Resale market is hot again!

In January of 2020, resale property transactions in the Greater Toronto Area (GTA) increased by 15 per cent annually and the composite index price jumped by 9 per cent year-over-year, the largest annual increase since October of 2017. Looks like the market is back, and dare we say it’s hot again.

The biggest contributor to this price spike was the fact that new listings were down 17 per cent annually and active listings were down 35 per cent annually - a perfect example of how low supply and high demand result in price inflation.

In early 2020, Engel & Völkers Americas released their 2019 Year-End Canadian Market Report. The high-end brokerage indicated that Toronto’s housing market proved resilient in 2019, finding its footing in the second part of the year, with sellers clearly having a negotiating advantage in Q4-2019. They pointed to strong economic conditions like job growth, accelerated population growth, and low interest rates as factors tipping the scale heavily towards sellers again.

The report suggested that the mortgage stress test and non-resident buyers tax had an impact on luxury property transactions for inventory priced more than $4 million, however, the latter part of the year saw these properties start to move again. Once the ultra luxury market picks up, that’s a clear sign the market is very strong. On the flip side of the market, demand for existing condos last year was high, and there were multiple offers for much of the available product under $500,000. In other words, the entire price spectrum is booming.

The local Toronto office of Engel & Völkers pointed to strong immigration supporting the housing market, and their agents are working with clients from China, Iran and Russia. There continues to be steady interest in the high-end market from this new GTA residents, including the typical affluent communities of Yorkville, the Annex, Forest Hill, and Rosedale. They also noted that there has been a noticeable increase of interest in King Street from domestic buyers looking to downsize, with a keen interest in one-of-a-kind builds like the one by Westbank Corporation that was designed by starchitect Bjarke Ingels.

Another observation by the Engel & Völkers Toronto Central office is that investor groups are pooling resources and looking outside Toronto for multi-family properties in areas like Hamilton, Burlington, and Barrie. Other driving factors for Toronto investors considering out-of-town opportunities is the lower prices, better affordability for the tenants, larger lot sizes, and more single-family new builds.

According to Anita Springate-Renaud, License Partner at Engel & Völkers Toronto Central, “Interest rates are coming down and buyers have become acclimated to the mortgage stress test. We are seeing more private financing to get around the constraints formal banks adhere to. As a result, things started picking up in the latter part of 2019, and we expect that to continue into 2020. Home sellers are also becoming more realistic about the offers and prices they’ll receive for their properties. Because of these factors, I see the market continuing to gain traction in 2020.”

The recently rebranded Toronto Regional Real Estate Board expects the average resale house price in the GTA to increase by approximately 10 per cent in 2020. According to Engel & Völkers, resale prices in the City of Toronto will increase by 4 per cent to 7 per cent in 2020 and suburban prices will rise between 0 per cent and 3 per cent this year, a more modest prediction.

Many other industry experts forecasting pricing for 2020 have pointed to the return of consumer confidence in the GTA marketplace, as interest rates stay flat and population continues to grow. CMHC’s Fall 2019 Housing Market Outlook report forecast that Toronto CMA population growth of 138,000 people in 2020, with employment rising by 92,000 jobs - these are very strong results historically.

In conclusion, the resale market often leads the new home market, as resale end-user sentiment leads investors and more affluent end-users to make decisions to buy or not to buy the more expensive new homes. The new condo market remained very strong in 2019 with over 26,000 sales, so the resale strength shouldn’t have a big positive impact on new condo sales in 2020. However, on the single-family home side, the resale market growth should lead to more single-detached, semi-detached and townhouse sales in 2020 and more launch activity in the outer-suburban municipalities.

I always like to end my articles with a reminder to only buy what you can afford, buy for the long term, and surround yourself with a knowledgeable team, which should include a local realtor, and a mortgage broker. Good luck.