Why Toronto Real Estate Market is So Expensive? The Toronto real estate market has shifted one of the most interesting markets to follow if you’re into that sort of stuff. Although Toronto real estate saw a clear head in 2016&2017 which had customers screaming “impure” because they were growing priced out of the market, Toronto remains to keep bouncing and not really seeing the bubble volley.
While 2018 observed dips and a slowdown in gains in the early months, spring saw a reaction to the normal swing of the real estate market and now Toronto is being called one of the most overrated cities in the world. So why is Toronto real estate so expensive and costly? There are many elements according to the city’s soaring housing prices.
Today as we go into the final month of the first quarter of 2020, Jason Mercer, TRREB’s Director of Market Analysis and Service Channels has some perspicacity to partake.
“A key difference in the price growth story in January 2020 compared to January 2019 was in the low-rise market segments, particularly with regard to detached houses,” he says. “A year seems to have made a big difference.
It is clear that many buyers who were on the sidelines due to the OSFI mortgage stress test are moving back into the market, driving very strong year-over-year sales growth in the detached segment.”
He further says that Toronto’s constrained housing supply is a major factor that will continue to prompt rising prices.
“We started 2020 where 2019 left off, with very strong growth in the number of sales up against a continued dip in the number of new and available listings,” explains TRREB President Michael Collins. “Tighter market conditions compared to a year ago resulted in much stronger growth in average selling prices.”
As well, Collins says there are three things underpinning competition between buyers:
- Steady population growth
- Low unemployment
- Low borrowing costs
This is contributing to the price increase.
Real Estate Investors
More people are choosing to invest in real estate as they try to profit from a shortage of rental properties in the city.
Condos are being purchased up to provide rental homes for GTA tenants desperate to find a home.
According to Statistics Canada, 37.9 percent of Toronto condos are not owner-occupied.
More people are viewing condos as an investment property which is a problem according to Andy Yan, the director of the City Program at Simon Fraser University in Vancouver.
This is because the purpose of condos has changed. As well, Toronto has failed to create purpose-built rental housing over several decades which has led to a shortage of rental inventory.
The lack of purpose-built rentals has forced Torontonians to seek secondary housing market rentals, hence the boost in condo purchases by new investors.
This in hand with limited inventory, to begin with, will continue to inflate condo prices. Further proof this is the case, a report showed condo rents rose by 30 percent between 2006 and 2018.