Industry experts are starting to call the problems in the Toronto housing market a “blip” rather than a bursting bubble. While it is true that in some areas, housing prices are going down, overall prices are still up year-over-year in the Toronto area.
Flood of listings sellers trying to cash in at “peak”
The primary driver behind the dip in Toronto home prices has been a flood of supply on the market, mostly from sellers looking to cash in on what experts had determined was the “peak” of the housing market in early 2017. Generally, when you are told prices are the highest they are going to get, you’re going to make the decision to sell.
However, the new listings are high-priced, and there are a limited amount of buyers that can afford the average home price of $746,218 across the GTA. Even condos, which used to be the entry-level option to the housing market, have an average price now of $519,000 – which is definitely out of reach of the single income individuals who usually purchase these properties. So while sales have decreased, prices remain steadily growing at a single-digit pace, in accordance with the Toronto Real Estate Board’s prediction earlier in 2017.
Will buyers come in off the sidelines after seeing steady price increases?
There are three things that could happen with prices in the Toronto housing market. The first sees sellers lowering their prices significantly in order to sell their properties. But since the primary driver for these sellers was to “cash in”, this is highly unlikely – although it is what buyers want to happen. The second option – the inventory will be pulled off the market or turned into rental properties, as there is a rental crunch in Toronto and the GTA, and non-selling properties could make their owners more money if they become rental properties.
A third option, and one advocated by the TREB which has so far predicted every move in the Toronto housing market correctly for 2017, is that buyers waiting on the sidelines for prices to decrease see them increasing instead, and decide to purchase homes in the fourth quarter of 2017 and the first quarter of 2018. Those hoping for a deal will see steady price increases month-after-month and will realize that the deals won’t materialize. What remains to be seen is if there are enough people with the incomes to afford Toronto and GTA housing at current prices to snap up the current supply.
Sales need to decline for a number of months to see a price drop
Big price drops don’t realistically happen unless sales decline over a long stretch of time – and there are other factors at play, such as sellers deciding to convert their properties to short-term or long-term rental properties rather than selling them if they don’t get the price they want. For now, real estate agents and industry experts are predicting an “insane” fall season for property sales in Toronto and the GTA.