Toronto Real Estate Market Is Bound To Get More Competitive In 2020
Friday Mar 13th, 2020
We are already headed towards the second quarter of 2020 and overall, it’s looking to be a bright year for Toronto’s real estate and economy; low interest rates, increased demand for housing, and vibrant labor market. But according to Canada’s Real Estate Association and our own observation, here’s how 2020 will fare for Toronto Real Estate:
Prices Across The GTA Will Continue To Rise
The Greater Toronto Area experienced a price surge in 2019, and the trend is projected to continue its upward journey in 2020 as well. The median price of a two-storey home is projected to soar over $1 million and that of a condo expected to reach $600,000 by the mid of 2020. In addition, the national home sales saw an 8.9 per cent increase over the total expected for 2019 and are predicted to reach 530,000 units in 2020.
You might be thinking what’s driving this momentum? The answer is population growth and low supply. Canada’s population saw the biggest 12-month increase in their history, having grown 531,000 from August 2018 to July 2019. The situation is further intensified by the strong immigration numbers, who are likely to maintain a sustained demand for housing. In fact, according to a Royal LePage survey, over the next 5 years, 1 in 5 Canadian immigrants are expected to be homeowners.
These newcomers need a place to live and almost 60% of that growth is happening in British Columbia and Ontario. With sky-high rents and shifting demographics presenting an affordability crisis in Vancouver and Toronto, shortfalls seem to be the highlight of the foreseeable future.
The RBC Economics report states that in order to bridge the gap in demand between 2019 and 2023, Toronto needs 22,000 new rented condominium apartments and rental apartments. With inventory at an all time low, chances are we could return to the time of accelerating high prices sometime soon, without the presence of new houses to satisfy the need.
An Ever More Competitive Rental Market
According to Rentals.ca, the average rental rate for all property types in Toronto has witnessed an increase of 8.6% annually, having grown from $2,385 in November 2018 to $2,591 in November 2019. The condo rental rate growth stopped at 4% in 2019, while single-family homes rental rate growth proved to be a whopping 11%. Average rent is looking to exceed $2,800 sometime in 2020. Rent by December 2020 will have seen an 7% annual increase, reaching an average of $2,770 per month.
A More Flexible Housing Stress Test In 2020
Canadian government imposed a stress test on insured buyers in 2016, especially those who failed to pay more than 20 per cent of a home’s purchase price as down payment. The test was designed to analyze if borrowers can afford their mortgage payments at higher interest rates. In contrast to what the test was intended to do, home prices continued to soar around Vancouver and Toronto. As a result, another version of the test came about for uninsured buyers who make larger down payments. However, even this test was accused of slowing down all real estate activity and pushing out all first-time buyers.
While Prime Minister Justin Trudeau has called for a reviewal of the stress tests in a bid to make them more flexible and dynamic, it is still uncertain how it will play out. Even though the real estate industry has been pushing for flexibility in the stress tests, experts worry that easing its requirements could lead to increased household debt and a sharp spike in home prices.
Condo Inventory Will Continue To Shrink
With the home prices in Toronto spiking ever higher, the load is shifting to Toronto’s condominium market. With only about 7 months of supply available, the unsold condo inventory is at a decade low. Buyers who were previously inclined towards a house in Toronto are shifting to larger condo units. And with the inventory of these units already running low in the resale market, the demand for pre-construction condos is rising as a result. This shift is making developers add more two bedroom and three-bedroom units in their buildings, instead of smaller units.
A Shift Towards Co-living and Co-ownership
With the ever-soaring real estate prices in the GTA forcing more and more people out of their homes, co-ownership of homes is a highly enticing option for many would-be buyers. This translates into friends purchasing condos and homes together to live under one roof. Co-ownership will see its fair share of spotlight once the feasibility of lending to would-be buyers seeking to own property, dawns on Canadian financial institutions.
Another trend we are witnessing a lot in rental property management is that of co-living. With sky-high rents and an all-time low vacancy rates, renters are resorting to living with others to keep living costs low. Renting a room in a shared space, including shared housekeeping, hosted community events, WiFi and Netflix subscriptions, and all utilities included, can save you a great deal as compared to living alone.