Bring your mind back to Toronto’s housing market heydays of 2016. It was a time when double-digit price increases seemed like they'd never end.

But soon after, a slew of new mortgage regulations and real estate taxes came into effect and those days did end.

The average Toronto sale price plummeted from $920,791 in April 2017 to $748,328 in January 2019. But fast-forward another year to January 2020, and the average price is now back up to $839,363.

Yogi Berra would call it déja-vu all over again.

That’s kind of what RBC senior economist Robert Hogue is calling it too. “It’s looking more and more like early-2016 all over again for the Toronto housing market,” he wrote in a recent report. “This is not a good sign. Those were the days when things started to heat up uncomfortably, propelling property values sky-high in the ensuing year.”

In January, Toronto experienced its largest month-over-month home price increase since October 2017, and on a year-over-year basis prices were up 12.3%.

The average selling price for a detached home in January was $1,038,247, up 10.5% year-over-year.

Condo prices, meanwhile, surged 15% to $630,047. Some of that is linked to the limiting mortgage stress test (which reduces maximum approval amounts) and default-insurance rules (like CMHC’s $1 million property value limit).

Atlantic Region Not Immune to Overheating Markets

Even usually tepid housing markets on the east coast are experiencing some sizzle, in certain hotspots.

Take the island province of Prince Edward Island, for example. Price appreciation from 2018 to 2019 surpassed 16%, according to the Canadian Real Estate Board.

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“Prince Edward Island is experiencing a housing boom as a result of leading the region (and the country overall last year) in population growth,” according to Don Mills, former owner of Corporate Research Associates and an expert in data trends.

He noted there are now more housing units being built on the island of PEI than Newfoundland and Labrador, “a province with more than three times the population, but a population in decline.”

“The P.E.I. economy has outperformed the rest of Atlantic Canada over the last decade or so, largely due to steadily increasing population growth,” Mills noted. “There can be no economic prosperity without population growth.”

Halifax, too, is experiencing a housing boom. Home prices in the province’s capital rose 11.1% from 2018 to 2019, according to CREA, again driven largely by steady population growth over the past three years.

"The advantage is in the hands of the sellers,” Matt Honsberger, president of the Nova Scotia Association of Realtors, told CTV News.

How Will the Government Slow Housing This Time?

All of this begs the question…what form of cold water will the government attempt to throw on these red-hot housing markets next?

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And will those that are under-performing—i.e. the Prairies and Newfoundland & Labrador—once again be unwitting victims of blanket, cross-country mortgage regulations?

Here’s a look at just some of the government policies recently introduced to cool down hot markets:

  • February 2018: B.C. Speculation Tax – A .05% tax on home values to target domestic and foreign speculators. (There’s an exemption for homes that are an owner’s primary residence and on those that are rented out for at least six months of the year.)
  • January 2018: OSFI’s mortgage stress test on uninsured mortgages took effect, one of the most impactful Canadian mortgage regulations of all time.
  • April 2017: Ontario Government introduces its Fair Housing Plan – The two key changes implemented included a 15% foreign buyer's tax and an expansion of rent controls.
  • November 2016: Vancouver implements its Vacant Homes Tax – Vancouver city council approves a 1% tax on vacant homes that are not principal residences or that are not rented for at least six months of the year.
  • October 2016: The Department of Finance implements its mortgage stress test on all insured mortgages. The DoF also bans several mortgage types from being insured, including properties over $1 million and amortizations over 25 years—thus raising borrowing costs for such purchases.
  • July 2016: B.C. introduces its Foreign Buyers Tax, a 15% tax applicable to real estate purchases by foreign nationals or foreign-controlled corporations within the Greater Vancouver Area.

These are just some of a long list of mortgage regulations that have been introduced since 2008—there have been more than 60, in fact.

More could be added to the list if home prices continue setting records. But instead of pouring cold water on a fiery market with more regulation, the powers that be might be wise to limit what’s fuelling the fire in the first place.

Steve Huebl

Steve Huebl is the operations manager for RateSpy.com and a regular contributor to RATESDOTCA.

At the age of 15, Steve founded a neighbourhood newsletter that eventually grew to a circulation of hundreds and was supported by over a dozen local advertisers. He later honed his writing and editing talents at The Toronto Star, The Calgary Herald, the Sarnia Observer and Canadian Economic Press. He also worked for several years as a chief English writer of the McGill University Health Centre’s marketing office. Born and raised in Toronto, he now calls Montreal home. When he’s not writing about mortgages, Steve can be found appreciating nature — typically along the shores of the St. Lawrence.

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