The Toronto Regional Real Estate Board (TRREB) announced 4,581 homes were sold in the Greater Toronto Area (GTA) in January 2020. While this is an increase in transactions of 15.4 per cent of all housing types-condos, towns, semis and detached compared to January 2019, the number of new listings declined 17.1 per cent and the number of active listings dropped 35 per cent.
A shrinking supply of available homes for sale in Toronto continued to push prices higher in January, bringing annual increases to the strongest in more than two years. Tighter market conditions compared to a year ago resulted in much stronger growth in average selling prices.
We continue to have steady population growth coupled with low unemployment and low borrowing costs which is driving substantial competition between buyers in all major market segments. The average selling price in the City of Toronto where there are increasingly competitive conditions was up 12.3 per cent over the same period last year.
It appears to be clear that any lingering concerns about the stress test or the tax measures that were implemented on the housing market have been put to rest with many buyers who were on the sidelines are now moving back into the market. A key difference in the price growth scenario for January 2020 compared to January 2019 was in the low-rise market segments, particularly with detached houses. The average price of a detached house in the City of Toronto rose to $1,369,848, an increase of 16.7 per cent over January 2019.
Detached house sales grew 23.3 per cent in the GTA in January and prices climbed 10.5 percent year-over-year. Condo prices rose 15.1 percent to an average of $630,047 in January in the GTA.
One would think the strong sales in theory would prompt more people to list their homes and cash out their equity however that is not happening. Over the past two years listings have been flat or down. TRREB blames a few policies, including the introduction of a municipal land transfer tax in the City of Toronto that means many homeowners have chosen to renovate rather than move up, and the lack of less expensive “in the middle” low-rise homes that give condo owners move up choices and downsizers better options.
The forecast for 2020 by Toronto Regional Real Estate Board for the GTA and the City of Toronto in particular, anticipates strong growth in homes sales and selling prices, while the supply of listings is expected to remain flat or decrease. Regional economic conditions remain robust coupled with strong population growth and low borrowing costs will support increased home sales in 2020. Unless we see a significant increase in supply, it is highly likely that new listings will not keep up with sales growth in 2020. The result will be an acceleration in price growth over the next year, as an increasing number of home buyers compete for a pool of listings that could be the same size or smaller than in 2019.
“The fact that tens of thousands of new households form each year in the GTA is testament to our region’s competitiveness on the global stage. We attract some of the best talent available into and across a diversity of economic sectors. However, in order to remain competitive, policy makers need to continue their focus on the constrained GTA housing supply and to ensure we have an integrated and efficient transit and transportation network that will effectively allow the movement of people and goods.” said John DiMichele, TRREB CEO.
It is anticipated with these strong underlying demand drivers, the GTA should see home sales crest the 90,000 mark in 2020, with a point forecast of 97,000. An increase of almost 10.5 per cent compared to 87,825 sales reported in 2019. Sales growth will be driven by the higher density low-rise market segments (semi-detached houses and town houses) and the condominium apartment segment as these home types on average are more affordable.
The point forecast for the overall average selling price for the GTA in 2020 is $900,000, almost a 10 per cent increase compared to the average of $819,319 reported for 2019. A 10 per cent growth in price year-over-year is not sustainable and is a concern. This rate of growth forecast assumes price growth will continue to be led by the less expensive mid-density low-rise home types and condominium apartments. If the rate of detached home price growth starts to catch up to that of other major home types, the average selling price for all home types combined could push beyond the $900,000 price point over the next year.
It is much of the same story for the rental market too. There continues to be an increase in the demand for rental properties as affordability of home ownership becomes out of reach for many buyers. Last year the GTA experienced the fastest rate increase in a decade as demand for rental properties outpaced supply and that is anticipated to continue for some time. The average rent for a one-bedroom condo last year was $2200, an increase of 5.4 per cent from 2018 and a two-bedroom condo rented for $2,874 on average, a 6.1 per cent increase year-over -year.
If you are giving any consideration to selling your home, the fast approaching spring market looks from all accounts that it will be a very robust time for sellers in the Toronto area.