The new year has arrived – and it will be the priciest ever for Toronto homebuyers, as the real estate market is anticipated to eclipse Vancouver’s as Canada’s hottest.
According to the December Monthly Resale Housing Market Figures from the Toronto Real Estate Board, 2016 sales broke the annual record for the second year in a row; 113,133 homes changed hands via MLS last year – an 11.8% yearly increase and an 8.6% uptick last month alone.
Price Index Reaches New Heights
Along with brisk sales come higher prices – TREB reports its Home Price Index rose 21% over 2016 to an average price of $729,922 across all home types, and up 17.3% year over year in December. Such sales and price gains are being driven by an intense supply and demand imbalance; housing inventory is at a 16-year low in the Greater Toronto Area, and there’s no relief in sight.
“Price growth accelerated throughout 2016 as the supply of listings remained very constrained,” stated Jason Mercer, TREB’s director of market analysis, in a release. “Active listings at the end of December were at their lowest point in a decade and a half.” The number of new homes available for sale fell nearly 0.4% last year.
Historically low interest rates, heavy migration, and stable jobs are also factors behind the boom, said TREB President Larry Cerqua: “A relatively strong regional economy, low unemployment and very low borrowing costs kept the demand for ownership housing strong in the GTA, as the region’s population continued to grow in 2016.”
Buyers Want Houses – At Any Cost
While TREB’s numbers show condos changed hands the most within the 416 at 20,860 units sold (a 19.9% increase), make no mistake – the frenzy for detached houses remains in full force. Buyers are snapping them up across the GTA, hindered only by the fact that there’s so few available – only 12,354 were sold within the city proper (+3.1%) compared to the 41,363 in the 905 (+12.9%). Buyers could also expect to pay an average of $1,252,069 and $891,856 in the 416 and 905, respectively.
Year over Year Sales and Price Change by Home Type
|Year over year % change||3.10%||12.90%||10.50%||19.50%||22.50%||20.80%|
|Year over year % change||-5.50%||9.40%||4.10%||17.10%||18.40%||16.20%|
|Year over year % change||4.10%||9.00%||7.70%||15.70%||17.60%||16.80%|
|Year over year % change||19.90%||21.10%||20.30%||9.40%||10.80%||9.70%|
Source: Toronto Real Estate Board
Foreign Buyers Still a West Coast Issue
The Canadian Press may have named the faceless “foreign buyer” as the top newsmaker of 2016, but TREB insists Toronto’s market growth is due to home-grown demand. According to an Ipsos survey conducted by the real estate board, only 4.9% of transactions in the GTA can be attributed to foreigners. This is backed by previous research that found domestic real estate investors account for a quarter of local real estate agents’ client bases.
However, out-of-country buyers are strongly alleged to contribute significantly to Vancouver’s housing woes. The west coast city is still reeling from government changes that targeted these buyers.
Despite an extremely strong first half of the year, sales plunged following a 15% tax placed on foreign investor purchase in Metro Vancouver, falling 5.6% over the year and a full 40% in December.
“As prices rose in the first half of the year, public debate waged about what was fuelling demand and what should be done to stop it. This led to multiple government interventions into the market. The long-term effects of these actions won’t be fully understood for some time,” stated Real Estate Board of Greater Vancouver President Dan Morrison.
However, the changes haven’t led to much price relief. The average detached house cost an average of $1,483,500 in December, while prices dipped only 2.2% over the year to a MLS benchmark of $897,600.
“The supply of homes for sale couldn’t keep up with home buyer demand for much of 2016. This allowed home sellers to raise their asking price. It wasn’t until the last half of the year that prices began to show modest declines,” Morrison adds.
All these changes have left buyers wary of rushing into the market alleges CIBC Chief Economist Avery Shenfeld. In an interview with the Financial Post, he said, “The spate of federal and provincial measures has seen the Vancouver market temporarily freeze in its tracks, as buyers and sellers both try to assess the implications for valuations ahead,” adding that while sales will likely recover slightly in 2017, prices could continue to slide.
Do you plan to buy a new home in 2017? Share your thoughts in the comments!