Where are prices going within the Toronto Condo Market?

With 2017 being a rollercoaster year for pricing, and uncertainty in the overall market due to government intervention.  I wanted to take a look at my predictions for the 2018 market on a specific topic, that pretty much everyone is interested in.  What is my condo worth? And is the price going to continue to go up?  When it comes to value, it’s a complicated issue, but I am going to give you some insight into the fundamentals, and why the market has been so strong, for such a long period of time.  Some enlightening Statistics:

  • Rising immigration year to year. Currently the federal government is raising its targets by 3-6% per year; 310,000 (2018), 330,000 (2019), 340,000 (2020). In the previous decade the average was 260,000. 35% of these new immigrants end up in the GTA
  • Economic growth in Canada is now approaching 3% (GDP)
  • The unemployment rate is 5.7%, the lowest it has been in 40 years.
  • Inflation is less than 2%
  • Interest rates are still very low historically
  • Provincial and Municipal governments have meddled in the condo economy to a huge extent, contributing to a shut off of new inventory.
  • Historically low inventory of condos available to buy or rent
  • New rent controls that discourage the development of all rental housing including condos.
  • Toronto is now a world city with many international buyers and visitors eager to experience the exciting city it has become.

Those are the macro reasons the Toronto condo market has been so hot for the last 20 years.  Here is what is the biggest driver in an easy to follow graphical representation.  At the end of the day, pricing is, and always will be, affected by the supply and demand of any product.  Higher demand, with low supply always pushes prices higher.  It’s just fundamentals.  In Toronto, I have been saying this for a decade now, we just don’t have enough property to match the amount of people coming into this world class city.  The restraints by the government are not making it easier, and their vote getting “strategies” to cool the market have not worked.  This is the main reason:

With the 3rd lowest supply numbers in a decade, there should be no surprise that the market has not cooled down.   It doesn’t have an opportunity to.  And with some of that inventory being marginal and poorly built condos, the realistic supply is even lower for what the consumers actually want.  This stat tends to predict what prices will do over the year. 713 units is a tiny supply for this region. I think this indicates significantly high prices for 2018. If a huge burst of supply doesn’t come we have some big long-term price issues.

For all of these reasons plus a few more, it seems unlikely that prices for condos will see much relief. Bubble talk is just talk. I have heard it every year since 2005 when I first entered the market.

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