Is Toronto real estate cheaper than Vancouver? This is the million-dollar question.

As conditions shift in the current housing landscape, this has become a common question in today’s Canadian real estate market. While some places shift into a buyer’s market and others maintain their seller’s market status, prospective homeowners, investors, and analysts are attempting to determine what trajectory these major urban centres are heading as the country continues to move on from the pandemic and contend with higher interest rates.

The most effective tactic is to look at benchmark or average prices.

According to the Real Estate Board of Greater Vancouver (REBGV), the MLS® Home Price Index (HPI) composite benchmark price for all residential properties in Metro Vancouver was a little more than $1.2 million in July, up 0.5 per cent from the same time a year ago.

In Toronto, the benchmark price for all homes was just below $1.15 million in July, data from the Toronto Regional Real Estate Board (TRREB) show. This was up 0.5 per cent from July 2022.

So, the chief price measurements are essentially the same in Canada’s two largest housing markets.

Now, let’s take a deeper dive into the state of the Toronto and Vancouver real estate industries.

The State of Toronto Real Estate

TRREB’s benchmark composite price indexes show million-dollar homes everywhere, be it the heart of Toronto or throughout the Greater Toronto Area (GTA). Here is a breakdown of the major GTA markets:

  • Ajax: $1.063 million
  • Burlington: $1.044 million
  • Markham: $1.429 million
  • Mississauga: $1.105 million
  • Oakville: $1.406 million
  • Richmond Hill: $1.547 million
  • Whitby: $1.13 million

Of course, there has been a stark difference in prices between a single-family detached home and a townhouse or condominium. The benchmark price for a detached property is $1.16 million. In July, the benchmark prices for townhomes and condominiums were $848,000 and $728,000, respectively.

Here is a look at the three main property categories in Toronto:

  • Detached: $1.765 million
  • Townhomes: $921,500
  • Condos: $761,500

That said, the Toronto real estate market is experiencing a trifecta of benefits: growing home sales, rising new listings, and increasing home prices. This is occurring in a climate of climbing borrowing costs, a cooling labour market, elevated inflation, and a slowing economy.

“Home sales continued to be above last year’s levels in July, which suggests that many households have adjusted to higher borrowing costs,” said TRREB President Paul Baron in a statement. “With that being said, it does appear that the sales momentum that we experienced earlier in the spring has stalled somewhat since the Bank of Canada restarted its rate-tightening cycle in June. Compounding the impact of higher rates has been the persistent lack of listings for people to purchase compared to previous years.”

At the same time, uncertainty regarding the overall outlook, whether interest rates or the labour market, has resulted in a different type of summer than in previous years, says Jason Mercer, the chief market analyst at TRREB.

“Over the long term, the demand for ownership housing will remain strong on the back of record population growth,” Mercer said. “However, many homebuyers will continue to be on the sidelines in the short term until the direction of monetary policy and the economy becomes clearer.”

Ultimately, supply will struggle to keep up with demand moving forward, especially as public policymaking on the housing front disappoints and population growth becomes “unsustainable if people can’t find an affordable place to live.”

Additional supply could come online as new housing construction activity has ballooned this year. According to Canada Mortgage and Housing Corporation (CMHC), there were 5,200 housing starts in July, up 52 per cent from the same time a year ago. Year-to-date, housing starts have exceeded 30,000, up 35 per cent from the first seven months of 2023.

The State of Vancouver Real Estate

The three main property categories are slightly more expensive in Vancouver than they are in Toronto:

  • Detached: $2.012 million
  • Townhomes $1.104 million
  • Apartments: $771,600

Meanwhile, the Vancouver real estate market is widely expected to keep witnessing increasing home prices as strong demand will contrast with lower housing inventories.

Home sales soared nearly 29 per cent year-over-year in July, totalling 2,455 units. While this was more than 15 per cent below the decade seasonal average, market analysts argue that residential property transactions continue to be robust in the face of the Bank of Canada’s (BoC) rising interest rates.

“What’s interesting to see in the current market environment is that, while the Bank of Canada rate hike this July was only a quarter of a per cent, mortgage rates are now at the highest levels we’ve seen in Canada in over ten years,” said Andrew Lis, REBGV director of economics and data analytics, in a market report. “Yet despite borrowing costs being even higher than last July, sales activity surpassed the levels we saw last year, which I think says a lot about the strength of demand in our market and buyers’ ability to adapt to and qualify for higher borrowing costs.”

Like Toronto, Vancouver is seeing a jump in supplies, with new listings climbing 17 per cent year-over-year to 3,975 units. This is five per cent below the ten-year seasonal average of 4,902 units.

New housing construction activity has also been robust in the Vancouver real estate market. In July 2023, housing starts homed in on 3,000, up 49 per cent year-over-year. Year-to-date, housing starts have topped 21,000, up 47 per cent from the same span a year ago.

What’s Next for Toronto and Vancouver Real Estate?

At this point, the Bank of Canada’s next policy decision might not have much impact on the Toronto or Vancouver real estate markets. If the central bank raising the policy rate to five per cent since early 2022 has not decimated the two largest Canadian cities, another 25-basis-point rate hike might not influence these cities either. In fact, supply trailing demand might exacerbate affordability challenges more than monetary policy.

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