New data from the Toronto Real Estate Board (TREB) shows that resale home prices in the Greater Toronto Area (GTA) increased by 4% in 2019, prompting the board to predict an ongoing rise in prices into 2020 if the housing supply doesn’t pick up.
Last February, the board had forecasted a moderate market recovery, and the latest data seems to meet those expectations. However, according to TREB, tighter market conditions are already having an effect on the region.
Increase in Home Prices & Sales
Last year, the average price of resale homes in Toronto (which includes both houses and condos) increased to $819,319, compared to $787,856 in 2018. In December alone, the average resale price increased 12% year-over-year to $837,788, mostly due to gains in the detached houses and condos categories. In fact, May 2018 was the last time that monthly home prices decreased on a year-over-year basis.
In 2019, home sales totaled 87,825 – up 12.6% from the 10-year low of 78,015 recorded in 2018. In December, sales also increased by 17.4% year-over-year to 4,399. Much of last year’s gains happened in the second half of 2019, with boosted buyer confidence thanks to decreasing mortgage rates and a stronger local economy.
The low-rise housing market experienced one of the most significant recoveries last year, particularly in 905-area communities around Toronto that hadn’t recovered as quickly as the city did after the 2018/early 2019 market correction.
Things Could Continue to Heat Up
While the number of new listings in 2019 (153,000) was fairly standard for the decade, it represented a 2.4% year-over-year decrease. TREB Chief Market Analyst, Jason Mercer, noted that current conditions could mean more price growth if the market doesn’t see increased supply. In a press release for TREB, he said:
Increasingly, policy makers, research groups of varying scope and other interested parties have acknowledged that the lack of a diverse supply of ownership and rental housing continues to hamper housing affordability in the GTA.
While the board isn’t set to release its 2020 market forecast until Feb. 6, Mercer noted that current signs seem to indicate a hotter market is still to come:
I buy into that notion that as the market tightens up, you’re going to see stronger price growth. Right now, the listings trend is pointed downwards and the sales trend is pointed upwards. We’re kind of headed in that direction.
Mercer referenced the provincial government policies implemented in spring 2017 and the stricter mortgage lending rules that were introduced in 2018, both of which helped create a more moderate market after things had heated up in 2016 and early 2017:
It’s a bit of a warning sign for us in the sense that we’re starting to get back to the same discussion we were having pre-Fair Housing Plan and pre-stress test.
Toronto Market: One to Watch
More people continue to move to the area and add to the local population growth, including new Canadians, who are attracted by job opportunities, amenities and great neighbourhoods. But, with limited home supply in the region, finding affordable homes for sale can be difficult. And, according to Mercer, renting isn’t always a viable alternative because the vacancy rate here is around 1% – leading even more people toward homeownership.
Meanwhile, PwC (PricewaterhouseCoopers) highlighted Toronto as one of the markets to watch in 2020 due to its healthy real estate market and solid economy. The company points to Conference Board of Canada predictions that the city will see 2.4% economic growth in 2020, which will likely fuel the population growth in the area even more.
By working to increase housing supply in the city in 2020, experts believe Toronto could move toward a more balanced housing market. Doing so would offer potential homebuyers additional options at a variety of price points to suit many types of budgets. This could help temper the predicted “hot” market that will result from limited supply and growing demand.