No one was suprised when TREB President Larry Cerqua announced that 2016 was a record year for home sales in the Greater Toronto Area. GTA Realtors reported 113,133 sales, which is an 11.8 per cent increase compared to sales in 2015. In December 2016, 5,338 properties have been sold – up by 8.6 per cent in a year-over-year comparison.
The condominium segment experienced a 19.5 per cent increase in December 2016 compared to the year before, and the strongest annual rate of sales growth for the whole 2016 was also recorded in the condominium segment. It is obvious that the demand has shifted from freehold to condos, due to low inventory and higher prices in the freehold segment.
The average selling price was $729,922, up by 17.3 per cent compared to 2015. The average price of a condo in the 416 area in December 2016 was $466,592 which is a 16.6 per cent increase compared to December 2015. Detached homes in the 416 area, with the average selling price of $1,286,605 in December 2016, experienced a price increase of 23.7 per cent compared to December 2015.
The strong price growth throughout 2016 can be attributed to the low inventory Toronto has been experiencing the whole year. New listings for 2016 were down by almost four per cent and the active listings at the end of December were at their lowest point in a decade-and-a-half.
"If we want to see a sustained moderation in the pace of price growth, what we really need is more policy focus on issues impacting the lack of homes available for sale,” said Jason Mercer, TREB’s Director of Market Analysis.
Another year of growth in sales, but sadly no mention of increase in population and the effect that might have on the market growth. Yes, we have an active market in Toronto, but what about the population increase that consists of foreign investment, as well as an influx of immigration of our population to Ontario, from provinces like Alberta and Newfoundland which have seen a slowing of their economies. Low rates and low unemployment are great for the Province, but do put pressure on our Real Estate market in terms of increases.
The condominium market will still continue to have solid growth as the entry level for residential properties increases.
For instance, buyers moving up from condos with $900,000 to spend on a house will either have to look at condo townhouses or look further east or west of the city. It is likely there will be supply and demand issues for product in the central core, so areas outside the GTA will become hot spots.
This coming year will show an increase in foreign investment as a direct result of the foreign buyers tax implemented in Vancouver. This will further strengthen the very active Toronto market and it will be another Sellers market with multiple offers. I think the trend will no longer be property specific, as in freehold vs. condominium, it will all be about square footage.
Those who do not wish to commute from the suburbs will settle for a condominium or a townhouse out of necessity rather than it being their top choice. This is because people have already started to realize that chasing freehold is becoming more and more unattainable. In return, this will grow and strengthen the condo market, not at the same rate as freehold, but enough to start seeing more multiple offers on resale condominiums than we did in 2016.
The Canadian Dollar spiked to 1.3177, its strongest level since December 2014, just after Canada's economy unexpectedly added 53,700 jobs this last December, all of them full-time positions, and also posted its first trade surplus since September 2014. Strong market performance shows that home purchasers have solid confidence in our economy. However, it seems even these positive developments won't change government's plan to try and tighten the market.
Generally speaking, real estate activity in 2017 will be quite similar to what we experienced throughout 2016. That is, a lack of inventory (houses and now also condos), more buyers than sellers (another seller's market), multiple offers, frustrated buyers and price appreciation.
However, one key difference that we will see in 2017 is a rise in mortgage interest rates. Although the Bank of Canada has clearly projected that they do not plan on raising their benchmark interest rate, south of the border, Janet Yellen (Chair of the US Federal Reserve) has indicated that she expects to make up to 3 increases in the USA benchmark rate. Consequently, the bond market will go up and money will flow there unless banks here in Canada raise their mortgage interest rates rates too. So, expect mortgage rates here to go up in the year ahead. Might be a good idea to lock-in a mortgage rate too.
Title Photo by Abdulkadir A