Toronto To Experience a Heated Real Estate Market in 2020

By: Team D - Harkirat Dhillon

Toronto To Experience a Heated Real Estate Market in 2020

Tags: Toronto Real Estate Market, Surging House Prices, 2020 Real Estate Market

"There's a certain stubbornness that has persisted in the GTA Real Estate Market"

After a rocky few years of declining home prices and sales amidst government cooling measures, Toronto's real estate market has heated up over the latter half of 2019.

The Toronto Real Estate Board's most recent figures put the average price for a home in the city of Toronto at $910,419 for both house and condos. Last year at the same time, the average Toronto home price was $840,391.

Moving into 2020, the highs and lows of 2019 will level out with healthy price increases expected estimating a 3.7% increase in national average residential sale prices and 6.2% increase in the Toronto market.

With the latest changes to the stress-test, presence of COVID-19 in Ontario and Bank of Canada lowering its rate by 50 index points down to 1.25%, what are some of the things we can expect for this years Real Estate Market?

1. Home Prices Are Recovering from 2018 and Will Soar in 2020

The housing market has come a long way from the 2016-2018 boom-bust cycle. Roughly two years of softer sales and price growth followed by the introduction of the federal mortage stress test, demand for homes for sales increased exponentially in the second half of 2019.

The Greater Toronto Area has started to experience sustained rebounds in home buyer demand due to a number of factors, with lower interest rates, subdued Bank of Canada, combined with strength in the bond market, kept the consumer bost of borrowing at historic lows all year long.

Lower unemployment rates, economic growth fuelled in part by immigration , improved overall affordability in the Greater Toronto Area  are expected to drive the market forward. While Toronto is experiencing its "busiest" construction season ever, housing supply is still falling short of demands of the city's rapidly growing population.

With renewed purchasing power in hand, this is driving buyers back into the market, causing year-over-year sales and price growth to spike in Toronto, home buyers and sellers can expect this trend to extend well into 2020 with it currently being a Seller's market. ?

The Canadian Real Estate Association expects the year to close out with 530,000 transactions at an increase of 8.9% from 2018 and average home price nationally to rise to $531,000, an increase of 6.2% from 2018.

2, Ontario Will Lead Housing Market Growth & A Sellers Market in the GTA

It is no secret that market conditions in Canada have been largely defined by a growing supply and demand gap. While factors such as foreign and domestic investments have contributed to too-hot-to-handle price growth, there have been too few homes to satiate demand, in the GTA market, setting the stage for bidding wars and a surge in home prices. 

TREB's analysts are raising concerns should undersupply persist, it could raise unsustainable price growth seen before in the 2016 market. "Increased competition between buyers has resulted in an acceleration in price growth. Expect the rate of price growth to increase further if we see no relief on the listings supply front" says Jason Mercer, TREB's chief market analyst.

3, Mortgages Will Remain Cheap & Easier to Qualify

The Bank of Canada, the national central bank that sets the cost of borrowing for consumer lenders - has kept mortgage interest rates relatively low and stable at 1.75% which has just dropped down to 1.25% last week with the worldwide outbreak of COVID-19, otherwise known as Corona virus. These moves by the Fed and BoC appear to be part of a co-ordinated series of central bank actions around the world to fend off possible negative economic effects.

As a result, banks and credit unions were able to lower their variable mortgage and line of credit products  that were competitively priced. Due to this, borrowers have access to some of the lowest mortgage rates on record in 2020 and is likely to persist. With new changes coming to the mortage stress test in April, it will allow for more flexibility when qualifying borrowers. This allows for purchasers to qualify for a higher lending amount while saving on monthly payments. Overall, a better time to purchase or refinance for any plans you may have for 2020. 

With this being said and considering everything, now is the perfect time to list your property and maximize on selling price and refinancing to get your hands on some extra cash although borrowers should be extra mindful as empoyment rates could be heavily impacted.