Toronto being one of the most expensive cities in Canada, has experienced the highest housing market fluctuations to date. Studying real estate trends for Toronto is crucial to understand the overall environment of the housing market and invest into a property only after careful evaluation. The housing market in Toronto is a humongous affair that has to be scanned through and through as changes may occur in a flick and sideline you from the deal you find but end up losing. If you are an investor, or looking into buying your first home, take our advice and avoid relying on click bait news. You need to study the statistics and numbers from reliable sources to understand the real picture of Toronto real estate.
Toronto housing forecasts by TRREB (Toronto’s Regional Real Estate Board)
If you are a first time real estate evaluator, studying the TRREB report is a valuable resource that helps you understand statistically calculated numbers of Toronto’s hot real estate market, based on widespread survey responses. Each year, the TRREB discloses an outlook report for the Greater Toronto Area. Below is the brief representation of the 2023 report:
- Respondents willing to buy a home made up 28% of the total responses
- 39% plan to list their homes in 2023
- The average selling price was down 4% from 2022, presently sitting at $1.14 million
- 46% plan to buy a home in this year or the next
- 70,000 house sales expected during 2023, a 7% decline from the past year
Improving the housing market for the average buyer
The TRREB has outlined the major yardsticks that have heavily influenced housing prices and made suggestions that can possibly improve the housing market conditions for an average buyer in the Toronto area.
Discarding the Stress Test
The government introduced a stress test in which the average buyer has to qualify for a mortgage at higher rates than they would be liable to pay. The TRREB has made suggestions for the removal of the stress test, with the expectation that this will increase affordability for the buyer. However, according to our observations, discarding the stress test and improving short term house affordability will not prove fruitful for the long term as this may adversely affect the housing market and would result in a default, same as the one that occurred in the 2008 global financial crisis.
Since the stress test provides a definite level of certainty, that the house buyers indeed are financially sound to pay off debts, removing the test will destabilize the housing market with any and everyone qualifying for the mortgage at lower rates. One thing that can be done to increase affordability for the house buyer in Toronto is to provide extended mortgage periods in which the buyer may easily be able to pay off the debt.
Put in place 40-year amortizations
Just as we suggested previously, the TRREB has the opinion to introduce 40 year amortizations to home buyers, that will increase month to month affordability and distribute the costs into lower monthly costs paid over a 40 year period. The 40 year amortization effectively puts away the burden from the homeowner.
The Educated Guess for Toronto housing Market
While definite claims cannot be made, opinions from expert economists play a great role in letting the average house buyer have a rough estimate about the housing market in Canada. Referring to the low mortgage interest rates that enticed home owners, to buy house properties they could not afford, an economist from Montreal Concordia University commented:
“If some people are taken down, that’s really unfortunate,” Lander said. “But it’s really necessary to restore some sort of semblance to the market.” He passed these remarks after the warning by the CEO of Scotia bank who mentioned that tens of thousands of mortgage holders could be at risk of defaulting.
Based on the higher interest rates at present that forced home buyers to flock towards less expensive house properties, TD economists have predicted a 33% decline in home sales for the next 2 years, and then stabilizing at these numbers. Alongside house sales, TD foresaw the house prices to drop 19% in the same period, followed by a rise and modest stability from that point onwards.
The pandemic affected the housing market, driving up home prices and inflation. Though new house construction projects have been in full swing, factors such as higher interest rates, economic recession, taxation and political factors such as the Russian-Ukraine war, will continue to affect the housing market for the next five years. Automatically, effects will be pronounced for cities that are economic hubs, including Toronto.
