Jenny & Justin’s Real Estate Update January 2017

Toronto market remains exceptionally tight – condo inventory drops 57%

For months now, we have discussed what we believe to be the key issues or causes to the upward explosion in housing prices: strong, steady demand, low borrowing rates, Provincial government policies that have restricted construction and low inventory. Of these factors, we believe it is the lack of inventory that has resulted in the recent acceleration in prices. Home buyers can relate to this, as the dearth of product has resulted in multiple offers and selling prices that are consistently above list. At the end of January, the number of detached homes available for sale stood at 543 (up from 488 in Dec) for the City of Toronto.

Interestingly, the tight inventory is not isolated to houses alone. Condo inventories in the City have fallen dramatically with active listings at only 1,387, down from 3,231 a year ago – a 57% decline. For a city of some 2.8 million residents, these are extremely low numbers.

So despite concerns of affordability (or lack thereof), we do not foresee a situation that should cause prices to decrease meaningfully in the near future. In our opinion, only a massive pendulum shift in the current market dynamics would cause this. A scenario such as a collapse in demand which seems unlikely given relatively stable economic conditions and continued immigration into the GTA, or a spike in the supply of listings flooding the market which is equally unlikely at this juncture. On the contrary, we anticipate listings to remain tight and expect prices will likely continue rising in 2017.

January prices rise again

The average transaction price in the City of Toronto rose 14.5% from last January reaching $728k. Detached homes rose 27% to $1.337 million. In York region, average transaction prices for all home types including condos surpassed $1 million for the first time to $1.045 million (up 29%). Detached homes in York region averaged $1.350 million in January, an increase of 29%.

Long term returns on Toronto real estate have been impressive.

Despite the attention on recent price gains, Toronto residential real estate has demonstrated remarkably good long term performance as well. Over the past 10 and 20 years, prices in the GTA have risen on average 7.5% and 6.7% per year, respectively. Even if we exclude the gains of the last three years, the annual returns are respectable at 6.7% and 5.9%. These are impressive returns considering, for most, these are tax free gains. We remain upbeat on the long term outlook of the Toronto real estate market given limited places to build (detached homes specifically), positive economic fundamentals and demographics (net migration and population growth in the GTA is approximately 100,000 per year). Toronto’s growing status as a global economic, financial and technology hub with safe neighbourhoods, diverse communities, strong educational institutions, and ample green space make it a great place to live.

To receive a full copy of our detailed analysis of the January data, please message us or comment below. Or if you are planning on buying or selling and would like to discuss confidentially, please reach us at [email protected]

Jenny & Justin Wu
Real Estate Sales Representatives
RE/MAX Hallmark Realty Ltd.