Toronto Market Explodes Out of the Gate in 2017

The Toronto market is typically very quiet, almost sleepy, in the month of January. Not so this year. 2016 was exceptionally strong, with sales over the full year up 12% over 2015 and prices up more than 17%. This January, however, prices were up by a jaw-dropping 22% over the same month last year, and sales were up 12%. Last January’s prices were up “only” 14% versus January 2015, so this year’s result is particularly striking.

Looking at the breakdown by type, prices for freehold properties (detached, semi-detached & townhouses) were up 26-28%, while prices for condominium apartments were up by 14.5%. It seems only yesterday that industry experts were confidently predicting the imminent collapse of a seriously over-supplied condo market. Not so any more – the inventory of condos has dropped, and first time buyers are turning to condos in ever-increasing numbers as freehold prices keep rising and, more recently, with the introduction of the new mortgage qualification rules.

Prices_Jan_2017One of the main drivers of this hot market has been, and continues to be, exceptionally low inventory. The supply of homes for sale remained at approximately one month throughout last year, and continued at this level in January. At this level, there is a strong self-sustaining quality to the supply of homes for sale. Since there are so few homes for sale, it is very difficult to find a suitable home to buy and extremely easy to sell, therefore, homeowners who are thinking about moving up will buy first before putting their home on the market in almost every case. The potential homes for sale are held off the market until something is purchased, and the inventory thus tends to keep contracting.

Inventory_Jan_2017

While it is early days to predict how the rest of the year will unfold, it seems pretty safe to assume that the spring market, at least, will be very explosive.