What to Expect for the Toronto Real Estate Market in 2020
Monday Feb 10th, 2020Share
Over the past few years we have seen some ups and downs in the Real Estate market. In 2018, after the Office of the Superintendent of Financial Institutions introduced the Stress Test on lending, the market adjusted and sales slowed causing a slump in the market for about a year. The Stress Test was introduced to support the goals of keeping future Canadian homeowners “heads above water” and preventing “loose” lending. While it did affect prices and sales in 2018 and part of 2019, it also made it more difficult for first time buyers to borrow, which ultimately had a more negative effect overall. It is apparent now that the Stress Test has caused more harm than good, effectively closing the door in the faces of first-time home buyers. I always viewed the introduction of the Stress Test as a temporary solution designed to slow down the increase in housing prices. I knew it would not last long as the real problem was a shortage of supply which was driving up housing prices. Since then, the government realized this was doing more harm than good and is now looking at re-evaluating the stress test and making changes. They found that the long term effect of the difficulty in borrowing for first time buyers ultimately has had a more negative effect and has contradicted the purpose of why the Stress Test was put in place in the first place.
With the announcements on easing of the Stress Test and the lenders opening up again slightly in the latter part of 2019, the market fueled back up with a vengeance. In the second half of 2019 we saw a huge increase in demand for housing again from buyers who were sitting on the sidelines. The Toronto Real Estate Board recorded 87,825 sales in 2019 - up by 12.6%, compared to the decade low of 78,017 sales reported in 2018, which was a result of the Stress Test.
Buyers are now appearing out of the woodwork again and there is currently a high demand for housing in Toronto both in the residential freehold market and the condo market. In January 2020, 4,581 sales were reported, up by 15.4% compared to January 2019. This was a great start to the year, although there could have been more sales if there was more product on the market. The problem which we are facing right now is a huge lack of inventory in order to keep up with this fueled demand. Over the past month every offer I have been involved in has been a multiple offer scenario with a high number of offers on each property and an average selling price far above the average in each location. If this type of demand continues and the supply stays low throughout the year, I see a significant increase in average prices for both residential and condo sales in 2019. I do note that the condo market seems to be very active and I do expect for condo prices to increase significantly in 2019. It will be interesting to see what the average prices on both home types will be after the second quarter of the year as as a slew of inventory hits the market and converts into more listings and sales.
In summary, I believe 2020 will be a strong seller's market as the environment for selling is ideal with very low supply currently and not enough product to fuel this supply. If you are a buyer, get into the market as soon as you can as prices will rise this year. You should also ensure you have an experienced Real Estate Broker representing you who knows how to play the multiple offer game and has a good winning record as it will be a very competitive buying environment this year.