed $1 million.

British Columbia has imposed a 15-per-cent tax on foreign nationals buying real estate in the Vancouver area.

Market 'dichotomy'

But the Teranet-National Bank data paints a much different real estate picture outside of the GTA and Vancouver.

In February, a traditionally slower month for home sales, prices dropped 1.9 per cent in Halifax, 1.3 per cent in Calgary and 0.2 per cent in Montreal.

"In order to accurately assess the Canadian home resale market, it is essential to recognize the dichotomy between markets like Toronto, Hamilton and Victoria, where price growth is in the double digits, and other markets where the progression of home prices has been much more moderate, if not negative," Pinsonneault said.