Real estate property price trend in Toronto

Updated January 13, 2017

After a record-setting 2015 the real estate industry anticipated a slow-down in sales. That never materialized, and 2016 was another record year in Toronto real estate. With 113,133 listings sold on MLS the sales were up by 11.8%. Average price of all property types increased by 17.3%, from $622,217 to $729,922.

Prospective buyers had a difficult time finding a home that would meet their needs, and getting their offers accepted. A shortage of available listings contributed to fierce competition among buyers, and caused bidding wars. In many instances listings would come up with an artificially discounted asking price, only to sell for hundred of thousands more.

On a yearly basis in the GTA (Greater Toronto Area) an average price of a detached house was $974,698; semi-detached homes sold for an average of $673,738; townhouses (row houses) for $621,601; condo townhouses for $476,824; and condo apartments for $416,252. Detached houses constituted 47.5% of all sales, but the largest increase in the number of sales was in the high rise category.

In the City of Toronto average price for a detached home in December was $1,286,605, semi-detached houses sold at an average of $808,920, average townhouse price was $662,959, and an average price of a condo apartment was $466,592.

Year-over-year price change in December in the City of Toronto was 23.7% for a detached house, 8.4% for a semi, 23.5% for a townhouse, and 16.6% for a condo. Comparing to December 2015, 7.6% fewer detached houses, 11.5% fewer semis, and 19.6% fewer townhouses were sold in the City. The only category that reported an increase in sales on a year-over-year basis was condo apartments - 19.5% more units changed hands in December.

In the City of Toronto, comparing with 2015, 9.4 fewer properties of all types were listed for sale, the average sold to list price ratio was 103% (while in 2015 it was 101%), and listings took, on average, 19 days to sell, 4 days less than the previous year.

Out of 18,323 freehold listings sold in the City of Toronto in 2016, 1,550 were sold for full price, 10,946 sold over asking and only 5,821 sold below asking. The lowest, 61%, was paid for a 'to be built' house on a large lot located near Dufferin and highway 401. The asking price of $1,900,000 was obviously considerably more than the market would bear for this type of property. The highest, 192%, was paid for a backsplit on Donalda Club area, listed with an asking price of $1,088,000 and sold for $2,090,000 (or just over a million more).

24,495 condominium units (townhouses, apartments), co-ops and co-ownerships were sold in 2016 in the City of Toronto. 4,068 received full asking price, 5,166 were sold over asking, and 15,260 sold below asking. The lowest, 68%, was paid for a renovated condo apartment at Jane and Steeles. The highest, 155%, was paid for a condominium unit in Granite Place (Yonge and St. Clair).

The following factors affect our real estate market.

  1. The interest rates which have been very low for a number of years, keeping the real cost of purchasing a house, townhouse, condo apartment or loft reasonable, increased by roughly 0.25%. In order to qualify for more competitive rates the mortgage must be "stress tested" which means: a) the property value cannot exceed $999,999; b) the buyer has to qualify using a benchmark rate; and c) the amortization cannot exceed 25 years.
  2. Multi-unit dwellings qualify only for a higher rate, usually another 0.25% higher than a principal residence, unless the buyer will live in one of the units.
  3. Change in mortgage lending rules in the recent past reduced the amount of loan for which the first time buyers with low down payment would qualify. Most recently introduced change requires a down payment of 10% for the amount of mortgage over $500,000. Buyers need to have 5% down for the first $500,000 and additional 10% of the loan sum above that amount.
  4. Properties selling for over 1 million no longer qualify for government insured mortgage.
  5. Young people, immigrants, and foreign investors are still fueling the demand, while older generation stays longer in their homes.

Ontario Greenbelt Aliance urge the province to expand the existing greenbelt and freeze urban boundaries to protect agricultural land and water sources in the Golden Horseshoe. Freezing urban boundaries contributes to the rise in land value.

New Toronto Land Transfer Tax was introduced in 2009, and Harmonized Sales Tax came into effect in July of 2012. The later does not have a great impact on purchases of resale homes, other than adding to the closing costs, but will be felt by buyers of new construction.

Using average house prices on record since 1953, corrected for inflation (for comparison purposes we brought the historical data up to today's equivalent values), I produced the following graph. The average prices are courtesy of TREB.

On the graph below you will see three 'spikes' in house prices, and three 'dips'. Straight line crossing diagonally denotes the trend. In 1974 and 1989, when the average prices rose steeply above the trend line, a 'correction' ensued. We can also see a small correction as a result of late 2008 and early 2009 market conditions. The rate of price gains between 2013 and 2015 was a bit lower that the one which led to the 'bubble burst' of 1989. But the last year's rise is steeper, but, at 17.31% it is still less than a half of the 36% yearly increase that happened in 1987, and just over half of the 33.3% increase from 1974. Each correction led to a period of stable prices, especially when these prices were corrected for inflation.

Average real estate prices 1953-2016 in Toronto, Canada, corrected for inflation

At the beginning of 2010, when the average house price reached $431,433 (which, corrected for inflation, amounts to $470,350), the price line has crossed over the trend line. The increase rate, initially moderate, was higher between 2013 and 2015, and . The brief correction which happened in 2007 - 2008 was more of leveling off the prices, similar to the period between 1957 and 1960. After that brief correction the prices continued to rise, and the increases were quite substantial since 2010.

When the prices rise faster than the trend suggests, the market eventually slows down. Whether the prices become stable, following the trend line, or actually drop, seems to depend on the speed with which the price increases happen. The steeper the angle of the curve representing house prices, the more likely is a price 'correction'.

While the recent rise in real estate prices in Toronto is quite significant, the year-over-year changes in prices (not corrected for inflation) have lately been much more moderate than in previous years (see graph below). You will also notice that the largest single decrease in price was approximately 8%, while the largest increase (in 1987) was around 36%.

Average real estate prices 1953-2016 in Toronto, Canada, corrected for inflation

If you are interested in more detailed information about the market in a specific area, please call Marisha Robinsky, real estate sales representative, Bosley Real Estate Ltd., Brokerage, 416-322-8000.

This is not intended to solicit buyers or sellers under contract.

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