It’s no secret that Toronto is arguably Canada’s hottest real estate market, and there appears to be few signs that the city’s market is going to soften anytime soon.
Spurred on by population growth and an influx of residents into the city’s downtown core and adjacent area, Toronto’s housing market has continued to make gains, even as similar markets across the country, most notably Vancouver, have begun to settle.
In the last year alone, the average cost of a home increased by 22 percent, according to the Toronto Real Estate Board’s (TREB) benchmark index. As of January 2017, the average selling price of a home in the GTA was roughly $770,745, an increase of approximately $140,552 from 2016.
In addition to the home sector experiencing double digit gains, low-rise housing (detached, semi-detached and townhomes) experienced large gains as well, with the year-over-year price growing by 26 to 28 percent between 2016 and 2017.
The current and long standing sellers’ market and the high demand for housing in the GTA has also sparked heated bidding wars. Of the 17,862 homes sold in Toronto in 2016, 37 percent or 6,583 sold over asking.
In the last few weeks, there have been multiple stories in the local media of homes selling for hundreds of thousands above listing price; there was even a home in the Don Mills and Lawrence area that sold for a million over the asking price.
“It just gets back to the fact that while we’ve seen sellers’ market conditions over the last two or three years, they only grew stronger this year,” says Jason Mercer, director of market analysis for TREB. “And if we don’t see any sort of change on the supply side we should continue to see upward pressure on home prices.”
Ironically, as Mercer notes, there is a lack of available housing options, which is in part fueling price increases in the real estate market. However, according to Statistics Canada there are roughly 99,000 unoccupied homes and units in the GTA.
While many speculate that the great number of empty homes is a result of foreign buyers purchasing Toronto real estate as a long-term investment, data from the most recent census proves otherwise.
Yes, foreign buyers do account for a small amount of the unhabituated units; however a large majority of the vacant homes are owned by Canadians who have purchased a second home or condo as an investment property. These second homes are most often used for temporary or short term rentals like Airbnb.
Whether it is foreign buyers or local residents, Toronto city council is looking into imposing an empty home tax similar to the one that was established in Vancouver in the late 2016. The tax, which would be imposed on homes that remain empty over a long period of time, is meant to inspire those holding on to properties in hopes of maximizing their selling dollars to sell the surplus homes or find permanent tenants.
Whether city council will impose the new tax remains to be seen, however there is no disputing that Toronto’s real estate market is moving into another year of record prices.