Toronto Market Remains Steady

Well, that was quite a roller-coaster ride we’ve been on for the past 24 months!

For many years, going back to the early 2000’s, Toronto area prices increased at a steady pace, averaging around 6% per year and always under 10% per year. Then, beginning in early 2016, prices began moving up much more quickly.

In the spring of 2016, prices were already about 15% higher than the same time in 2015, and by the end of 2016 they were more than  20% higher. Then, in early 2017, prices really took off, and by March they were 33% higher than the previous year. In April, the Ontario Government brought in their 16 point (or was it 18 point?) plan to bring prices down, and in May prices started falling quickly until they eventually gave back most of the increase.

Clearly, a bubble formed in early 2016 and collapsed in early 2017, leaving us… pretty much where we would have been had the bubble never formed. In fact, prices are somewhat higher now than they would have been if we had simply seen 8-10% increases in 2016 and 2017, in line with the trend over the previous 15 years or so.

Prices in December continued the stable trend that we have seen since prices bottomed in August, and inventory levels have remained just inside ‘sellers’ market’ territory, so we still have a very strong market in the Toronto area, albeit not as hot as it was for much of the past two years — and thankfully so!

 

Prices_All Property Types Dec_2017

Inventory_Dec_2017

It remains to be seen, of course, whether the market will continue in a positive direction in 2018.

The federal government’s new mortgage qualification rules took effect on January 1, requiring all mortgage borrowers to pass a ‘stress test’ to prove they could afford the payments even if mortgage rates rose by 2%. For a buyer in the $1,000,000 price range, this reduces affordability by as much as 20%. This was the cause of a minor buying frenzy at the end of 2016 as buyers rushed to purchase before the new rules became effective.

It seems likely that the new rules will have an impact on sales and prices, both because of the new rules themselves and because of the business that has been ‘pulled forward’ from this year to late last year to avoid the new rules. Also, it seems probable that interest rates will continue to creep upward, and this could further dampen both sales and prices.

Let’s hope that we see a steady, if perhaps not especially strong, spring market this year… and not something more unpleasant.