Anyone paying attention to the GTA real estate market has been on a rollercoaster ride of emotion since 2016. Between the high activity and 33 per cent year-over-year gains in April 2017 to the Foreign Buyer’s Tax and plummeting prices in December, it’s been an interesting time, to say the least.
Right now on that rollercoaster, we’re slowly inching up – but the drop isn’t quite in sight yet.
Home sales are down 22.2 per cent since May 2017, and prices since then have also dropped, though not quite as much. The average Toronto home price (across all housing types) is currently $805,320, which is 6.6 per cent lower than last year, when it was $862,149. But if you look at just the numbers from this year, prices are actually up – albeit slightly.
In April 2018, the average selling price for all property types was $804,584. In March, that number was just $784,558, according to TREB data. In fact, prices have risen every month in 2018, starting with a tiny 0.24 per cent increase from December 2017 to January 2018. Between January and today, prices are up 8.5 per cent. But listings remain low. How is this possible?
Demand Hasn’t Disappeared
People still want to live in Toronto, and we still haven’t reached unaffordability levels that literally force people out of the city. Even though rent is unaffordable for many, it doesn’t meant that they actually can’t pay for it, just that they’re spending too much of their monthly income on rent payments.
For buying a home, it’s a little different. There actually is a minimum level of income required because of the mortgage stress tests, even for uninsured mortgages (home purchases with a 20% or larger down payment). Because you have to qualify at at least the Bank of Canada benchmark rate, which just increased in May, you need to prove you have enough income to cover a 2 per cent increase in your mortgage rate. With the minimum income needed to afford an average Toronto condo sitting at over $100,000, and the median household income only $65,829, there is a serious hurdle to overcome.
But Toronto has an undeniable appeal to both Canadians and immigrants for its vibrant culture and job market. So long as those two things remain, it’s unlikely that any price will be sufficiently high to make people live too far away. Millennials are already moving farther away from the Toronto core to find housing, but still remain an hour or two by car away in order to continue working there.
Supply Is Still Low
If there is a limited supply of anything, the price goes up. If the demand is especially high, the price goes up even further. Unfortunately for those trying to enter the housing market, supply is low and demand is high, especially for condos. Older Canadians like condos for their easy maintenance and central location, younger Canadians like them for their lower price and access to work, well-off middle-aged Canadians like them for investment properties or secondary homes – it’s a popular product to be sure.
But enough aren’t being built. Housing starts are down across Canada except in certain markets. Shocker: those markets are far away from Toronto and Vancouver. Until the condo market gets some relief (and who knows when that will be), prices aren’t likely to drop.
Should I Buy Now?
If you’re thinking of buying, be prepared for a prime rate increase in July – many experts are. Getting a fixed rate mortgage lets you lock in interest rates for a period of time, which can save you money in a rising-rate environment. You can also get a rate hold for up to 120 days from most lenders, which lets you shop around for the perfect home without worrying if rates increase while house hunting.
Buying a pre-construction unit can help you spread out your down payment over a couple years, rather than putting it all down at once. With prices rising even as sales fall, especially for condos, this can give you a leg up for entering the market. You can browse pre-construction buildings online here.
If you’re on the fence about buying, you can join the homeowners waiting on the sidelines to see if the market is headed towards stability or more volatility.
Not intended to solicit parties under an exclusive contract with a brokerage. MLS®, REALTOR®, and the associated logos are trademarks of the Canadian Real Estate Association. RebateRealty Inc, is an Ontario licensed Real Estate Brokerage TREB® & CREA® The listing data is provided under copyright by the Toronto and Brampton Real Estate Board - TREB® and BREB®. The listing data is deemed reliable but is not guaranteed accurate by the Toronto Real Estate Board nor RebateRealty Inc., Brokerage. © 2017