After all the changes we saw in 2016, knowing what’s going to happen with the Toronto Real Estate Market in 2017 seems up in the air. While we don’t have a crystal ball (one that predicts the future anyways), our Fall Predictions for 2016 were pretty much bang on. And while we don’t know for certain, we have some pretty firm thoughts on what the future holds for the Toronto Real Estate Market in 2017.
First, let’s look at some of the highlights from 2016:
- GTA home prices increased 17.3 percent from last year
- Average GTA home valued at $740,685 (including condos), Detached at $1.35M
- New mortgage rate stress test reduces borrowing power by approximately 20%
- We saw bidding wars on rental properties
- It started to become cool to live in Scarberia and GTA West
- Gord Downie announced final tour, Trump became president and Kim Kardashian became old news (Finally!)
So what can we expect from the Toronto Real Estate Market in 2017? Here are our predictions:
Home prices will continue to rise. The reality is that while record breaking prices and new mortgage changes make it difficult (if not impossible) for homebuyers to purchase the property they want, demand for property continues to be strong.
Many homeowners are sitting back to let the storm pass in fear that if they sell their home, they won’t be able to find (or afford) a home to purchase for the next stage of their life. The number of active listings available is down by 48.1 percent over this time last year.
Lower inventory levels will keep competition strong. While we anticipate a decline in foreign investment due to the new regulatory changes and foreign tax laws, the Toronto area population is growing by an estimated 100,000 new immigrants annually. This combined with Millennials transitioning from single life to family life and current homeowners investing in multiple properties (majority for rental income), demand will continue to outpace supply.
Mortgage rates will continue to climb. If you didn’t get the memo, rock bottom mortgage rates are on the rise. New mortgage rules came into play last year to protect homeowners from dangerous household debt levels and potentially defaulting on their mortgage. The Bank of Canada is responding to government and regulatory changes, housing financing rules, as well as higher long-term bond yields that are increasing lender funding costs. While this is purely a guess, I predict we will see rates creep over 3% before the end of the year (which is still really good).
The bottom line is that under the new changes, rates will only continue to climb. If you’re thinking about buying this year, we recommend locking in your pre-approval rate sooner than later. Most lenders will guarantee the rate 120 days from the date it is locked in.
The rental market will continue to be on fire. Skyrocketing sale prices, increasing demand and below average inventory levels have forced many young professionals to continue saving for their first home, resulting in a 26 percent rental rate increase from this time last year. As property becomes less affordable downtown , we anticipate many to continue to rent in order to maintain their lifestyle. Under the assumption that housing prices continue to outpace household income, we see the rental marketing continuing to be strong for the Toronto Real Estate Market in 2017.
This year, 6,000 new construction rental homes are being built in Toronto to accommodate the demand. This is the highest number of new construction rentals to be approved in years.
Condo life will be king. If you were looking for property last fall, you were likely put through the ringer if you didn’t buy, leaving you houseless with 15-20% less buying power (due to new mortgage changes), climbing mortgage rates, and you were likely priced out of areas you could have easily afforded if you have bought this time last year.
While many have turned to the burbs, it’s not for everyone — not to mention it’s getting expensive now too. The concept of the “condo life” for families has become an acceptable reality in order to afford property, maintain a downtown lifestyle and enjoy shorter commute times. Others will rent until they can save enough for a down payment.
Luxury condos will continue to not make sense. If you’ve considered dropping your hard earned money on a luxury condo instead of a house, you’ve probably learned that they don’t make a lot of financial sense. We’re seeing fancy schmancy buildings being advertised (with fat condo fees), but for many, the unit sizes are small and the layouts don’t make sense. While many builders are going after baby boomers looking to cash in on their Toronto homes and downsize, they have an opportunity to capture young couples who are in between a $600,000 condo and a house that will cost them over $1M. Until builders are willing to give up square footage, we don’t see this market growing in popularity in the immediate future.
The GetToronto Team will have another record breaking year. I predict that in 2017, we will help more buyers find their dream home and more sellers get top dollar for their homes than ever before. We will win more than our fair share of bidding wars and continue to make sure that every client we work with can’t stop talking about us.
We love to educate our clients and share everything we know. If you’re thinking about buying, selling or just have questions, shoot us a message or give us a call. We’re here to help!
We’re ready for the Toronto Real Estate Market in 2017!