TORONTO REAL ESTATE MARKET OUTLOOK 2020By CondoWong Saturday, November 30, 2019
Do you remember 2017?
It was the craziest year in Toronto real estate.
People all “buy buy buy, don’t ask why”.
All sales numbers and prices were at the peak.
Does that mean the builder is planning to cheat you on size?
Then came 2018, the low rise market got onto the roller coaster for a big drop.
Now, we’re getting to the end of 2019, where do we stand when we compare to the peak of 2017?
In order to study the trend, we need a good metric.
Average and median prices are very simple metrics that don’t take into account how a home’s features affect its prices, such as age, number of bedrooms and bathrooms.
The MLS Home Price Index, HPI, uses 48 different variables that may affect home prices in its calculation model.
The calculation is done with alpha, gamma, beta, you know, those super complicated regression equations.
Simply put, the MLS HPI is the most advanced and accurate tool to gauge home price levels and trends.
Let’s take a look at the trend from 2016 to now for low rise homes in the Greater Toronto area. Those are the houses and townhouses.
You can clearly see that roller coaster ride in 2017.
We’re now climbing back up with a benchmark price of $895,800.
The peak benchmark price was $972,500.
So there is still some distance to climb.
What about the trend for high-rise condos and apartments?
You actually don’t see that roller coaster ride in the high-rise market.
The trend is actually always going up, at a pretty fast rate too.
The highest benchmark price in 2017 was $466,800 and the benchmark price now is already 17% higher than that, at $546,900.
So what’s the market outlook beyond this point?
Let’s look at it from a global and local perspective.
#1 Canada’s Economy
There are a lot of discussions around the possibility of a global economic slowdown, but the situation is very unique in Canada.
Canada has 1 unique force supporting our economic growth. A driving force that the rest of the world don’t have.
That is an explosive population growth. We’re adding 1 person to our country every minute.
If you haven’t watched my video on population growth, you can click the link at the end of this video to watch it.
Of course, new immigrants need to find new homes and new jobs.
Studies have shown that 75% of new immigrants come to Canada prepared with savings to purchase a property.
1 in 5 home buyers is a new immigrant, that’s 20% of the home buying population.
#2 Toronto’s Housing Market
Toronto is ranked the 2nd highest financial center in North America. We obviously gain a significant portion of the population growth.
The October market watch report from the Toronto Real Estate Board showed the biggest spike in prices since the drop in 2017.
Supply still fails to keep up with demand.
The continuous supply problem results in tighter market conditions and an acceleration in price growth.
We will likely see stronger price growth moving forward if the supply problem is not resolved.
In fact, the Canadian Housing and Mortgage Corporation is predicting that the low rise market will recover and even surpass the peak in 2017 in the next 2 years.
We will soon find out if the prediction is correct, but if you buy and hold real estate, you will always be fine in the long run.
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