Surprising Strength in Market, Prices still RisingDuring the last decade, the real estate market in the GTA has constantly surprised analysts. This summer was no exception as the market roared back to life after taking a breather for about a year.
The resale market is brisk for all types of housing; perhaps in response to mortgage interest rate hikes. A shortage of good listings continues to drive up sales for detached and semi-detached homes. Condos have also seen price appreciation compared to this time last year.
"GTA households are approaching home ownership with a renewed sense of confidence," says Diane Usher, president of the Toronto Real Estate Board (TREB). "Prospective home buyers have taken a hard look at their household balanced sheets over the past year and have found that, despite stricter lending guidelines, there are affordable property types from which to choose."
Prices for detached homes are up by almost 8% in the GTA, and by 7% in the 905 regions, according to the most recent sales figures from TREB. In the City of Toronto, the average price for a detached home now tops $856,000. In the 905 regions, the average is just over $608,000.
Buyers have been turning to more affordable semi-detached houses. The average Toronto semi now sells for more than $616,000, while in the 905 regions it is priced at just under $406,000.
Fear of interest rate increases and more government regulation in the mortgage market has helped fuel real estate sales, but most experts believe the Bank of Canada will move slowly with further increases because of global economic uncertainty and concerns over Canadian household debt. Interest rates are still far below historic levels. TD Economics determined that housing affordability in Canada is at its most favourable level since the early 2000s.
"The anticipated 3% to 4% growth in personal incomes over the next 2 years will likely help offset much of the impact of gradually rising rates, helping to keep household debt affordable to the average Canadian," according to TD Economics.
Meanwhile, all of the factors that have driven Toronto's real estate market during the last decade are still in play. More households are being formed as the baby boomers' children start their own families. More single people are purchasing property and living alone. Immigration continues to support the market and real estate investors from all over the world see great potential in Toronto housing.
Condo prices edge higher, Steady growth predicted
The GTA condo market is probably discussed more than any other real estate story. It's impossible to travel anywhere in the GTA and not notice all the new condos under construction, and wonder what impact that's having on the resale market.
The resale condo market is doing well, although sales earlier in 2013 were down from previous years. Currently, the average GTA condo apartment sells for just under $340k, which is up about 2% from this time last year. In the City of Toronto, the average price is about $355k, while in the 905 regions the average price is just under $300k.
First-time buyers were hit the hardest by strict 2012 mortgage regulations, which dampened the market for the first half of this year. But demographics and economic trends favour condos --- they are affordable and attractive for everyone from new arrivals to Canada to first-time buyers to seniors who are downsizing from detached homes.
There is more commercial development going on downtown than we've seen in years, which will provide jobs for people living in the dozens of downtown condos now in place or under construction.
Investors are also an important part of the equation. The Toronto Real Estate Board reports that condo apartment rental transactions are up by almost 23% compared to last year, resulting in above-inflation rent increase for 1 & 2 bedroom units. The vacancy rate remains low, so investors are able to rent their properties. However, competition for those renters will increase during the next 2 years as a record number of new units are completed. Many of those units will find their way to the resale market.
Looking ahead, the Conference Board of Canada predicts that as Toronto's economy strengthens next year, demand for resale condos will rise. It forecasts a 2.2% increase in sales in 2014 and an average growth of 2.5% from 2015 to 2017.. The Conference Board says the market will be balanced, leading to modest price growth of 2.8% annually.
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