The Greater Toronto Area is one of the hottest regions in the Canadian housing market and has been for a long time. With so much attention from buyers and investors, the ever-pressing question is how the market will perform in the coming months and years.
Despite difficulties stemming from pandemic conditions in the past two years, price growth has stayed strong in the GTA, continuing its decades-long climb. Can we expect a continued fast pace of growth in house prices, or will things slow down? Will we see a large price correction in the coming years?
In this article, we will explore some of these questions and get a better idea of what the future may hold.
It should be no surprise to anyone paying attention that the housing market in the GTA is growing at a rapid pace. For over a year now, markets in the GTA have continuously reported record-breaking months and record-high house prices. At the same time, housing stock in the GTA has hit dismal lows. Today, the GTA is one of the most expensive of all Canadian housing markets.
In November of 2021, the average price across the GTA rose to $1,163,323, up from $955,889 at the same time last year. In terms of market activity, the region recorded over 9,000 home sales and only 10,036 new listings.
In this month, the price of single detached homes edged above $1.5 million, a 30% increase year over year. The semi-detached and condo segments saw average prices of $1,206,016 and $715,104 respectively. That means condos now in the GTA cost around the same that an average single-detached home did in 2014.
With sales up since this time last year but listings down, the GTA has remained firmly within seller's market territory and the Toronto Regional Real Estate Board (TRREB) is calling attention to "an inherent supply issue across all home types in the Greater Toronto Area."
Though home price appreciation continues in the GTA, price acceleration has begun to slow, indicating a cooling off from rapid price gains of mid-2020.
As indicated by the statistics above, there are a few things that are driving the real estate market in the GTA. Firstly, the area has a lot of economic momentum. Not only is it Canada's most populated region, but it’s also a hot spot for industry, business, and jobs. It sees huge amounts of yearly investment from both domestic and international sources, as well as steady population growth.
This can to some extent explain the high levels of housing demand in the GTA housing market. Simply put, people want to be where the action is. This is coupled with the fact that supply is so low in the city. In the past years, active supply in the market has dwindled, with homes being bought up about as fast as they can be put on the market, contributing to tight market conditions.
Demand can be reduced in a few ways. One major way would be to push buyers away from the housing market, while another would be to actually satisfy demand with a proportionate amount of housing supply. Unfortunately, even with large increases in housing seen in the GTA in the last year, it is unlikely to make enough of a dent to significantly impact housing affordability.
In terms of reducing demand, there is hope that an increase in interest rates could ease demand and slow price acceleration. In addition, upcoming regulations such as limiting foreign purchases and a vacancy tax are intended to help reduce demand as well. However, the actual effectiveness of these changes is contentious and remains to be seen.
With the forecasted end of pandemic conditions in 2022, other factors may keep demand high in the GTA, such as many people returning to work in the city, returning post-secondary students and increased immigration.
With more population growth and increasingly unfavourable detached homes, the condo segment, which has seen relatively slower increases in price, may see sales and values continue strong in the coming years.
Overall, opinions are mixed among economists and real estate professionals on what the future holds for the GTA and for Canada's housing market. In general, it seems the market will continue strong or steady through 2022, with the potential for a small price correction. Though given the recent increases in home prices, even a significant correction would only see prices return to the still high values of a few years prior.
In its recent Housing Market Outlook report, the Canada Mortgage and Housing Corporation predicted continued price growth through to 2023, though at slower rates than seen recently.
In terms of buying, many are trying to get in now before an impending increase in interest rates makes large mortgages moderately less affordable. If you are waiting for lower prices before buying, however, you may be out of luck.
For sellers, you can be assured your house will sell easily, and for a good amount of money if you choose to list it. But should you? With property in the GTA being so hard to come by, and its years-long trend in appreciation, values in the market will likely remain strong for at least a few years to come. However, if you want to move your money elsewhere or buy in another city, you will find your money will go much further in other areas with better affordability.
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