GTA home prices spilling over to surrounding centres

Increasing home prices in the Greater Toronto Area (GTA) are having a spillover effect in surrounding centres, particularly those within commuting distance. This analysis is part of Canada Mortgage and Housing Corp.’s (CMHC) latest Housing Market Insight (HMI) report on the relationship between GTA home prices and those of neighbouring markets.

While most Ontario markets have seen substantial home price increases over the past 20 years due to favourable economic conditions, more recently, CMHC detected moderate or elevated evidence of overvaluation in Hamilton and the GTA, suggesting that price appreciation in those centres is partly driven by other factors.

Report highlights include

  • GTA house prices have increased disproportionately compared to other Ontario CMAs.
  • Single-family home prices in the GTA are motivating buyers to purchase more affordable homes in nearby CMAs, driving up prices in those centres.
  • Historically, house price spillovers from the GTA were prevalent in Hamilton, Barrie and Guelph.
  • More recently, house price spillovers have been occurring a bit farther out, especially in St. Catharines-Niagara, driven by the price of lowrise homes in the GTA

 

To further illustrate the spillover effect, the report also considers the potential impact that a positive and negative shock to GTA home prices may have on surrounding areas. While these scenarios are in no way predictions, they demonstrate that should GTA house prices rise unexpectedly by 10 per cent in a given quarter, Hamilton house prices could rise by 14 per cent within a year. Conversely, an unexpected 10% contraction in GTA prices could lead Hamilton prices to decline by 14 per cent within a year. In both cases, the impact would moderate over time and be less pronounced in other nearby communities.

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