The Year in Toronto Real Estate: 2012 Roundup

Posted by: Elise Stern, Created date: January 7, 2013

Now that we’re at the very tail end of the year, it’s time to take a critical look back at the year in Toronto real estate. It’s been a tumultuous year, particularly in the latter half of the year after the new CMHC mortgage rules were put into effect: now, at the end of the year, we find ourselves in a shifting market. Here’s our take on how we got where we are now – and in my next post, I will discuss where we might be going in the next 12 months.


The Canadian Real Estate Market Overall in 2012


Real estate website BuzzBuzzHome has an excellent roundup of Canadian housing statistics in general for 2012. The parabolic curve of this year’s market, topping out in April and proceeding to slide downward following the announcement of the new CMHC mortgage rules (which we discuss below), is similar to what we’ve seen in the Toronto market in particular.


Among the interesting findings that Buzz brings to light: one-person households now make up over a quarter of Canadian households (the most ever – a statistic that bodes well for the ever-smaller condos being built in urban centres). Over two-thirds of condo purchasers are not aware that their condo fees can increase any time. Rental vacancies are up slightly across Canada, and Canadian home prices are up 3.3% on average from December 2011 levels: not the kind of increase we’ve seen in recent years, but not too bad, either.


Toronto Real Estate: A Year In Review


2012 has been an enormously interesting year where Toronto real estate is concerned. Large-scale changes in the market combined with fairly strong seasonal trends to create a Toronto real estate market that started out hot, but became turbulent and shifting by August, a trend that has continued into the end of the year.



  • The Lowest Interest Rates Ever: As part of the fallout from the global recession of the past several years, the Bank of Canada has kept its prime interest rate historically low in order to encourage economic activity – including the purchase of real estate. Because of this, we’ve seen fixed-rate 5-year mortgages on offer this year at rates consistently under 3%, which have contributed to the ongoing strength and continued rise in prices of Toronto’s real estate market.

  • CMHC Applied The Brakes: In July of this year, Finance Minister Mark Flaherty and the Canada Mortgage and housing Corporation put into practice a series of new rules that were designed to control Canadian mortgage-debt levels, in the hopes of ensuring that Canadian homebuyers would borrow only what they could afford. Among these changes were a rule capping mortgage amortization at 25 years, raising monthly payments for homebuyers, and a rule that required a down payment of at least 20% for buyers of properties over $1 million. (The Toronto Real Estate Board has argued that these new rules are responsible for the reining in of the Toronto real estate market; the Canadian Association of Accredited Mortgage Professionals released a report in November accusing Flaherty of going too far with the new rules.)

  • Popular Pushback Against the Toronto Land Transfer Tax: Homebuyers in Toronto are double-dinged on land transfer tax, and are subject to thousands – often, tens of thousands – more in taxes than buyers elsewhere. C.D. Howe has estimated that the City of Toronto’s double tax imposition has depressed sales by 16%, a major blow to the health of our housing market. Mayor Rob Ford has vowed to get rid of the tax; meanwhile, many homebuyers in Toronto can’t actually afford to move to more suitable homes, due to the tax… which is opposed by fully two-thirds of Torontonians. Let’s Get This Right Toronto, an initiative of the Toronto Real Estate Board, has more information.

  • Falling Sales, Rising Prices From August Onward: In the latter part of 2012, each and every Toronto Real Estate Board bimonthly report was characterized by a trend of fewer sales, but higher prices, in year-over-year figures for Toronto and the GTA. Despite the aforementioned attractive interest rates, the combination of the new CMHC rules and the Toronto land transfer tax (see above) helped to cool the market but not to freeze it, turning it from a red-hot sellers’ market into a calmer, more balanced one.

  • A Fine Balance: There’s been a lot of press about the “cooling” Toronto real estate market – and in a sense, that’s true. The market is not as hot, and prices are not rising so stratospherically quickly, at this point as it has been in the past few years. But rather than a “crash”, this shift has taken into what we sometimes call a “balanced” market.  In short, the past few years have been characterized by a market that has been unbalanced in favour of sellers, with much more demand than supply, driving up prices at a rate of 6-10% per year overall. Now, with supply and demand in a better balance, we’re likely to see slower price growth but more stability in the long term.

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