Chris Helgren / Reuters A row of houses under construction Kleinburg, Ont., about 50 kilometres north of downtown Toronto, May, 2017.

Greater Toronto’s housing market has had a stellar spring, but it’s unclear if this is the start of another housing boom in the city, or just panic-buying ahead of a new government policy that some expect will push up house prices. New home sales in Greater Toronto soared by 94 per cent in May, compared to the same month a year earlier, according to data from the Building Industry and Land Development Association (BILD GTA). That’s well above the long-run average for the month, and the total number of new homes sold, including pre-sales, hit the highest for the month since 2002, BILD GTA said. Watch: How high house prices are impacting the job market. Story continues below.

“The recent rebound in new home sales in Toronto is an encouraging sign that the local housing market is not about to emulate the sharp falls in prices in Vancouver,” wrote Stephen Brown, senior Canada economist at Capital Economics in London, in a client note this week. John Pasalis, a Toronto-area realtor and noted blogger, said the market is finally adjusting to the mortgage stress test put in place at the beginning of 2018. “It’s not uncommon for a market to take a year-plus to adjust to major policy changes,” he wrote in an email to HuffPost Canada.

Pasalis noted that it also helped that developers finally reduced prices for new detached homes; they’re down three per cent in the past year, though to a still-high average of $1.109 million. Condos are a different story. Prices are up 2.8 per cent in the past year, and while that’s a slower pace of growth than earlier, new condos are still overpriced compared to resale condos, Pasalis noted. As a result, they’re mostly being bought by investors who “don’t really care about paying more than resale because they simply assume prices will keep going up.” Pasalis doesn’t think it’s realistic to expect condo prices to keep rising strongly, “which is why I think pre-construction condos present a considerable risk for our market over the next two to four years,” he wrote. “The risk is that resale prices will not catch up to the prices investors paid and they start backing out of deals like they appear to be in Vancouver.” A booming population and possible panic-buying But there’s more than investors driving demand for housing in Toronto today. The city is the fastest-growing municipality in the U.S. and Canada, according to recent research from Ryerson University, and Greater Toronto is the second-fastest growing metro area. Evidence is mounting that Toronto’s housing supply has not kept up with demand in recent years. At the same time, the government’s new First-Time Home-Buyer Incentive may be prompting people to jump into the market faster, particularly those who don’t plan on using the program, Capital Economics’ Brown wrote.

Pre-construction condos present a considerable risk for our market over the next two to four years. John Pasalis, realtor