Varun Kohli May 19, 2023 No Comments

The Toronto housing market continues to show ironclad  resilience despite COVID-19, post-pandemic challenges, and interest rate hikes. A flurry of historically unprecedented wrenches were thrown at the housing market, and yet it has stabilized and begun to recover remarkably well. If anyone ever had doubts about the long-term prospects of GTA real estate, or feared its ability to absorb higher interest rates: the proof is in the pudding. GTA real estate continues its bull run as a gold-plated investment asset. A recent CBC News article highlighted these positive trends, pointing out that despite the pandemic, the housing market has continued to see healthy demand. Sales in March were up 9% from March 2022 levels, and prices have increased 4%. As has been repeated ad nauseum, the article noted that supply constraints continue to hamstring prospective new buyers. Market dynamics are skewing toward sellers as they hold off on listing their homes in wait for lower rates and another price boom. All of this suggests that property holders will be well served and that the market will remain strong for the foreseeable future.

James Laird, the CEO of Ratehub.ca, summed it all up well: “I think it’s fair to assume that the decreases in home prices might be behind us.” To recap some recent history, according to the Toronto Regional Real Estate Board (TRREB), home sales in the Greater Toronto Area (GTA) were robust throughout the pandemic. 2020 saw a record-breaking 95,151 transactions, surpassing the previous record set in 2016. While the initial lockdown measures in March and April caused a temporary decline in sales, the market quickly rebounded and continued to grow throughout the year. This was attributed to a variety of factors, such as then low interest rates, high demand, and limited housing supply. Higher rates were a body-blow to the market, but the latest data suggests that they weren’t high enough to induce a prolonged stagnation or decline in prices. The trend is very novel, but its momentum will likely continue if rates aren’t repeatedly increased in the coming months.

The history shows that GTA real estate can be slowed down by a crisis, but that it recovers quickly. These market conditions appear to persist as long as strong demand continues to meet limited supply, despite what the interest rate is. Toronto’s population continues to grow rapidly, and its economy continues to serve as an engine of job creation. The intense competition for homes continues, driving up prices and increasingly pivoted the advantage back to sellers. Multiple bids and over-asking sales proliferated across the market over the last several years, particularly for detached homes and in desirable neighbourhoods.

A recent report by the Canadian Centre for Economic Analysis (CANCEA) found that the GTA will need an additional 700,000 housing units by 2041 to accommodate its growing population. Tembo has repeatedly noted this report, and it speaks to the supply challenges that policymakers are dealing with. Transit Oriented Cities, a provincial plan to encourage condo and high rise construction at key public transit nodes, is one response to meeting our supply needs. Densification is going to be a key tool in responding to the challenges we face. Record provincial investment in public transit is another pillar that is supporting densification. Construction along Queen St. of the Ontario Line, the first new subway project built in the downtown core in many decades, has begun. The report also noted that without significant policy changes, the GTA will fall short of meeting this demand, resulting in a suffocating housing shortage.

This housing supply issue has the potential to create challenges for the real estate market. If there aren’t enough homes to meet the demand, it could lead to further price increases and a slowdown in sales. It’s also possible that people will begin to look outside of Toronto for more affordable housing options, which could lead to a decline in demand for properties within the city limits. However, despite these challenges, the Toronto housing market has proven to be incredibly resilient. In addition to weathering the pandemic, the market has also proven to be robust in the face of interest rate hikes. The Bank of Canada increased interest rates five times between 2017 and 2018, yet the housing market continued to grow. This is a testament to the strong demand for properties in Toronto and the city’s stable economy.

The Toronto housing market has also proven to be an excellent investment for those looking to build wealth through real estate. The average price of a home in the GTA increased by 13.5% in 2020, reaching a new record high of $929,699. This increase in value shows that even in the face of economic uncertainty, real estate remains a safe and profitable investment. The Toronto housing market has shown remarkable resilience in the face of economic uncertainty. Despite the challenges posed by the pandemic and interest rate hikes, the market has continued to thrive. While the issue of housing supply is once again at the forefront, the market remains strong and shows no signs of slowing down.

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