Five Reasons Why Toronto Home Prices Are Going Through the Roof
2016 was without a doubt a record breaking year for the Toronto real estate market. With the average condo prices staggering by 15% and the house prices soaring by a monstrous 22%, things were pretty much looking up for the Toronto real estate market. And surprisingly enough they still seem to be looking up up until now despite the many speculations put out about how the prices could go to an all time low in the coming years. In fact, the average selling prices have skyrocketed to an all time high this year by climbing by a 33.2% margin to $916,567 from a year ago. A situation that has placed Canada’s officials in a bit of a pickle with angry voters who think that the soaring prices are being fueled by speculators and foreigners.
But enough about that. The real question lingering in so many people’s minds today is why the prices seem to be soaring to even greater heights from one year to the other. And while there are a plethora of factors responsible for the rise, we are going to explore five factors alleged to have a hand in the upwards trajectory of the house prices in Toronto:
- Inadequacy of supply
One of the biggest perpetrators often fingered when prices go to an all time high in the Greater Toronto area is the lack of developable land. There just isn’t any land left to build more homes and this creates an unnecessary strain in the market. Additionally, there two land transfer taxes that Toronto home owners have to incur when buying another home and high cost everywhere else that discourages them from letting go of their homes further exacerbating the supply problem.
- Foreign buyers
Although the volume of foreign buyers cannot be conclusively determined, there has been an influx of foreign cash into the Toronto market that can be attributed to among many things the fact that Toronto and Vancouver have introduced a 15% tax on foreign buyers. Nonetheless, whether foreign money has a significant hand in the situation or not remains yet to be seen.
The growing number of newcomers entering Canada and more particularly Toronto is a frequently alluded to reason for skyrocketing prices in Canada. What can we say, Toronto is a desirable city and immigrants contribute to it's economic growth and help make it such a great city. Over the past couple of years the number of immigrants coming into the Greater Toronto has significantly increased with roughly 120,000 people having immigrated from the outside of Canada into Ontario from the year 2015 to the year 2016. This seems to play on the supply issue again.
- Low interest rates
Borrowing rates have been hanging at an all time low record for nearly a decade now making mortgages attractive and impelling an influx of buyers into the market.
- Speculative investing
Speculative investing has been on the spotlight for being one of the glaring factors explaining the skyrocketing prices of homes in Toronto area. In fact, according to Tal, the precipitous rise in prices between 2016 and 2017 suggests that there is a much bigger thing in play.