We don’t have to wait for the final numbers to come in to know that this has been an extraordinary year for real estate in Toronto. In the city’s luxury neighbourhoods, the average price of a detached house in Rosedale rose by 15% from $2,083,801 in November, 2015 to $2,409,444 in November, 2016. The average price of a detached home in Forest Hill rose by 35% from $1,434,960 in November, 2015 to $1,943,683 in November, 2016. In the same time period, the average price of a detached house in Lawrence Park rose from $1,642,798 to $2,294,291 – an increase of over 39%.
The Toronto Real Estate Board’s statistics for all of Toronto in November, 2016, show a picture consistent with the rest of the year. The number of sales in November, 2016 rose by 16.5% from November, 2015. The average sale price of any property in the Greater Toronto Area rose from $632,774 in November, 2015 to $776,864 in November, 2016, an increase of 22.7%.
Economics tells us that when demand exceeds supply, prices will rise. Here are 3 factors driving up the demand for homes in Toronto:
1. Investment and Immigration: Toronto’s global reputation as a safe, clean city of opportunity attracts both real estate investors and those who wish to become residents. Even as the Canadian government considers gathering data on how many properties are owned by foreign investors, it’s worth remembering that Toronto also receives an average of 100,000 new inhabitants a year.
2. Demographics: These days, becoming an elder doesn’t mean incarceration in the house the children were raised in. Many “empty nesters” would like to trade in the family home for a turnkey condo lifestyle, but have no interest in a small cubicle in the downtown core. Toronto is still very short of the 1400 – 1700 square foot condo apartments that are the desired transition from a 2000 – 3000 square foot house. Because of this shortage, Mom and Dad are staying put, frustrating the younger generation’s search for a family home.
3. Economics: Despite the periodic government tightening of qualifications for home Buyers, money is still cheap. Because it’s anybody’s guess how long the low interest rates will last, Buyers are scrambling to secure loans at favourable rates, and to make their purchase at the first opportunity.
The current market may change if and when investment and immigration taper off, when more “next step” housing becomes available to potential Sellers or when interest rates rise. In the meantime, it is easy to see demand for Toronto real estate continuing to exceed supply, and prices reacting accordingly.