Greater Toronto’s real estate market outlook 2017

Don’t expect price drops in the GTA in 2017 as lack of supply is still a major issue

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Despite a predicted decline in sales activity for 2017, most of Ontario’s housing markets won’t experience price declines this year. That’s because the inventory on single family homes continues to be dramatically low, making it a seller’s market in most of the Greater Toronto and Golden Horseshoe areas.

How inventory is dictating prices

Housing stock inventory is measured by a ratio known as months-of-inventory (MOI). This ratio helps determine the supply and demand equilibrium. In other words, it helps illustrate how long it would take to sell all the current listed homes for sale, based on the area’s current rate of sales activity.

According to statistics from the Toronto Real Estate Board,  the GTA was a seller’s market with an average of only 36 days of inventory by the end of 2016. To put this in perspective, a market is considered to be in a seller’s market—where conditions are far more favourable for the seller—if there are 120 days of inventory or less.

Now, the theory with MOI is that a house will sit on the market for longer when competition isn’t as fierce and when conditions favour home buyers. This is also the reason for seasonal affects in real estate—year after year house prices, on average, drop in the winter months when compared to hotter selling months, such as April and May.

To help illustrate the impact of demand on home prices, TheRedPin, analyzed Toronto housing sales data for the last six years (ending in Q3 2016). TheRedPin found that the selling price of a home sold in January was, on average, $60,000 less than a home sold in May. The MOI ratio showed that, on average, it took 29 days to sell a home in January in the GTA, versus 18 days during the spring selling season.

Most recently, this current lack of housing inventory in the GTA helped push prices up. Between November 2015 and November 2016, the average selling price of a GTA home rose to $776,684—up 22.7% on a year-over-year basis.

Read more: What housing inventory numbers can tell us right now »

Where are the seller’s markets? 

Based on mid-2016 statistics, the markets that were really skewed in the home seller’s favour included: Ajax, Whitby and Oshawa. Turns out these suburban areas quickly outpaced metro Toronto’s price growth in the first half of 2016, primarily because buyers were being pushed out of the more urban neighbourhoods due to rapidly escalating prices.

Still, not one city in Greater Toronto Area favoured the buyer by mid-2016:

CITY MOI Median Price 2016 Year-over-year change
Whitby 0.7 $582,500 26.60%
Ajax 0.7 $570,000 17.50%
Oshawa 0.7 $425,000 25.00%
Newmarket 0.8 $731,000 25.00%
Clarington 0.9 $430,000 14.90%
Pickering 1 $580,550 17.30%
Aurora 1.1 $853,300 26.90%
Brampton 1.1 $560,000 19.10%
Milton 1.1 $608,643 16.20%
Markham 1.4 $928,000 20.50%
Richmond Hill 1.5 $996,500 23.10%
Vaughan 1.5 $882,000 20.80%
Mississauga 1.6 $601,800 15.70%
Toronto 1.9 $595,000 7.80%
Source: TheRedPin

And there is no expectation of a sudden change in inventory in any of these markets. This means it will continue to be a seller’s market in the Greater Toronto Area.

Keep in mind, however, that if 2017 brings in additional changes to the mortgage market—such as higher variable or fixed mortgage rates—sellers can expect the number of qualified buyers to diminish, which will reduce demand pressure and prompt a drop in housing prices.

Toronto buyers will get a teeny-tiny break

If you are buying a home in Toronto there is a silver-lining: Starting January 1, 2017, Ontario is doubling the first-time homebuyer rebate on the land transfer tax (LTT). Announced in mid-November 2016, the Ontario government pledged to double the land transfer tax credit that it currently offers to first-time home buyers. This will mean an extra $2,000 or 0.26% on a home priced at $762,000 (the average price of a Toronto home). 

Toronto sellers expect more of the same

If you’re considering the sale of your single family detached, semi-detached or row home in the Greater Toronto market than 2017 may be the year. All predictions suggest that the tight demand will allow prices to continue to climb, despite recent mortgage regulation changes and the threat of higher interest rates. So, unless there are major changes in demand and supply or shifts in the economy, sellers in the GTA can expect bidding wars and further price escalation during the hotter buying seasons in 2017. 

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3 comments on “Greater Toronto’s real estate market outlook 2017

  1. I agree all of the GTA markets are strong sellers markets. However, I would advise caution for anyone looking at the rankings shown to determine relative “hotness”. Because these are overall averages, they are mixing houses and condos. Condos historically have had higher months of inentory (“MOI”) than houses. While that might not make much of a difference in Newmarket or Whitby, it certainly does in Toronto where 58% of all sales in 2016 were condos. So it’s not an apples-to-apples comparison. It was noted these numbers were for mid-year 2016. At the end of January, Toronto (416) condos had an MOI of 3.5 while houses were 1.7. For the rest of the year, houses were between 0.7 and 1.1 and ended the year at 0.8. This would be comparable to houses in any of the outlying areas. Even Toronto condo MOI dropped severely, remaining below 2.0 from March onwards, and ending the year at 1.0.

    Reply

    • Thanks for the insight Scott.

      Reply

    • Tks for that scott

      Reply

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