Will Toronto home prices increase by 4% this year?

The real estate market in Toronto has been witnessing some mixed trends in recent times as per several reports and studies. Latest reports and expert analyses indicate that home prices may go up by around 4% this year in Toronto. Average re-sale prices for homes in Toronto went up by 1.7% on a year on year basis for January 2019 to touch $748,328 as per reports. This included condominiums and single family housing units as per studies released by TREB (Toronto Real Estate Board). The agency is also predicting an increase of 4% in prices annually for Toronto real estate this year.

This may indicate that housing units which were sold for an average of $787,195 last year may be sold for upwards of $820,000 throughout multiple housing segments. However, condominiums may continue being a red hot realty segment and will be a major driver for growth in prices while detached homes may witness a slight dip in pricing. TREB has reportedly stated that record levels may not be seen in 2019 for the Toronto real estate market but there will be improvements in terms of selling prices and also sales volumes for homes.

Key market trends worth noting

The Toronto Real Estate Board (TREB) has already issued its appeal to the OFSI (Office of the Superintendent of Financial Institutions) for reconsideration of the mortgage stress test that was introduced in 2018. This test is tailored to safeguard customers from repayment issues in case their monthly costs and housing expenses go up and this means that they have to qualify for mortgages which are a sizable 2% more than the rates negotiated with financial institutions or the 5-year benchmark rate of the Bank of Canada.

OFSI authorities have also reportedly acknowledged that affordability of homes is an issue that needs to be addressed. However, they have also stated that consumers simply cannot be allowed to keep piling up higher levels of debt as per reports. The higher rates of interest and stress test have been highlighted as key factors behind the volatile nature of the housing market last year after good performance in the year 2016 and the first few months in 2017. Sales volumes of homes went up on a year on year basis for January 2019. 4,009 transactions were noted in January 2019 and this was higher than January 2018 by 0.6% as per reports. However, the sales volumes were higher than December 2018 by around 3.4% as per studies.

Average pricing for detached homes in the Toronto area stood at $941,488 in January 2019 which indicated a dip of 2.8% on a year on year basis. The average pricing for condominium units stood at $548,176 which indicated an increase of 7.9% in comparison to January 2018. Prices are gaining better in case of high-density units like townhouses and also apartments since their affordability levels are on the higher side as per TREB officials. The market in January 2019 witnessed year on year increases in prices albeit moderately. Listings on the MLS (Multiple Listings Service) of TREB came to levels seen after the year 2009 at 155,000 units after a rapid increase in the year 2017.

There has been a slight dip in the number of house owners who are listing their own properties although the number of people seeking to purchase homes has gone up moderately as per studies. TREB is forecasting a tighter rental sector with the average rentals forecasted to increase by at least single or double digits in case of one, two and three bedroom condominium units based on its MLS framework. A large majority of investors or home owners are reportedly considering selling properties over 2019 and 2020 and this may lead to higher transactions for the market overall.

Spring housing trends in Toronto

Toronto’s spring real estate market trends are interesting to note as far as industry experts are concerned. The spring real estate market in Toronto is not expected to be at its peak levels according to reports. As per reports, prices are expected to slightly increase throughout the spring. Prices in January were roughly $748,325 and went up to around $780,397 in February. This moderate increase should continue according to reports. Sales figures also went up to 5,025 units in February from 3,993 units in January. February 2018 had 5,149 units sold which was slightly higher than this year’s tally as per studies.

Sales volumes could go up slightly over the spring season according to experts. The ratio of new listings to sales volumes stood at 51% overall and 56% for the core Toronto area last month. This indicates a more balanced market for housing in Toronto and there is no specific tilt in favour of sellers or buyers alike. Prices may not be going up as rapidly as they did before although there could be moderate increases as mentioned earlier. The winter has been prolonged and extensive in Canada and this may have impacted sales figures a little as well. Home buyers have usually refrained from listing units on the market in situations where the weather has not been favourable.

As per reports, demand is expected to go up for condominium units and luxury housing units. This latent demand is expected to facilitate an increase in property prices. The average pricing for luxury property in the Greater Toronto Area (GTA) is expected to reach $3,691,700 by beginning 2020 as per reports. There will be a spring market that is more active in 2020 likewise. In the same duration, average pricing for luxury condominiums will go up to $2,390,405 as well.

The rates of interest may not be increased by the Bank of Canada more than one-two times in 2019 although rates are not expected to be lowered as per reports. Rates currently stand at 4.375% for 30 year fixed term housing mortgages and this should remain at the same level all throughout the spring as per experts. Mortgage rates are a major influence on home affordability overall and their movements will naturally affect demand levels in the short-term.