GTA house price 'spillover' driving up prices as far away as Sudbury, Ottawa: CMHC
CMHC data shows sky-high prices in the Greater Toronto Area are pushing homebuyers further afield
Potential homebuyers thinking that a longer commute is their solution to the red-hot real estate market in the Greater Toronto Area should be prepared to spend more time on the road – or relocate, if the results of a new report are any indication.
The report by the Canada Mortgage and Housing Corporation (CMHC) says house price "spillover" is occurring not only in traditional GTA alternatives like Hamilton and Guelph, but also further afield in cities like St. Catharines and even as far away as Sudbury and Ottawa.
"As people relocate to closer areas like Hamilton, the prices there rise, which forces people to relocate a little bit farther out," Jean Sébastien Michel, principal market analyst with CMHC, said in an interview.
"In turn, this purchasing behaviour is driving up house prices in these markets," Michel said.
'Disproportionate' GTA growth
CMHC's latest Housing Market Insight report, released Tuesday, concludes that since the 2008-09 recession GTA home prices have increased "disproportionately" to other Ontario municipalities.
The gap is sending potential buyers outside of the GTA, especially those searching for detached and semi-detached single-family homes.
And since 2008-09, the report says, stronger "house price growth relationship" with the GTA has been occurring farther away, with larger effects in Barrie and St. Catharines-Niagara than in Hamilton, Guelph or Kitchener.
It doesn't stop there.
The report says even real estate prices in Sudbury and Ottawa "appear to be affected" by what's happening in the GTA.
CMHC has found a high correlation between apartment prices in the two cities and the GTA. It speculates that well-paying jobs and affordable housing in Sudbury and Ottawa may be encouraging first-time GTA homebuyers to relocate there.
"There's only so far someone is willing to drive," Michel said.
Effects of a 'price shock'
The report also warns about the consequences that a GTA "price shock" could have elsewhere as its relationship with other markets tightens.
CMHC analysis shows that the effects would be greatest for those markets that are closer to the GTA.
The report says a one per cent house price shock in the GTA would cause a 1.4 per cent price change in Hamilton.
Cooling hot housing markets
In the past year, the federal government has taken several steps to cool Canada's hot housing markets.
New mortgage rules came into effect last summer that cut the borrowing power of primarily first-time homebuyers.
The federal government also tightened the rules around foreign money coming into the real estate market.
However, some in the real estate industry say the solution is fewer rules.
"The lack of housing supply is the main driving factor behind increasing prices of detached houses in the GTA," Tim Hudak, Ontario Real Estate Association CEO, said in a statement to CBC Toronto.
More homes on the market will bring prices down, Hudak argues.
"One way to increase housing stock is to remove government-imposed barriers that are artificially limiting housing supply, so as to allow developers to build more "missing middle" housing types, like townhomes, duplexes and stacked townhomes."