This is the epicentre of Toronto's housing bubble

Harding, a tiny neighbourhood in the heart of Richmond Hill, north of Toronto, is at the epicentre of the boom in home prices in Canada’s largest city. Prices in this neighbourhood are rising at the fastest rate in the Greater Toronto Area, doubling over the past three years. That jump took the value of a typical single-family home to $1.14 million by the end of 2016. In less than four months in 2017, the average price is likely another $100,000 higher given the level of activity in Richmond Hill.

The price increases in Harding is hitting Richmond Hill like an earthquake, and the effects are being felt across the GTA. The top 10 biggest price jumps in all of the GTA over the past several years are concentrated in Richmond Hill and neighbouring Markham.

Why Harding?

There is nothing particularly remarkable about this neighbourhood to help explain the $600,000 jump in price since 2013. It’s an older subdivision mostly consisting of small bungalows and back splits. Only the large lots stand out. And Ontario Premier Kathleen Wynne had this kind of froth front of mind Thursday when she announced a mixed bag of measures to cool the market in her Ontario Fair Housing Plan.

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Susan Taylor, a realtor in Richmond Hill with Re/Max All-Stars Benczik Team Realty, has never seen this level of intensity in the market before. “The average list price to sale price ratio is 114% over a year period,” she says, meaning homes listed at $1 million are selling for $1.14 million. “That’s crazy.” In MoneySense’s recent Where To Buy Now report, which scores neighbourhoods for the attractiveness of buying real estate, Harding came in at No. 16 for the GTA. While the high prices in the area don’t scream value, it’s still cheaper than some of the surrounding neighbourhoods. Its strong price momentum and high praise by realtors solidified its position near the top of the ranking. Just as seismic waves dissipate the further you get from the epicentre, the pressure on prices abates as you move further from Harding—albeit only slightly. Even some of the least desirable neighbourhoods in the GTA saw their values climb by a comparatively low 40% over the past three years.

Buyers are willing to pay a premium for new homes

Buyers want new and they’re willing to pay a premium to get it, says Taylor. They want to determine the figures, design the home and select the countertops. Aside from the steep cost to get into this area, the large lots in Harding make it well-suited to accommodate that type of demand. Many of the existing homes are being torn down to make way for new larger homes, explains Taylor. Most of the buyers she’s encountered are buying them to live in, although she adds there is also a large number of buyers who are renting out the property while they go through the process of getting building permits to replace the home. She adds that the surge in prices is forcing some owners to shift their attention to condos in the area. Some units are getting miltiple offers, which wouldn’t have been the case long ago. Taylor recently had 12 offers for a two bedroom and den unit. It sold for more than $500,000, which is around $120,000 more than what a larger unit in the same complex sold for just six months earlier. “It blows my mind,” she says.

Foreign buyers

But while the focus of local, provincial and federal governments has been on the influx of foreign buyers and new Canadians with deep pockets, Taylor isn’t convinced that’s the real source of the problem. She adds that the buyers she’s encountered in Richmond Hill isn’t any different from the diverse mix of buyers she encountered when she became a full-time realtor a decade ago. Benjamin Tal, deputy chief economist of CIBC World Markets, agrees that foreign buyers in Toronto are less a factor on the GTA housing market than they’ve been made out to be. In a recent note commenting on new measures introduced by the Ontario government to tame the housing market, he argues “the share of foreign buyers in the GTA is notably lower than in Vancouver.” As a result, the impact of a tax on foreign buyers, one of the proposals currently being considered, would be minimal. “Something does have to change,” says Taylor, but she feels it’s a supply and demand problem. In her view, the focus should be on expediting development, but only if it can be done in a planned and orderly fashion.

The top 10 areas in the GTA experiencing rapid price growth

Neighbourhood	Average price (as of Dec. '16)	3-yr. price change	$ change in the value
Harding (Richmond Hill)	$1,143,900	93.6%	$553,043
Angus Glen (Markham)	$1,163,300	91.1%	$554,561
Bullock (Markham)	$1,145,700	88.8%	$538,867
Royal Orchard (Markham)	$1,324,100	88.6%	$622,032
Grandview (Markham)	$1,554,000	84.6%	$712,180
Thornhill (Markham)	$1,529,200	84.2%	$699,015
Crosby (Richmond Hill)	$1,036,400	84.1%	$473,445
Westbrook (Richmond Hill)	$1,315,500	81.3%	$589,907
Cachet (Markham)	$1,557,500	80.7%	$695,574
Bayview Fairway-Bayview Country Club Estates (Markham)	$1,037,300	80.0%	$461,022