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Toronto Housing Market Forecast 2020
Toronto home buyers are leery of a Toronto housing bubble and a possible crash because of politically induced volatility in the past. And politicians erratic behaviour is still present and likely to create further drama for the Toronto real estate market in the next 5 years.
The December report from TREB (shown below) reveals strong sales and prices, but against ever decreasing listings. Will this make the market in Toronto bubble up, and vulnerable to another major correction (bubble burst) in the coming years? Over-indebted young buyers who make up more of the market
Buyers in the GTA and from outside Canada eagerly gobble up any home listed, but the issue here in the GTA has been housing shortages. And as the December report shows, there are even less homes to buy now. The quest for buyers is where to buy, at what price point, type of home to buy, and can they get a mortgage?
Why Are There So Few Homes for Sale?
That topic has been discussed well on this blog for many years now. Not enough pressure has been put on government to promote housing market health. Instead, political philosophies have suppressed the market and now these shortages are setting up a worst case scenario.
Listings and new listings plummeted in December, a trend that will color the Toronto Housing Market throughout the next 5 years. Buyers could get desperate again, given that even the rental market has dried up. Not possessing a 700 credit rating and not owning a home could spell homelessness for many GTA residents in 2020.
Particularly in Toronto’s suburbs where demands eats up anything built. Millennials have cramped for years in their urban condos and rental apartments, and they’re looking to grow out into Mississauga, York Region, Halton, and Durham regions. With low housing supply, continued immigration, and stronger millennial demand, we should see house prices jump much higher than the 4.5% predicted for 2020.
CMHC moved the 2020 Toronto housing market out of its “red zone” for the first time in 3 years. It appears first time buyers and immigrants are powering up sales. Economically, the signing of the USMCA agreement should settle the nerves of Toronto employers.
When Will Toronto Home Prices Moderate?
Toronto’s resale home price growth accelerated its fastest in the past two years and raced forward in the last half of 2019. Continued and forecasted low mortgage rates and ultra-high rental rates, are encouraging most prospective buyers to commit to a purchase. The Toronto condo market is cited as where much of the price growth is happening. But that preference may change in 2020 despite the deep restriction on homebuyer lending.
ZooCasa discovered that 8 Toronto neighborhoods have seen their sales prices double in the last 5 years. 22 other neighborhoods saw their prices rise 50% to 99% during that period.
It reminds us of how the Toronto housing market is girded for higher prices by government restrictions. As long as those building regulations, zoning and development restrictions exist, the price will rocket further. New developments such as the new city in Innisfil and big developments in Barrie and York Region won’t satiate the pool of buyers in TO.
Toronto Housing Sales December
What were resale home sales like in December in the GTA? Sales grew up by 17.4% year-over-year to 4,399 , with a price rise of 7.3% YoY. What was the average selling price in Toronto in December? It was up an amazing 12% YoY to $837,788. Prices rose 4% from $787,856 in 2018 to an average home prices in the GTA of $819,319. It was an excellent year, which started off slowly.
This year, we’re starting strong, so price pressure might be much higher this time with USMCA being signed and the American economy surging forward.
New listings in the GTA fell 2.4% YoY, For the past decade, annual new listings have lagged between 150,000 and 160,000 units. Active listings have fallen a frightening 35% from year to year and new listing have dropped 18% year over year. Will new construction supply enough to satisfy demand?
The key stat: sales to listing ratio rocketed 23% YoY, to 82%. 10% is considered healthy. Days on market dropped 3 days while it rose slightly over October.
Investment Condos Toronto
Looking at investment condos in Toronto in 2020? Condo sales hit 239 in the city of Toronto and 648 units across the GTA via the MLS. There were 590 condo townhouse sales across the GTA in September and 233 in the city of Toronto. See more on Toronto investment condos.
Condo apartment sales rose from 2071 across the GTA compared to 2219 last month, reflecting the beginning of big shortages for 2020. There were $97 million in condo transactions in York Region in September but rose to $105 million in October. Total condo transactions across Toronto was $1.37 Billion in October compared to $1.23 billion in September.
BILD Reports Growth in New Home Sales
We often forget the new home market. BILD reported 4,720 new home sales in the GTA in November which was up 53% YoY, and 19% above the 10-year average.
There was a big 207% increasing new houses (+ 1,156 detached, linked and semi-detached houses and townhouses sold over last November. Yet that was 4% lower than the 10-year average for new home sales.
New construction condo apartments in low, medium and high-rise buildings, stacked townhouses and loft units, saw 3,564 sales. That was up 32% from November 2018, 29% higher than the 10-year average.
Forecasts are for continued rising prices in the high density homes sector including apartment condos (Toronto condo forecast) as listings lag behind buyer demand.
See more detailed Toronto housing stats below.
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See more Toronto housing market stats below.
Vancouver and Calgary are suffering massively due to political posturing and BC trade blockades. With so many Millennials wanting to buy a home, something is going to give. Just in the case of the Los Angeles, San Francisco, and San Diego Housing markets, anger is building.
CMHC – Housing Starts Up
A nice surprise was the increase in housing starts back in August in Canada and Ontario. CMHC reports a growth of 10,000 new homes — 218,998 units in August 2019, compared to 208,931 units in July 2019. And in Ontario, new home starts grew 18% YoY from 1865 homes to 2209 homes in August.
In Toronto GTA, new build condos rose to 2,574 in August, which is up 600 over last August.
Incoming new TREB President Michael Collins believes change is in the offing, “Over the next year, as demand for ownership and rental housing continues to grow, my hope is that we will see more movement from policy makers on two fronts: alleviating the constrained supply of housing and providing more flexibility around demand-side policies, including the OSFI two percentage point mortgage stress test and allowable amortization periods on insured mortgages,” said Mr. Collins. This contrasts to Vancouver new home start collapse of -18% to only 334 new units. Read more on the Vancouver housing market which like Calgary, is suffering badly.
Condos and townhouses are the object of interest for many buyers. TREB’s Jason Mercer says the growth rate were sustainable, but at current sales rates, home prices will likely rise fast due to constrained volume of homes for sale. New home listings rose 0.8% in May and barely at all in June.
Only the core neighborhoods of Toronto housing market saw a drop in prices, as condo prices in most districts have reflected the end of rent price controls, and the movement of investor money.
Why the Toronto Housing Market Forecast is Rosy
What no one is talking about so far, is whether Andrew Scheer and the Conservatives will wipe out the mortgage stress test rules when they’re elected in the fall. That would give the Toronto housing market a big boost, something which will lift the spirits of Toronto GTA real estate community.
“We are experiencing annual rates of price growth that are largely sustainable right now in the GTA – above the rate of inflation, but in the single digits. If, however, we continue to see growth in sales outstrip growth in new listings, price growth will accelerate.” sais TREB Chief Market Analyst Jason Mercer.
What Caused the May/June Bump in Home Sales?
- buyers estimating that now is a good time to buy
- buyers expect prices will rise strongly over June and July
- buyers have more money for down payments
- buyers see mortgage rates potential falling
- trade deal with US appears to be stronger
- employment rates are strong in the GTA
- there are properties for sale
- long winter created lower sales for a longer time
Some districts saw unusual prices including Toronto C01 MLS district which rose 9.6% and W02 district which saw price increases of 5.7%.
The wealthy communities of King and Whitchurch Stouffville saw average price growth in the last month exceeding $100,000. Milton’s average home price jumped $70,000 in May. Other districts including Aurora, Markham, Richmond Hill saw price drops while eastern cities including Whitby, Oshawa, and Pickering saw upward price growth.
See all current Toronto Home Prices below.
The stats and graphics below show conclusively that the Toronto housing sector was dealt a death blow in 2017. We’re left to deal the consequences such as low housing availability, high prices and rents, and a weakened economy. The Toronto condo report is a little more positive given demand for rentals and lower priced condominiums.
TREB Report via Youtube with Jason Mercer for August 2019
As you’ll see below, housing prices (and rents, cost of living and taxes) have risen although government promises were the opposite. Forecasts have been for mild sales and price increases, yet a lack of housing is the main reason why those predictions are unlikely.
The Teranet Home Price Index for Toronto
The Teranet HPI index is up 2.8% in the last year, well behind that in Hamilton (+4.8%), Montreal (¬5.4%) and Ottawa-Gatineau (6.3%), yet much better than Vancouver’s at -4.9%.
Lots of Eager Buyers
Prospective buyers are on the sidelines. Many believe the best time to buy is when the market crashes. That’s not likely this year. Huge government and consumer debt are definitely playing into the scenario and trade relations with the US are worry.
TREB indicates there are still plenty of active buyers and there are reports of bidding wars on some properties. The Liberal government said they would resolve the housing crisis, and so far PC leader Doug Ford is not rectifying the high prices and lack of availability.
This chart from TREB shows sales over time. At a time when economies were booming, Toronto’s housing sales were crushed. Housing is a key component of the Canadian economy. There’s no better stat to tell you what the politicians did to Toronto, than this one:
TREB’s affordability chart shows even that has taken a turn downward as well. It seems none of the current political parties are willing to resolve housing issues anywhere in Canada.
Take a quick look at the Vancouver housing market and at energy issues for Calgary’s housing market. What is the end benefit of not permitting new housing, especially the “missing middle” type of home? Montreal’s housing market, the best performing Canadian housing market, helps us see how a more open minded political approach pays off. Businesses would rather go to Montreal or Ottawa now.
TREB keeps calling for the eradication of Federal, Provincial and municipal policies that make housing development impossible. And when housing and banking regulators call real estate investors “speculative, money laundering, law breakers” it’s an obvious attempt to suppress housing growth and trivialize the real estate market plight.
Toronto Housing Market Prediction: Housing prices in Toronto will rise this summer of 2019 and will keep rising past the Federal election on October 21, 2019.
The GTA market is still a big market and only the Montreal housing market has a chance to outperform the GTA housing market through 2020. Housing markets in Calgary and Vancouver are down significantly. However, the fall market is normally subdued, and buyers are likely waiting to see how the US elections pan out and whether the US housing market and economy will continue growing.
Investors wants to know whether demand will continue or if this the end of the business cycle with the usual stock market crash or housing crash.
There’s a lot of talk about rent controls in Toronto rental market, yet we know what damage that will do to housing development and contribute to even higher prices. With the economy improving, and a cessation of building in the GTA, rents will likely take a big jump by spring 2020.
There are lots of reasons why homeowners won’t sell and number one is that they have no where to go.
Toronto’s unemployment rate remains stubbornly high at above 6%. The Bank of Canada continues its messaging about higher interest rates and this would impact sales and construction in 2019/2020.
New Housing Starts Toronto
According to TD bank, new housing starts in Toronto last July dropped notably, down 16k to 40k units. In Ontario, urban new construction pulled back 35,000 to 66,000 units. Most new construction was condos. Estimates are that starts across Canada will drop to 200k, from about current 219,000. This looks to be a rosy estimate.
With new construction stopped, mortgage stress test, Ontario job losses, and Canadian economic uncertainty, demand for homes in the GTA should fall. However, in many parts of the city of Toronto, prices may not fall much.
This graphic courtesy of Teranet house price index shows Toronto home prices have just about recovered from last year’s collapse, a significant psychological event.
New single-family home prices in November sold for 6.6% less ($1,075,215) while new condo prices rose 10.2% to $866,827 over last November.
See the full housing stats in this detailed report of the true picture of the Toronto real estate market and for the Toronto condo market outlook.
Predictions: Housing Market Crash?
Given how strong demand in the GTA is, a Toronto housing crash is little outlandish. Despite issues related to the Federal and provincial governments, the enormous unfulfilled demand for housing (i.e. affordable housing) will ensure prices continue upward. While the stress test rules are blamed, it may be the economic uncertainties of Ontario and Canada that are dampening buyer spirits.
When will home prices fall? Some cities in the US and Canada may see lower prices in 2020, but most are headed for much higher prices.
The much prophesied US housing crash and China housing crash haven’t happened either so maybe this spirit of optimism in Toronto will conquer all of the tariff strife? (Okay, Trump does love Tariffs).
With NAFTA cancellations, US tariffs and retaliation by Canada, high consumer debt, oil flow blockages in BC, rising interest and mortgage rates, and tough lending rules it’s hard to predict price growth in the GTA.
Should you consider selling your home? Absolutely. Is this the best time to buy a house or condo? Hard to say. It’s surprising how resilient the economy is given the threat of trade issues. If you’ve saved you money and can hang onto your job, 2020 might be the year you finally buy a home.
A potential Toronto housing crash is something the IMF is concerned with too.
NAFTA Was Cancelled as Forecasted
I forecasted 3 years ago that Trump would be elected and NAFTA would be cancelled. With last months decline in US manufacturing, the ripples of protectionism and tariffs become a worry for GTA companies. The situation with China exacerbates the trade issues for Canada.
With the Ontario economy highly dependent on the strength of auto manufacturing and a stagnant housing market (governments need the taxes) there’s some valid worry about 2020.
Should you Call a Realtor and Sell Your Home? It’s a good time if you have a plan and somewhere to go. Try this to sell your house fast and for more.
Housing is Critical to the Ontario Economy
If Ontario’s economy should falter, a shaky GTA housing market could send it plummeting.
Graphic courtesy of TREB and the new MARKET YEAR IN REVIEW & OUTLOOK REPORT for 2018
The Canadian government hasn’t come up with a plan to stop investment money fleeing to “low tax” United States. The US economy and the US stock market and USD have all soared with Trump’s strategy. With the border blocked, there will be no reason to invest in Canada. Trudeau has refused to look at tax reductions. That has severe implications for the financial markets here.
If not for the Toronto Condo market, the Toronto housing market would be very stressed?
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Teranet Home Prices
You can view the prices for each city and MLS district below.
Toronto House Price Chart
Toronto Housing Market Sales Stats December
Some smart buyers are looking at financing solutions that give them a shot at rental income. Real estate investors in Toronto, Vancouver and even Calgary are focused on rental income investment properties.
What is the most notable change? It would have to be Toronto condos. Sales dropped by 15% yet condo prices rose by 23% across the GTA. When the selection of lower priced condos are gone, we’ll see a renewed surge in prices as buyers hunt the luxury market to see what they can get.
Are you considering using a HELOC to do a house renovation?
Considering buying or selling? Take a look at some of home buying tips and home pricing tips posts and this new post on the best renovations to grow the price of your house for sale. First Time buyers should remember that house prices always climb even through recessions as you’ll see in the graphics and housing data below.
Consider this your most up to date report on the Toronto Real Estate Market – lots of food for thought below. Enjoy the monthly price charts below which may help you decide whether it’s time to sell your house. Also see the Mississauga real estate forecast if you’re out in Mississauga, Milton, Oakville or Brampton.
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Are you Ready to Sell Your House?
The Toronto situation seems to mirror the US housing forecast only with troublesome government meddling in TO. Experts suggest it is government action that causes the markets to suddenly slide out of control.
What’s Compelling about the Toronto Housing Market?
Toronto is a high value housing market similar to New York City or the Bay Area of California, and TO is a city destined to be a super city. It’s unlikely that a property purchase in Toronto will be a disappointment over the long run. If you see the Toronto home price charts, you’ll notice that prices have climbed in the last 18 months. So buyers have not lost their equity.
And detached house prices will rise much further due to a severe housing shortage, improving economy, and rising population.
Despite the Ontario government’s new foreign buyers tax threat, demand for housing won’t fall. As the loonie falls in value, Toronto home prices turn out to be reasonable internationally, and may be a worthy investment for rising wealthy Americans. Canadian real estate is still a good alternative to US Real Estate in 2019/2020.
While many buyers would like to live in Central Toronto, Oakville and Milton the prices in these cities is prohibitive. Instead, buyers are looking north to Vaughan, Newmarket, Aurora, Bradford, Barrie, Innisfil, and East Gwillimbury.
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The 17 Key Factors Driving Toronto Housing Market:
- severe shortage of housing stock in the GTA region
- rising demand from buyers who have been renting
- easing FSTI rules to allow more buyers to afford condos
- restrictions on development land for housing
- Trump and NAFTA free trade deal and implications for Toronto’s automakers
- Canadian dollar beginning to fall – good for jobs
- oil and energy costs beginning to fall — good for home owners
- rising numbers of millennials hunting for an affordable home or condo
- bank of mom and dad continues funding kid’s home dream
- mortgage rates falling — good for home buyers
- Toronto and Ontario land transfer taxes inhibiting purchasing
- rates of employment and income
- business investment in Ontario continues falling – NAFTA cancelled and Canada suddenly alone
- consumer debt loads and credit ratings
- further federal restrictions on first time buyers/down payments
- commuting distances and new construction in York region and Vaughan
- recession likely ever going to happen
Investment Rentals are Big Money — How About Rental Income Property?
As we progress to 2020, emotions are going to run high as the critical factors you can read about below become intense.
What are the Causes of High Home Prices in Toronto?
The major factors that drive housing demand growth to Toronto: immigrant investors, better economy, low interest rates, increasing numbers of buyers in their home home buying years (millennials), and optimism all look on the upswing. As mentioned in the Los Angeles Real Estate and US housing crash post, forecast post, here are the key factors that affect home prices:
Housing Demand – High overall demand – “all cash bidding wars” in some cases
Housing Supply – Throttled, supply is far from what’s needed
Developable Land – Throttled by government which is the single biggest factor
Builder Red Tape – Builders can’t build even if they have funding – high exposure to financial loss
Mortgage Rates – Continuing Low, especially in light of global economic slackening and with recent tightened lending rules
Down Payment and mortgage rules – these are being tightened this taking some pressure off of the purchase market and re-routing it to the rental market (people have to live somewhere)
Toronto Region Employment – moderate and remaining moderate despite Federal infrastructure
Taxes – rising quickly due to Ontario government and federal government spending
Buyer Income – moderate and not rising much
Home or Condo Prices – High and rising fast – out of reach for most buyers
Demographics – Millennials coming into family and home buying years and must begin to acquire their own living space
Number of Renters – increasing fast because of tight mortgage lending rules
New Home Construction: limited because of Green Spaces Act, but is a source of supply
Economic-Foreign Trade – Canada struggling and Free Trade agreements now being scrutinized because they don’t see to be working like they used to
Taxes on Sale of Home – huge tax burden for those selling in the city of Toronto
Some point to the Ontario government’s Places to Grow intensification plan as the major culprit in skyrocketing single detached home prices. Toronto condo prices haven’t risen like house prices have, yet condo demand is usually not spoken much about. It does look like a growing population want house to live in. A growing millennial family would certainly find it tough to live in high rise condos designed for adult living.
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Remember, The Provincial and Federal Governments Said Toronto’s High Home Prices were Driven by Chinese Buyers
Looking back on 2017 is worthwhile. We get to see what politicians told us what the problem was (foreigners and speculation) and what the solution was. They failed (lied?) and now we know it was people in the GTA who just wanted to own their own home and have a roof over their head. Hardly the evil which governments suggested. Can we ever trust what is said to us?
Fully 10% of new condominiums built in central Toronto were going to foreign buyers, according to a survey released by the Canada Mortgage and Housing Corporation (CMHC). They stated the vast majority were mainland Chinese investors. Of course, that demand has disappeared as we fast forwarded into 2019. Demand from foreign buyers will weaken further in 2020, despite Trudeau’s import of non-qualified immigrants, which will weigh down the economy.
TREB’s own survey found that foreign buyers actually had little effect on the market, and it was the chilling effect of the fair housing act that destroyed what was a healthy Toronto real estate market. Although Doug Ford originally promised to free up land, lower prices, and cut red tape, he quickly recanted. He has announced a new buck a beer program.
Graphic and data courtesy of CMHC
A quick look at the US housing forecast and predictions for Los Angeles, San Francisco, Houston, Seattle, and Florida, tell you the US is hot. Check out forecasts for Boston, New York, Miami, and San Diego.
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