Toronto Real Estate Market Outlook in 2019

2017 was a fluctuating year of unprecedented highs mixed with lows for the Toronto housing market, whereas 2018 was more of a balanced market in that respect. So what does the future hold for the Toronto housing market in 2019?

In order to tackle this question, we must first briefly discuss the Toronto Housing Market in the years leading up to 2019, while paying close attention to 2017, as it laid the groundwork for things to come.

Brief Overview of the Toronto Housing Market Prior to 2019

For several years, the average selling price for the Toronto housing market has been increasing at a high rate year-over-year (more than 10% per year), according to the Toronto Real Estate Board (TREB). Such an increase in the growth rate of the average selling price is in itself alarming for residents in Toronto looking to buy a home. Then from January to April 2017, there was a staggering 19% increase in the average selling price of homes in Toronto in just three months, reaching it’s all-time high of nearly $1,000,000. This was the final signal for government to intervene.

In response, the Ontario government introduced the ‘Ontario Fair Pricing Plan’, a series of policies to address the housing issue. For one, A ‘foreign buyer’s tax’ of 15% was introduced in an effort to reduce the investment attractiveness of foreign investors. The Bank of Canada also hiked interest rates and introduced a higher approval rate for mortgages - which in turn increased mortgage costs, all in an effort to stabilize the housing market.

The government’s concentrated efforts to slow down the fast appreciation of the housing market put to effect a decline in the number of homes sold, the rate of appreciation, and the number of new listings in the months that followed.

Nevertheless, due to the high demand, mainly a result of increased migration to Toronto (approximately 200,000 newcomers in 2017), the average sale price of homes continued increasing but this time at a more conservative rate. The government intervention resulted in a more balanced housing market for Toronto in 2018, with prices shifting only a few percent from month to month, versus the double digit appreciation the market was experiencing in the years prior.

In the recent years, most of the demand for housing has been for condos located in downtown Toronto. As a result, in 2018, 37% of all residential sales were condo sales, with the majority being downtown Toronto. The benefits of living in downtown Toronto which include more employment opportunities, good public transportation, and great entertainment, are luring more and more immigrants and migrants to relocate to downtown Toronto. This will continue to fuel both the rental and purchase prices of Toronto condos.

2019 Toronto Housing Market (January and February)

Home buyers are still struggling to meet qualifications to buy a house after the government intervention which took place in 2017. As a result, the total sales of homes in February declined 2.4% over the course of a year compared to February 2018. New listings also declined by 6.2% over the course of a year.

Decrease in Sales & New Listings = Increase in Average Selling Price

Although there is a decline of total sales of homes and in the number of new listings, the average selling price of homes in the Greater Toronto Area continued to increase, this time a moderate 1.6% over the course of a year (February 2018 vs February 2019). However, this increase should not be taken at face value.

Out of the 5,025 sales that took place in the Greater Toronto Area in February 2019, the most activity comes from detached homes with 2,171 sales (43% of total sales). These homes which make up the majority of the transactions actually depreciated by 2.1% compared to February 2018. Contrasting that with Toronto Condominium Apartments, which appreciated at a rate of 6.1% and had the second most transactions - 1,064 sales (21% of total sales). You begin to see that the market is different based not only on location but more importantly on the type of property.

What to Expect in 2019? A Stable Market

With compelling forces at either side of the spectrum, government regulations to slow down the market at one end versus high demand resulting mainly from high levels of migration to the city on the other, we expect the Toronto housing market to remain relatively stable in 2019. Increasing by less than 5% from month-to-month over the course of the year for condos in high demand neighbourhoods in downtown or decreasing by a few percent points for houses in less attractive areas.