Toronto’s housing market has been a hot topic for years, with skyrocketing prices and a shortage of affordable housing. But what is the current state of the market, and what can we expect in the future?
In this article, we will discuss the current situation of Toronto’s housing market. We’ll examine the reasons behind its growth and look at what might happen in the future.
The Current Housing in Toronto
Rising Prices and Low Inventory
by Alora Griffiths (https://unsplash.com/@aloragriffiths)
Toronto’s housing market has been steadily growing for the past ten years. The average price has been increasing by 6.8% each year since 2010.
In 2020, the average price of a home in Toronto reached a record high of $930,000, a 13.5% increase from the previous year.
One of the main factors driving this increase in prices is the low inventory of homes for sale.
There are not as many new houses for sale in Toronto as there are homes being sold. This makes it harder for buyers to find a property.
Impact of COVID-19
The COVID-19 pandemic has had a significant impact on the Toronto housing market.
At the onset of the pandemic, sales and market values significantly dropped due to buyer and seller hesitancy.
However, as the city began to reopen and adapt to the new normal, the market quickly rebounded.
The last six months of 2020 had really high sales and prices. The average price of a home went up by 13.5%.
Shift to Suburbs and Surrounding Areas
Another trend that has emerged in the Toronto housing market is the shift towards suburban and surrounding areas. With the rise of remote work and the desire for more space, many buyers are looking outside of the city for more affordable options.
Consequently, there has been a significant increase in the volume of homes sold as well as their prices in cities such as Hamilton, Barrie, and Kitchener-Waterloo.
These areas are preferred by buyers as they have lower prices and more spacious houses.
Factors Driving the Housing Market in Toronto
Low Interest Rates
One of the main factors driving the Toronto housing market is the historically low interest rates.
The Bank of Canada has kept interest rates very low to help the economy during the pandemic. This reduces the cost for individuals to acquire mortgages.
This has led to an increase in demand for homes, as buyers are able to afford more expensive properties with lower interest rates.
Lack of Supply
As mentioned earlier, the low inventory of homes for sale is a significant factor driving the market. The demand for homes in Toronto is high, but the supply is not keeping up, leading to bidding wars and driving up prices.
There are a few reasons for the lack of available housing. One is that the rules about where buildings can be put are very strict. Another is that there isn’t much land to build on. Lastly, it takes a long time to get approval to start new construction projects.
Foreign Investment
Toronto’s housing market has also been impacted by foreign investment, particularly from China and the United States.
Individuals from abroad are interested in purchasing Toronto properties, attracted by the city’s robust economy and solid real estate industry.
This is causing more people to want to buy property, which in turn is driving up prices.
The government has taken steps to decrease the market and discourage foreign investment. They have done this by implementing a tax for foreign buyers and making mortgage rules stricter.
Housing Market Forecast for Toronto
Continued Price Growth
Experts predict that the cost of homes in Toronto will continue to rise in the coming years, despite the impact of the pandemic.
The Toronto Regional Real Estate Board (TRREB) forecasts a 10% increase in the average home price in 2021, with a more modest 4% increase in 2022.
This growth is expected to slow down in the long term, with a projected 3% increase in 2023 and a 2% increase in 2024.
Increase in Inventory
The TRREB expects more homes to be available in the future. This could help make the market more even and relieve some of the stress for buyers.
This increase in inventory is expected to come from new developments and a shift towards more affordable housing options.
Impact of Government Policies
Different strategies have been employed by the government to manage the real estate market, including a tax on foreign buyers and a mortgage stress examination.
These rules are likely to keep affecting the market. They may slow down how prices increase and make there be more items available.
Conclusion
In Toronto, there are more people wanting to buy houses than there are houses available. This makes prices go up and creates a market where buyers have to compete with each other.
While the pandemic has had a significant impact on the market, experts predict that the market will continue to see price growth in the coming years.
But, if there are more products available and the government puts some rules in place, the market might become more fair in the coming years.
The Toronto housing market is still a popular subject for buyers, sellers, and investors. We can only wait and see how it will change over time.
If you’re considering buying a home in Greater Toronto Area or want to get a free home evaluation or just want to understand more about how property taxes might affect your real estate decisions, reach out to our team of experts. We’re here to guide you through every step of your real estate journey in Toronto.
