Many of the headlines and facts reported in the news about the GTA real estate market have been correct. It’s been on a roller coaster for the last two years!
First, after an uncomfortable, impossible-to-maintain escalation of prices in 2016-2017, the Ontario Government decided they needed to "slow down the market" part-way through 2017. Many cringe when they recall Premier Wynne's press conference in April 2017 announcing the changes that would ultimately stall the Real Estate Market. Then came “the Stress Test!” Any mortgage applicant would need to qualify for an interest rate that was 2% higher than what they would actually need to pay. With this tightening of lending rules, purchasing power was reduced by about 16%. Canadians could now afford less of a home, which saw a shift in the market from detached homes to less expensive homes and especially condos. Then, of course, interest rate hike, after hike, after hike. All this contributed to one of the worst declines in annual units sold in recent history.
Here’s where it’s important to read beyond the headlines: When analyzing Real estate trends for 2018 closely, we see that the first five months were very different from the last seven. January to May 2017 was one of the most explosive and dizzying markets EVER in GTA Real Estate history. Therefore January to May 2018 was behind the eight-ball before it even started. Comparing the first five months of 2017 to the first five months of 2018 was like comparing Apples to Oranges. And yet those unfair year-over-year comparisons made headlines. Obviously we were going to see sales declines from 2017 due to the government's strategy. Comparing prices to 2016 and 2015 would have been more relevant.
As the year progressed, comparing June-December 2017 over the same period in 2018 showed a very different picture. The volume of sales was about the same year over year, and most segments saw slight gains in average selling prices.
As we head into 2019 on a level playing field, what should we expect? A Key Performance Indicator will be inventory levels. Without any external/artificial forces affecting the market, supply and demand will dictate results. Coming off a year in which we saw one of the worst declines for units sold, there seems to be a lot of pent up demand, and not much inventory to fill it! For buyers looking for deals, the window of opportunity is closing fast. This year, we anticipate a moderate increase in units sold.
While 2019 is unlikely to bring the crazy price increases that we saw in the early part of 2017, analysts are predicting a healthy and sustainable appreciation in the 2-5% range.