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Rising GTA house prices spreads to surrounding centres

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Rising GTA house prices spreads to surrounding centres

by Canada Mortgage and Housing Corporation


  • Recent GTA house prices have increased disproportionately compared to other CMAs.
  • Increasing single-family home prices in the GTA are motivating buyers to purchase more affordable homes in nearby CMAs, driving up prices in those centres. In particular, historical house price spill overs from the GTA were prevalent in Hamilton, Barrie and Guelph.
  • Recent house price spill overs appear to have been occurring a bit farther out, especially in St. Catharines-Niagara, driven by GTA lowrise home prices.

The Greater Toronto Area (GTA) MLS average price in the third quarter of 2016 increased by 18 per cent compared to the same quarter in 2015. Market participants suggest that recent price increases are causing buyers to purchase more affordable properties in nearby Census Metropolitan Areas (CMAs), and that prices in these nearby CMAs would be pressured up as a result.

This report examines whether increases in GTA house prices have historically spilled over into Ontario’s other CMAs, especially those surrounding the GTA. We also provide the impact that a shock to GTA house prices might have on surrounding CMA house prices, in light of house price overvaluation in the GTA and house price spill overs from the GTA to surrounding CMAs.

Recent GTA house prices have increased disproportionately compared to other CMAs.

Except for the clear but short decline in many centres in 2008, house prices have steadily increased in most Ontario CMAs over the past 20 years, with even higher growth rates in the last five years. Overall, this substantial increase was due mainly to favourable economic conditions, population growth and relatively low mortgage rates, which increased demand for housing and drove up prices. However, more recently, moderate or elevated evidence of overvaluation was detected in Hamilton and the GTA by CMHC’s Housing Market Assessment framework, indicating that some of the price appreciation was not driven by fundamental factors.

Indeed, since the 2008-09 recession, the average GTA house price has been increasing at a faster rate and has also been increasing disproportionately compared to other Ontario CMAs. This trend is reflected in Figure 2, which shows the ratio of the GTA average price to the GTA expected price based on the average price across Ontario CMAs. Since the first quarter of 2016, the GTA average price increase has exceeded by about 30 per cent the GTA expected price increase. The previous historical peak was 26 per cent in the first quarter of 1989. Recent house price growth in the GTA has therefore been at its highest level relative to Ontario CMAs.

Read the full report.


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