In Kitchener Waterloo, we have long said that whatever happens in the GTA real estate market will soon happen here too. It is the “spillover” effect. I have written about it before.
The Canada Mortgage and Housing Corporation recently released a study outlining by exactly how much the spillover effect impacts our local real estate prices. The study looked at Toronto’s home prices and those of neighbouring markets: Barrie, Brantford, Guelph, Hamilton, Kitchener, Peterborough, and St. Catherine – all centres considered to be within commuting distance to the GTA.
The study found correlations between home price movement in the Greater Toronto Area and surrounding areas. House price spillovers from the GTA are most prevalent in Hamilton, Barrie and Guelph with Kitchener coming in fourth.
The GTA impact on Kitchener Waterloo real estate
The study shows that house price spillovers are greatest for centres that are closer to Toronto.
For example, the report says that a 1% house price shock in Greater Toronto will lead to a 1.4% change in Hamilton. After three years, the total impact of a 1% house price shock in the GTA on Hamilton prices is 2%. Guelph, Brantford, Kitchener, Barrie, and Peterborough all have impacts in the range of 1.7 – 1.9% after three years, while St. Catharines has a slightly lower impact at 1.5%. The remainder of the CMAs all have impacts that are lower. It is worth noting that the GTA experiences the strongest impact from a one per cent shock, at 2.3% after three years, as prices spillover even within the GTA from more central to surrounding areas.
In the long-run (ten or more years), only Hamilton’s house price increases have kept up with GTA price increases, such that the price of a home in Hamilton relative to the price of a home in GTA has remained fairly constant over time.
For other centres, house price increases have not kept up with those in Toronto on average.