The GTA Housing Correction That Never Seems to Come

Toronto home prices are awfully high, and getting higher. This past April, for example, prices were up 10% year-over-year.

Detached home sales saw a 17 per cent spike across the GTA, with sales gains stronger (18.2 per cent) in the 905 regions than the City of Toronto (up 13.8 per cent.) The average price of a detached remained above $1 million in the 416 region, up 9.2 per cent year over year in April to $1,056,114. The average detached price was up 13.1 per cent in the 905 regions to $729,961.

Sales of semi-detached homes climbed by almost 15 per cent across the GTA and prices hit a new high of $727,875 (up 3.5 per cent) in the City of Toronto and $489,796 (up 10.5 per cent) in the 905 regions.

For years I've read and listened to economists claiming a housing correction in the GTA is imminent. This bubble has to burst, and every year someone predicts that is the year it'll happen. Every year comes and goes with housing prices rising.

A smart first-time home buyer would be wise to wait until the correction before entering the market, but is that so wise if the correction never comes? If detached home prices are up 17% this year, you'd have been far wiser to buy last year, unless your crystal ball works better than mine.

Is anyone out there waiting for the bubble to burst before buying a home in the GTA?

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Comments (16 - click here to join in!)

Mark H

At this point its a damned if you do damned if you don't argument.

When we bought our house outside Toronto 5+ years ago now, I was convinced we were pretty near the top of the bubble. I (mistakenly) locked in my Mortgage to a fixed rate a year after that again convinced that we were near the end of the low interest rates.

Wrong on both accounts. The value of my house (on paper) is up 21% and the interest rates have gone lower.

It is a no win situation for anybody out there save perhaps for those getting out of the market completely. I'd love to move to a bigger house, there's a nice profit to be taken from mine, but the prices are so high I'd be re-buying at the top of the market making my position even worse.

For new home buyers you can get a low mortgage rate but no property is really all that affordable. If you wait until housing prices go down then you'll likely be paying a lot higher interest rate.

May 5, 2015 @ 11:23 AM

Toronto Mike Verified as the defacto Toronto Mike

@Mark H

And if you buy in Toronto, you get hit with the two land transfer taxes that need to be paid in cash.

For what it's worth, and I'm no economist, I recommend those who want to buy in the GTA do it today. Don't wait for the correction.

It's like planting a tree. The best time was 20 years ago. The second best time is today.

May 5, 2015 @ 11:26 AM


Toronto Mike, first time commentar but someone who respects and appreciates your hard work on this site and the podcasts for a long time.

The bubble burst is imminent. Real estate is about timing. The reality is that people have been drawn to Toronto for work purposes or because they bought the "big city hype" all the hipsters have been doling out for the last 7-8 years.

But the numbers don't lie. Unemployment is slowly creeping up, and that's not including the massive increase in temporary, part -time and unstable work that the government uses to gloss over the hundreds of thousands of full-time jobs lost last year.

More people are working 2-3 jobs to try and pay a $4000-plus mortgage every month, leaving them with little money for groceries, bill payment, and forget any savings. Estimates are that the average Torontonian sends 80-89% of their earnings to pay the mortgage every month. This is simply not sustainable.

The thing is, the longer this goes, the more ridiculous prices get, the harder the crash will be. People keep talking about "adjustments" and "corrections", as if a total crash is not possible. But that's exactly what happened in 1987-1992.

When jobs disappear, housing prices are through the roof and almost 90% of income goes to a mortgage, there's more than just an " adjustment" on the way.

There was an economist on CBC about 2 months back who was saying some things that the President of the Bank of Canada and all the other sheeple on Bay St keep dismissing every few weeks. He conducted a study with a US university on all the real estate bubbles in the major north American cities (excluding Mexico City of course, because only the US and Canada exist, unfortunately).

The study tracked a period of 100 years and looked at 33 bubbles in cities like Montreal, New York, Chicago, LA, etc. Of all 33, a whopping 31 all experienced major readjustments to major crashes. In all of them, houses were overvalued by 40-60% and were dramatically re-set to market standard, which lost a lot of people their property and equity. The only 2 bubbles that hadn't burst at the time the study was conducted? Toronto 2000-2015 and Vancouver in the same period.

On the one hand, this would/will be awful for many Torontonians but on the other, many of them have been way too loose with their purse strings and helped get this whole crazy cycle started anyways.

If I had the capital, I would love to scoop up 2-3 income properties once the bubble bursts but having that kind of cash handy is rare.

May 5, 2015 @ 11:51 AM

Alison in Ottawa

I was newly married (24 years ago) when housing prices had fallen and interest rates were sky high and I worried that we would never be able to afford a house. We had many friends paying 12%-15% interest rates and waiting years for their home value to rise back up to what they paid for their houses years before the "fall". Luckily it didn't last too too long and we bought our first house, a semi-detached in the suburbs for about $150,000 at a 6.25% mortgage rate (my parents told me at the time that it was the same mortgage rate they had for their first house in the early 60's). We sold that house 12 years later for a very nice profit and entered the Ottawa market where prices do not rise as dramatically and houses sell more slowly than in the GTA. Our most recent mortgage rate is half what our first one was.....SO all in all I've been in the market for well over 20 years and all that time I've been warned that another correction is coming IMMINENTLY, in fact I hear that every 5 years when I renew my mortgage. I'm in a house I can afford and have no plans to interest is locked in and is pretty low for the next 5 years....I hope that IF it happens it will come and go before I need to renew and or sell.

May 5, 2015 @ 1:55 PM

Mark H

@Mike - I respectfully disagree. Even if we are not at the summit now we have to be close...and if you buy now, then when the correction does come you're immediately going to be under water on your Mortgage. At this point a 15% correction on the average Semi-Detached would destroy ~$110,000 of value.

Getting away from the other side of the argument that it is probably smartest right now to rent vs. buying and to keep that down payment invested in a strong market, if you really must buy, I would say try to find something in the 905 where perhaps you can still find 'deals'. 6 years ago we were in Mimico and loved it, but knew that we could not afford a home there and still manage to have any sort of life. We moved farther out, near a GO Train line and have been happy, and I paid half of what I would have in West Toronto.

I get that's not an option for some...I just do not get how anybody making a good middle class salary can afford these prices without their finances balancing on a knife edge.

May 5, 2015 @ 2:27 PM

Toronto Mike Verified as the defacto Toronto Mike

@Mark H

You may be right, and I sure don't pretend to be an economist, but I've heard "the correction will happen this year" every year for the past five. I feel like Charlie Brown trying to kick that ball.

May 5, 2015 @ 2:43 PM


@Christos $4000 per month? 80-90% of earnings? 2-3 jobs? Where did that data come from? I can't think of a single person I know that fits into any of those characterizations, so I'm curious where that information comes from. I think affordability is only one of the variables. I'd have to check the data, but I think at this point the GTA doesn't build housing quickly enough to absorb the uptick from GTA population growth which of course is what drives a lot of the upwards cost pressure.

That being said, there is likely to be a market correction driven by economic downturn or issues in other housing markets (Vancouver) and as Mark pointed out, people are going to continue to move further out of the core to try to find better value. I would think though that it is these areas that are going to be hit the hardest by any correction. Housing in good areas within 416 will still be desirable and competed for as will property in other desirable areas (ie along subway corridors). I would think the house in Brampton/Markham that is being duplicated (or will be duplicated at a lower $$) 5KM further out will be what brings those values down.

I think a good rule of thumb is that you always need to pay for where you're living (apartment, home, retirement residence). Apartment is where you're focused on short term (or watching cash flow), house becomes a long term investment where you're really only going to cash out when you downsize or move down market and of course retirement becomes sustain.

May 5, 2015 @ 3:21 PM


Hi Anonymous,

I would not use a personal "circle of friends" as any kind of indicator for economic prosperity. My circle did not have this issue 5 years ago, and suddenly 4 friends of mine have this issue.

Some reading material:

As for the $4,000 per month, go to any mortgage calculator (TD, Ratehub) and punch in the numbers. The average detached house price in Toronto (which uses the GTA boundaries), is $1 million. In the downtown core, from Lakeshore to Eglinton and Parliament to Lansdowne, you will be hard-pressed to find a house (many of which still require renovations), for under $1 million. Even if you have the cash to pay the 20% down payment ($200K), you're monthly mortgage is still $4,160.

I agree to an extent that Toronto has limited supply, but the same was true of Detroit in the '50's and '60's, until the big 3 automakers in the US stalled. Now you can buy a house for $500 in Detroit. Not making that up either. Obviously, Detroit is an extreme example, and Toronto is much more economically diverse than that, but it still makes you wonder if the economy is hit hard, how much of an adjustment is coming? It already happened in the '80's in the middle of a middle-class boom, waves of immigration and NAFTA... so who's to say it can't happen now?

May 5, 2015 @ 4:07 PM

twins from bolton

Moved out of Toronto 1999 & made a nice profit when 1st bought in 1985.
Bought a house in Bolton for $179K in 1999 & now valued at over $ 550K in 15 years & rising every year. Only problem is taxes at over $5K/year.
Still have a somewhat small mortgage compared to most at 2.25% interest. House will be paid off in 1.5 years.
25 minute drive to airport near where I work & wifey works locally.

It's worth the drive to ACTON - Sorry I mean Bolton.

May 5, 2015 @ 6:11 PM


Right after Lehman Brothers (bank) failed in the US, oil prices fell to around $35 dollars from $147. I knew people personally & professional who were underwater in their mortgages. The result was a great deal of stress with one having to work 2 jobs (7 days a week for two years straight) just to get "even". Others took in roommates or accepted the reality that "this is reality" for the next 5 years.

The housing market is a house of cards & the only thing holding it up is interest rates which are nearly 0%. And there is no more downside in interest rates only an upside. And you've got an economy where better than 50% of people have no savings & live pay to pay. It's very likely the money driving these purchases is money from parents.

Gordon Gecko once said "Bears make money, bulls make money, sheep get slaughtered". I think there are a lot of sheep out there. And when the market crashes, the government will be forced to bail out everyone. All those people who made stupid mistakes.

I've always lived by the adage that you spend a maximum of 3 times your income on a house. So if you make $100,000 a year, you buy a house for $300,000 max. If you can't afford one, you live in a condo or you move to a smaller town. I can't imagine being "house poor". No weekend trips, no travelling, living off processed food, drinking cheap beer, etc.

Personally I'm interested in this new Tiny House movement.

May 5, 2015 @ 6:11 PM


Hey--- my dumpster has been flipped 200 times and I come up smelling like roses each time.

May 6, 2015 @ 6:21 AM


I'm really surprised there aren't more comments on this considering how big an issue it is for both owners and buyers. I know a fee folks that have borrowed, I repeat borrowed money from parents in order to make an outlandish purchase. Not too many who were just handed cash by a parent.

The reality is there aren't that many parents who can afford to give their kids $20-50,000 for a down payment. These people are likely retired and need that money just as much if not more.

I think there are a lot of entitled younger people who dont always consider that viewpoint.

May 6, 2015 @ 7:19 AM


I recently read an article saying that parents giving their money to their children is what causing the jump in housing + also making alot of houses go into a bidding war..

The Wife and I are looking for a bigger space (we currently in Maple) and we went to two open houses in the last house sold for 50k more then asking and the other almost 100K more. The second being smaller then our current house but had two garages and a nice size backyard..its crazy out there..

May 6, 2015 @ 2:34 PM

twins from bolton

House on our street early March went up for sale at Noon on a Friday & by 11PM - same day sold for $75M more than asking price with 2 other offers on the table.
The only downfall is that house prices in Bolton have risen substantially last 4-5 years & property taxes almost doubled in last 10 to avg. over $5300.00/year.

May 6, 2015 @ 5:57 PM

Rick C in Oakville

I wonder if Toronto now has the New York effect? So many people want to be in the Toronto and GTA for work etc this may only fuel the craziness. Only real killer would be interest rates rising, it put a lot of people I know in the 80's in a real terrible place financially. One paid 17%, only paying the interest for 3 or 4 years.

May 6, 2015 @ 6:52 PM


I have owned 10 houses over the past 50 years in the GTA with renting in there for a few.
I have never lost money on housing, I struggled a few time with cash flow but its better than watching someone take your cash while renting. Start small with a condo or move up to a duplex or triplex.
In a few years you will gain equity and you can look for the house of your dreams.
One rule of thumb I use to buy a rental is never buy anything you would not live in yourself.
I do not own any rentals now but I own a single family dwelling outright, it does have a basement apt. but its empty and if I run into cash flow trouble I can rent it out to improve my cash flow.

As long as interest rates are low prices will continue to clime. When they go back up near 5% or more then a price correction will take place.

August 21, 2015 @ 9:41 PM

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