January 2022 Market Review
The Toronto real estate market has been characterized by low supply for years now. That’s really been the primary driver of price increases. Sure, there are other factors like low interest rates, a strong and diverse job market, new and renovated homes that drive up the average value – there’s lots in the mix! But, the most frustrating part has been the lack of supply. If you have tried to buy a home in the city in the last 20 years, you have experienced that frustration!
From time to time we hear OREA or TRREB lobbying the government to reduce barriers to new home construction, which would help. And, we hear from government that they’ve come up with a new monkey wrench to throw into the works of the market: mortgage stress tests to reduce demand, then grants/tax breaks for first-time buyers that stoke demand. Honestly, they should just stay out of the way…. And that would mean allowing for more construction!
Now, that said, I’m not a fan of building large homes on prime farmland. That’s not a good use of that important resource, and wouldn’t really help residents of Toronto. We need more of what we call ‘in-fill housing’, meaning new homes on land in the city that was used for something else before. We’ve all seen a billion condo conversions – it’s not a new idea. But, if you look around outside the core (either east end or west end) there’s lots of land that could be made into housing, e.g. old strip malls/plazas, low-rise commercial buildings, etc. Naturally, we don’t want to permanently remove commercial or retail space; that has to be built back in to the new builds.
I mention this because the January sales stats paint the usual picture of low supply driving huge price increases. Following the record-breaking sales pace of January 2021, the volume of sales dropped 18.2%, from 6,888 sales last year to 5,636 last month. New listings, where the bottleneck really is, were down 15.5%, from 9,438 last year to 7,979 last month. By the end of the month, active listings were down to just 4,140, off 44% from 7,396 at this time last year. And those numbers drove the sales prices: the average sale was $1,242,793, up 28.6% over $966,068 last January.
It’s hard to keep up with that kind of price increase – unless, of course, you already own and are re-sizing; then, you are fairly well protected (because what you already own is also going up in value). It’s hard to see what would change things in the coming months. TRREB expects the market to stay tight, but is estimating that the average sale price will increase by *only* 12% this year…. Depending on your perspective, that would be reasonable!
If you are among those considering getting out of the city, this year will be good for that – but keep in mind that prices are going up pretty much everywhere! I’d be happy to help you explore your options there – reach out any time. 🙂