According to the Teranet Resale House Price Index, the average value of a Toronto residential property in April increased by two per cent on an annual basis, but has declined seven per cent from the market peak in July of 2017. With higher interest rates, tougher mortgage rules and an increase in new-home completions expected later in the year, many forecasters are calling for prices to decline rapidly in the coming months. For the first time since the global economic crisis, we’ve seen a few developers lower their new single-family home prices this year.
Some people will say, “I told you so, prices don’t go up forever.” They are correct, pricing doesn’t always go up. However, in my search for the other side of the story, I came across an opinion piece in a major newspaper from early 2013. The author suggests renting for a while because prices are overvalued, as you might be able to buy in at a lower price in the near future. The average price of a resale home in the Greater Toronto Area at the time was $540,000, and despite the recent decline, the average GTA price in April 2018 was approximately $800,000. I wonder if that author is still waiting?
Toronto is a major global market, there is no glut of supply coming, and because of those two factors, we can suffer through periods of speculative purchasing behaviour by investors looking to make a quick buck. These factors can lead to house price volatility, which is scary for first-time buyers. Unfortunately, it is impossible to time the market, and if you desperately want to own your own home, you’ll have to take some risks. Keep in mind, the higher the year-over-year price growth, the higher the risk (and
the higher the potential reward).
Statistics Canada’s population estimate for the first quarter of 2018 shows there are 233,953 more people in Ontario than there were a year ago. That is the biggest 12-month increase since 1989. A significant portion of those are working-age adults who have moved here from other provinces and countries, and are looking to buy a home today or in the near future. Prices in the GTA may be down from the peak, but expect upward price pressure coming soon, as this huge number of new residents decide the market has stabilized, and they’re ready to jump in.
My advice to anyone looking to buy, is to make sure the home is somewhere you can see yourself living for five or more years, the price is well within your budget and you’re mentally and financially prepared for changes in borrowing costs and house prices. If you can confidently check off all those boxes, you’ll be fine. Do your own research and ask a lot of questions. Good luck.
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