Take a minute to look at this chart of Toronto home prices. What strikes you first?
The red line (2017) is clearly the odd one out. The months from January to April that year were surreal. But look back to 2016, and you can see the run-up taking place, as the year-over-year gap gets increasingly wider. In retrospect, the fall of 2017 looks normal, if you compare it with the years before 2016. The years from 2013 to 2015 all resemble each other, with similar seasonal patterns and annual increases within a band of 6% to 10% – perhaps a bit on the high side, historically.
What about this year so far?
The chart shows the sales prices for ten months of 2018 (in black), overlaid on our projection for the year (the grey dots). We made our projection back in January, and it’s a simple formula that builds on the average month-to-month market behaviour from the past two decades.
Most years we’ll see some variations as the various months come in higher or lower than projected. What’s unusual in 2018 is how exactly the ten months have tracked the historic pattern. It’s almost as if everyone decided that we’d had enough excitement for a while!
Trends to watch
Beneath the placid surface, of course, there are strong undercurrents of change. The most obvious one is that condo apartments have become more expensive, in proportion to houses where you own the land. It’s clear that affordability has been the key driver. Thousands of first-time buyers can afford a condo, but not a semi or a detached house. The competition for apartments has increased, to the point that the average price for a condo is now close to 55% of the average price for a detached house, across the GTA. Two years ago, condo prices were at around 40% of prices for detached homes.
For young families looking for a conventional house, their search is now more likely to include suburban and exurban locations. As GO service becomes more frequent, many communities along the commuter lines are getting a lot more interest from downtown agents.
Money from wealthy overseas families has played a significant role in Toronto real estate, as it has in other world cities including Vancouver. These investors are not going away, but the rate of spending has changed, and it will continue to fluctuate in response to economic and political changes.
Strong demand for housing is a given. While buyers are being more cautious with their spending, there is so much competition for homes and apartments that it takes a lot of work to find the right place, at a price that’s affordable.
As experienced baby-boomer agents, we’re pretty smart about this stuff. We relish challenges, we like to share, and we’re available to help… You can email us, or ask for James and Joanne at 416-483-8000.