2018 Review and 2019 Outlook

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The common sense advice for successful investing in real estate is timing your move to “buy low, and sell high”. While market fluctuations can be nerve-wracking, it’s difficult to “buy low” without experiencing a period of decreased property values.

The market correction that began in mid-2017 came after a frenzied period of near-constant competing offer situations that contributed to unusually inflated prices. Those briefly sky-high numbers skewed many of the year-over-year statistics we normally rely on to gauge market activity.

It’s important to note when you hear about TREB (Toronto Real Estate Board) statistics, that the “average sale price” data includes sales of all home types (condos, townhouses, semi-detached and detached houses) across the entire GTA (Toronto, Halton, Peel, York, Durham, Dufferin, and Simcoe), which is why more specific charts are also created.

As the Historic Statistics chart above shows, the GTA experienced record-breaking sales growth for the last several years that was unsustainable long-term. The average sale price rose by 9.8% in 2015, 17.3% in 2016, and 12.7% in 2017, before the correction began and caused an overall decrease of 4.3% in 2018 (note that historical data may vary slightly based on alterations in sales area boundaries).

The 2018 average sale price of $787,300 is still 7.9% higher than the 2016 figure of $729,837 when you remove the unusual rise and fall experienced in 2017.

Still looking at average and median home prices, which combine all types of housing, here is how the numbers fluctuate by location in 2018:

TREB also offers average sales prices broken down by home type in the GTA for 2018:

When it comes to Toronto’s rental market, conditions couldn’t be much tighter. According to CMHC (Canada Mortgage and Housing Corporation), the current vacancy rate in the GTA is around 1.1% – meaning for every 100 rental apartments, 1.1 are available for lease. This places Toronto on par with Vancouver and Victoria for the lowest vacancy rates in the country.

And rental prices? They continue to soar. As of October 2018, TREB estimated the average rent for a 1-bedroom apartment is $2,163/mo, and a 2-bedroom unit is $2,822/mo. The multiple offers that used to dominate the resale market are now the norm in the rental market. This is not great news if you’re trying to rent a place, but it’s food for thought if you’re considering the purchase of a rental property as an investment, or a home for yourself that also contains a separate rental unit.

There are mixed reviews regarding other key indicators of the economy as a whole. Ontario’s unemployment rate sits at 5.4%, just below the national average of 5.6% – which is the lowest level since Statistics Canada began measurements in 1976. However as reported in The Star, factors such as sluggish wage growth, the sharp drop in oil prices, and trade uncertainty contributed to the Bank of Canada’s decision to keep the interest rate at 1.75% as we begin 2019.

In related news, RBC just cut its rates for 5-year fixed mortgages to 3.74%, and other major banks are expected to do the same. The banks want to make fixed-rate mortgages more attractive to consumers, because they are a more profitable product for the banks than variable mortgages.

Predictions for the real estate market in the GTA in 2019 are cautiously optimistic, forecasting small, single-digit gains in sale prices, according to reports from Royal LePage and Re/Max, as well as CMHC (The Canada Mortgage and Housing Corporation). We are in a relatively balanced market, but with the ongoing decrease in new listings, demand does continue to outpace supply. The average DOM (days on market) for listings in the GTA in December was 31 days, with the City of Toronto slightly less at 27 days, while 2018 as a whole saw 24 and 20 days, respectively.

It’s always a process to find the home you’ll love at the price you want to pay, but we’re up for the challenge!

 

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