The Canadian Real Estate Association (CREA) is raising its annual home price and sales forecast for the year, due in part to the rising fortunes of Ontario’s housing markets, including the Toronto region.

The association predicts prices will rise a slight 0.5 per cent in Canada this year — up from its June forecast of a 0.6 per cent decline.

It also expects a 5 per cent increase in home sales from the five-year low last year, to 482,000 transactions compared to CREA’s June prediction of a 1.2 per cent gain or 463,000 sales.

Toronto region home sales jumped 13 per cent year over year in August with a 4.9 per cent benchmark price increase to $802,400. Condos continued to be the driver in the gain.

CREA reported home sales were up in most of the country’s largest markets, including B.C.’s Lower Mainland, Calgary, Winnipeg, Montreal and the Greater Toronto Area.

“Sales have been recovering all over Ontario, Toronto included and they’ve been stronger than we expected in recent months,” said CREA senior economist Shaun Cathcart, citing strong fundamentals, including lower mortgage rates.

“It was really Toronto and Vancouver that were really driving the upgraded forecast. But it’s also elsewhere in B.C. and elsewhere in Ontario,” he said. “The fundamentals are strong. We had expected recovery and it has been a little bit stronger than we expected.”

Listings are well above average on the Prairies and in Newfoundland but low in Ontario, Quebec and the Maritimes, causing more competition among buyers.

Where that competition becomes heated in Toronto depends on the price point of the property, said Toronto Royal LePage realtor Desmond Brown.

Properties priced below $1 million almost always draw multiple offers in his east-end base, he said. Sellers are pricing them just below $1 million and they tend to sell for about $1.1 million in Leslieville, Riverdale, Danforth Village and the Beaches.

Closer to the $2-million mark, there has only been a single $1.8-million sale since Sept. 1 and a prime Beaches property sold for $3 million, said Brown.

“Things from the $1.5 million (price range) and up, we’re still seeing some multiple offer situations. However, we’re also seeing quite a few properties sitting on the market for over a month,” he said.

Fall tends to be a little slower in the $1.5-million range. “That price is usually for a good-sized family home, and families are already settled in for the school year,” said Brown.

Although the mortgage stress test introduced by Canada’s bank regulator last year will continue to keep some home buyers out of the market, its impact has been diminished slightly by a small decline in the Bank of Canada’s five-year benchmark rate, said CREA.

The stress test requires buyers to qualify for a loan at 2 per cent higher than the rate their bank offers or the Bank of Canada’s five-year benchmark — whichever is higher. The real estate sector is pushing federal parties on the fall campaign trail to loosen the stress test, which applies even to home buyers with a 20 per cent downpayment.

CREA has not factored the federal government’s First-time Home Buyer Incentive into its forecast, said its chief economist Gregory Klump. That program, which offers home buyers with a household income up to $120,000 to apply for up to 10 per cent in federal funding toward a mortgage, was eligible for homes valued at up to $560,000 — far below the GTA average.

But last week, Prime Minister Justin Trudeau made a campaign announcement that the limit would be raised to $800,000 in the country’s most expensive markets in Toronto, Vancouver and Victoria.

There’s no data on the uptake of the program so far, said Klump.

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“We would not incorporate it until we saw the program actually looks like and when it comes into play,” he said.

The actual national average price for a home sold in August was about $493,500, up almost 4 per cent from the same month last year.

Excluding the Greater Toronto and Greater Vancouver regions, the national average price was less than $393,000, while the year-over-year gain was 2.7 per cent.

Files from Canadian Press and Bloomberg