According to a recent report, much of the growth in home prices over the past 18 months since the start of the Covid-19 pandemic was largely driven by strong demand from end users (home buyers intending to live in the property), not investors (looking to rent out or just ‘hold onto’ properties given the expectation that prices will keep going up).
But while end-users were the primary driver of the Toronto area’s housing boom in 2020, that trend appears to be changing in 2021. The market is crowded with optimistic investors who believe home prices will keep going up forever at a rapid rate and have been actively participating both in the resale and pre-construction markets. A record breaking 7,773 new pre-construction condos sold in Q3-2021, 63% higher than during the same period in 2020 (13,589) and the second highest level on record behind 2017 (23,919).
The fall will remain a seller’s market. The lack of listings means buyers will still face stiff competition especially for houses just below or above the $1 million mark that appeals to many buyers.
Throughout the pandemic, home prices in the 905 have risen faster than in the city of Toronto as buyers seek more for their money. Whether the suburbs remain hot remains to be seen. Suburban home prices went up 30%+, whereas Toronto went up 10%
Condo sales are back. Condos prices increased 9.4% YOY and sales were up 11% in August 2021. The high cost of homes and the general acceptance that we may be living in this pandemic for a while is feeding the condo market.
Immigration and population growth will push prices to rise in Toronto’s condo segment. Demand is expected to increase when international borders fully reopen and immigration, based on federal targets to welcome more than 400,000 newcomers annually between 2021 and 2023, resumes.
“The Greater Toronto Area will continue to be Canada’s single greatest metropolitan beneficiary of that population growth and all of these people are going to require a place to live,” Jason Mercer, TRREB’s chief market analyst.
According to Teranet’s recent data from January 2011 to August 2021, Toronto has accounted for 17% of total Ontario property transfers. 25% of activities were attributable to First-Time Homebuyers. This speaks to Toronto’s continuing appeal to investors as well as the younger generation which predominantly make up the First-Time Homebuyers segment.
Despite the cost, young families are still buying and first-time buyers still purchasing homes. According to a recent CIBC Economics report, parents gave their kids just more than $10-billion in down-payment help over the past year, which was 10 per cent of total down payments over that period. Just less than 30% of first-time buyers got this help, which averaged $82,000. The Canadian housing market’s secret sauce is parents helping first-time buyers with down payments.
This years rapid price acceleration has been driven largely by investors – across the board: Resale, new pre-construction; Homes, condos. How long can this investor-led price acceleration go on for? For a very long time, as long as there is another optimistic investor around the corner who is willing to pay more became their have family and friends who have done well with Toronto real estate investments, prices will continue to increase.
