Toronto Real Estate Forecast Part 2

Toronto Real Estate Forecast Part 2

 

Why Are There So Few Toronto Homes for Sale?

The shortage of houses for sale is a topic has been discussed well on this housing blog for many years now.  Not enough pressure has been put on government to promote housing market health.

Instead, political ideologies have suppressed the market and now these shortages were setting up a worst case scenario — a Toronto housing bubble that even the economy may not be able to save (higher mortgage rates).

With the Corona Virus taking the pressure off of the Toronto housing market, we could see more price deceleration in the coming months.  The over indebtedness of the Toronto city government is putting an extra scare into Toronto house buyers as property taxes could jump as much as 40% if Ontario and the Federal government can’t bail them out.

 

Forecast 3 Months, 6 Months, 1 Year, 5 years and 10 year Outlook

Forecasts of a steep 30% price drop from a few industry people over the next 3 months and a sales drop of up to 60%. The Corona Virus actually made some of those previous predictions come true.

Almost no one is willing to project too far into the future. Yet, we will get through the pandemic, even without a vaccine.  The Toronto economy has slowed, but it will return in 2021.  House prices and condo prices will deflate from June to August as many buyers are out of the market.

Mortgages will be tough to get even at record low rates. And unemployment will be higher than most expect. That will ease gradually beginning in the fall, but could worsen in the late fall depending on what happens between China and the US.

If China vs US trade deals breakdown, we could see the use lose$500 billion a year in trade debt, which could fuel a boom in the US that would spill over into Canada.

Sellers won’t give up their homes that easily through a 3 month buyer freeze.  They’ll wait it out because they know in 1 year, in 2021, they’ll get all they want and more.

Prices in the GTA all comes back to the government and unwillingness to allow residential housing construction. The supply constraints will push house prices up next year, another 15%. 2021 will be a really good year. Listings as you can see in the charts will continue dwindling.

As well, Toronto and Ontario’s business export situation is excellent. A low oil price means a low loonie, and typically when the loonie falls, Ontario goes into overdrive.

Listings and new listings trend low, which will color the Toronto Housing Market 5 year forecast.  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.

ZooCasa Housing Report

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.

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 previous reports on Toronto investment condos.  TREB will release data on condo sales in the coming months. The 4th quarter condo data is available.

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.

TRREB’s 2020 outlook: 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.

 

Sales to new listings ratio is steepening showing an eager apetite for any homes that appear.

Chart courtesy of TRREB

Toronto Home Price Timeline Chart

Home Price Timeline Chart. Screenshot courtesy of TRREB.

 

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.

Please do Share on Facebook with your Friends!

 

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.

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

Teranet House Price Index courtesy of housepriceindex.ca

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.

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.

And as Toronto’s housing market goes, so does Mississauga, Richmond Hill, Brampton, Scarborough, Markham, Vaughan, and even Newmarket, Bradford, and Aurora.

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 nowhere to go.

New Housing Starts Toronto

Screenshot courtesy of Ycharts

With new construction slowed, 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.

Teranet’s Home Price Index

Teranet’s home price index shows Toronto and Montreal have the fastest growing home prices across the country.

Screenshot courtesy of Housepriceindex.ca

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).

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.

Housing Market Taxes

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?

 

Please Do Share the Toronto Real Estate Market Report on Facebook

 

Teranet Home Prices

Teranet released its market report on July home prices in Toronto, Vancouver, Calgary and other Canadian cities.  Price growth has abated yet home prices remain high and unaffordable.

Teranet Home Prices

Check out the Vancouver and Calgary forecasts too as they reflect on Toronto (And Share on Facebook!).

While the talk was about rocketing house prices in Toronto, the Toronto condo market is doing okay and the demand for new construction condos is still brisk.

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 saleFirst 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.

Are you Ready to Sell Your House?

You’ll want to start reading my how to sell your home tips posts and a little on over asking bidding wars because even right now, multiple offers are still common.

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.

 

Please do share this Toronto Housing report

 

Huge new housing developments in Bradford, Newmarket, Aurora, and Vaughan are still selling well, but the market in the 905 area code has cooled. That means bargains are waiting.

TRREB’s districts include Mississauga, Oakville, Vaughan, Newmarket, Aurora, Richmond Hill, Markham Bradford, Scarborough, Brampton, Oshawa and Milton.

The 17 Key Factors Driving Toronto Housing Market:

      1. severe shortage of housing stock in the GTA region
      2. rising demand from buyers who have been renting
      3. easing FSTI rules to allow more buyers to afford condos
      4. restrictions on development land for housing
      5. Trump and NAFTA free trade deal and implications for Toronto’s automakers
      6. Canadian dollar beginning to fall – good for jobs
      7. oil and energy costs beginning to fall — good for home owners
      8. rising numbers of millennials hunting for an affordable home or condo
      9. bank of mom and dad continues funding kid’s home dream
      10.  mortgage rates falling — good for home buyers
      11. Toronto and Ontario land transfer taxes inhibiting purchasing
      12. rates of employment and income
      13. business investment in Ontario continues falling – NAFTA cancelled and Canada suddenly alone
      14. consumer debt loads and credit ratings
      15. further federal restrictions on first time buyers/down payments
      16. commuting distances and new construction in York region and Vaughan
      17. recession likely ever going to happen

Investment Rentals are Big Money — How About Rental Income Property?

Are you going to buy rental income property as an investment in 2020?  Check out cities in the US where there is a much better upside in profit.

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

 

Housing Trends for the US | Stock Market Forecast 2020 | Houses for SaleWill House Prices Fall?Jobs Outlook | California Housing Market | Toronto Housing Market Forecast | Vancouver Housing Market 2020 | Calgary Housing Market ForecastChicago Housing Market | Atlanta Housing Market | Marketing Software | SEO Services Toronto | Gord Collins Linkedin | Gord Collins Facebook | Sitemap

 

22 years of experience as a content researcher, strategist and SEO expert for marketing agencies and his own company. Gord's investigation into housing markets, stock markets, and AI marketing strategy helps clients achieve market dominance. Some of Gord's blog posts have achieved half a million pageviews with over 7,000 social media shares, revealing Gord Collins special talents for building reach and impact. Visit the AI Marketing website for an introduction to the AI marketing era. Artificial Intelligence is lending extra benefit to the power of marketing software which is enhancing SEO, Copywriting and Sales. Gord offers a new brand of SEO services and to regain his reputation as a leading SEO expert. See his 2nd book which describes the powerful relationship between SEO and Content Strategy. Gord's passion is researching algorithms, trends, forecasts, and market statistics to establish clients at the top.

Leave a Reply

Your email address will not be published. Required fields are marked *