Low interest rates, population growth, investment and unprecedented equity gains all combined to spark one of the strongest decades for price appreciation in Ontario’s six largest housing markets.
Between 2007 and 2017, the province’s six major housing markets experienced substantial growth despite some serious challenges that included a financial crisis and subsequent recession. RE/MAX found that housing values more than doubled in the 10-year period in the Greater Toronto Area and Hamilton-Burlington, while average price rose 81 per cent in Kitchener-Waterloo; 63 per cent in London-St. Thomas; 62 per cent in Windsor; and 44 per cent in Ottawa.
“Lower borrowing costs helped to jumpstart the province’s real estate engine, creating one of the most dynamic housing markets in recent history,” says Christopher Alexander, Executive Vice President and Regional Director, RE/MAX INTEGRA, Ontario-Atlantic Region. “For existing homeowners, especially those who purchased early in the decade, the equity gains realized have exceeded all expectations.”
Here are the last 10 years of housing activity in Ontario’s top six housing markets:
Despite so many challenges over the past 20-plus years (think tech meltdown, 9/11, SARS, the financial crisis of 2008 and the great recession of 2009), residential average price in the Greater Toronto Area (GTA) has continued to post consecutive growth. In the last decade alone, housing values in the GTA more than doubled, rising from $376,236 in 2007 to $822,681 in 2017—a 119-per-cent upswing with an 8.14-per-cent compounded annual rate of return.
Housing market performance in the GTA has been remarkable. At the close of 2007, the GTA posted its best year with both sales and average price shattering existing records. However, just six months later, storm clouds gathered on the horizon, bringing in the financial crisis and subsequent recession. For a nine-month period, the market was slack and listings were coming on-stream at a rapid pace. By April of 2009, the worst was over and the GTA’s housing market was firing on all cylinders.
There have been some bumps along the way—including Kathleen Wynne’s Fair Housing Plan announced last April—but the market is still sound, characterized by healthy home-buying activity and more balanced market conditions. While current inventory levels are still low, they are nowhere close to the dismal numbers reported in the first quarter of 2017 when active listings had fallen to 7,865—the lowest level on record, with days on market hovering at 10.
Single-detached homes experienced some softening in demand, while condominium apartments and townhomes held the course in the latter half of 2017. Given price appreciation for freehold properties, condominiums remain the only affordable housing alternative for many purchasers. Not surprisingly, condominiums represented just over 36 per cent of overall residential sales in the GTA at year-end 2017. While some first-time buyers will sacrifice size for location, there are many that will ultimately move north, east and west of the city to satisfy their needs for larger living spaces. Empty nesters and retirees are also figuring into the mix, sparking demand for larger units—especially in walkable neighbourhoods. To this point, two condominium apartments priced at more than $5 million sold in the Annex in November.
Demand for luxury homes has also soared over the past decade, peaking in 2017 with 3,435 sales priced over $2 million. The top end of the market is expected to continue to experience growth as local buyers cash in on equity gains in recent years, and foreign buyers secure Canadian home ownership.
Moving forward, strong economic fundamentals will continue to support the GTA’s housing market. Household formation in the GTA consistently exceeds the national rate of formation. Population growth continues to gather speed, increasing 9.2 per cent between 2006 and 2011, and a further 6.2 per cent between 2011 and 2016. Immigration will play an even greater role in that figure in coming years as the federal government raises its immigration allowance to more than 300,000 people annually. Amazon has just short-listed Toronto as the only Canadian market under consideration for its corporate headquarters (HQ2). Tourism posted its best year, bringing in more than $9 billion in 2017. Unemployment rates have fallen to 5.9 per cent in the Toronto CMA (December 2017). The International Monetary Fund just increased its forecast for GDP growth in Canada to 2.3 per cent. Canada has been named the second-best country in the world to live, second only to Switzerland, and Toronto has been ranked as the number one city in the world by many organizations in recent years.
The future bodes well for housing in the GTA. While the feeding frenzy is over, multiple offers still occur, but only on well-priced properties in hot pocket neighbourhoods. Seller’s markets remain in place in the 416 area code, especially south of Hwy. 401, while more balanced conditions have emerged in the 905 area code. By April and May, the traditional spring market should jumpstart 2018. Average price, however, is expected to remain on par with 2017 levels, hovering at $822,000.
After a decade of uninterrupted growth, housing values in Hamilton-Burlington have more than doubled. Average price has appreciated 110 per cent, rising from $274,798 in 2007 to $576,418 in 2017, providing a compounded annual rate of return of almost eight per cent. Local purchasers continue to fuel the renaissance in Hamilton-Burlington, alongside those buyers drawn from Toronto and surrounding areas.
Inventory has been a major factor in rising housing values. As purchasers from the Greater Toronto Area (GTA) sought refuge from rapidly rising prices, the influx of new buyers into Hamilton and Burlington placed substantial pressure on the market. Sales have soared and supply has dwindled—particularly at starting price points—and values climbed. Announcements such as the extension of the GO Transit line into Hamilton further bolstered home-buying activity, with one in every four purchasers hailing from the GTA. Throughout 2015, 2016 and much of 2017, existing homeowners took advantage of serious equity gains, trading up to larger homes or better neighbourhoods, and sparking sales in both Burlington’s and Hamilton’s luxury markets. Burlington’s northeast quadrant in particular has experienced tremendous growth, as demand for property in Oakville spilled over into Burlington.
Economic diversity has been key to the revitalization of both Hamilton’s and Burlington’s housing markets in the past 10-year period. With renewed focus on business development in Hamilton, considerable time and effort has been spent attracting and retaining business, urban renewal and the advancement of small business growth. Burlington is currently looking at two substantial projects. These include four strategic employment areas and an innovation district that would add as many as 30,000 jobs once completed.
Education, healthcare and manufacturing remain Hamilton’s largest employers. Unemployment rates in the Hamilton Census Metropolitan Area (CMA) have steadily trended downward and now sit at 4.6 per cent (figure accurate as of December 2017). This represents one of the lowest unemployment rates in the country. Priorities such as the light rail transit system and the redevelopment of Hamilton’s waterfront have helped to secure investment in the core and beyond. Additionally, a new waterfront hotel, condominium and trail have been proposed for Burlington. Population growth remains one of Hamilton’s greatest strengths, with a gain of 4.1 per cent between 2006 and 2011, and 3.7 per cent between 2011 and 2016. That momentum is expected to continue through the next five years, with immigration playing a major role.
Solid economic fundamentals are expected to support Hamilton-Burlington’s residential real estate market moving forward. Healthy home-buying activity should serve to prop up sales and price throughout the year, particularly in Northeast Burlington and Waterdown, while value-conscious buyers seeking affordably-priced properties fuel demand in areas such as East Hamilton. The top end of the market is forecast to experience another strong year of activity, but fall short of peak 2017 levels. Average price is projected to climb, albeit at a slower pace than in recent years.
Kitchener-Waterloo’s strong economic fundamentals have supported the twin cities’ vibrant residential real estate market for much of the decade. Average price has experienced a significant upswing of 81 per cent over the 10-year period, rising from $252,429 in 2007 to $457,415 in 2017, representing a compounded annual rate of return of 6.12 per cent.
While the number of homes sold in 2017 in Kitchener-Waterloo fell short of 2016 record levels (5,860 versus 5,939), housing values appreciated 21 per cent in this one-year period. Much of the appreciation occurred in the heated first quarter, when tight inventory, bully offers and bidding wars were the market norm. The subsequent months saw the twin cities return to more normal levels of activity.
Heading into 2018, the housing market is markedly different, but Kitchener-Waterloo is well-positioned to withstand the change. A two-month supply of inventory currently exists, and properties that are well-priced, and in good areas, tend to generate multiple offers. Affordability is top of mind with first-time buyers and young professionals, given that prices in Kitchener-Waterloo have edged up exponentially in recent years. The price of a starter home now sits at $350,000, out of reach for many Generation Z buyers, born between 1995 and 2005, who are starting their first high-tech jobs.
Condominium apartments and to a lesser extent, townhomes, are a popular choice for first-time buyers. Many Generation Z buyers are choosing to own, rather than rent, given that vacancy rates for rentals in Kitchener-Waterloo have fallen below two per cent. The demand in the marketplace has prompted developers to pick up their game, with an abundance of new condominium projects in various stages of planning and development in downtown Kitchener and uptown Waterloo. The work/play lifestyle resonates with many of these buyers, and home ownership is of paramount importance.
Confidence is also a major factor in Kitchener-Waterloo. This is in large part due to its thriving tech sector and access to top-quality talent. Kitchener-Waterloo has become ground-zero for start ups, with accelerator centres and incubators that help launch small tech companies. American tech leaders such as Microsoft have joined Canadian companies Shopify and the original start-up Blackberry/Research in Motion, in staking out young blood. Google has also joined in the fray, leasing 230,000 sq. ft. of office space in the Kitchener-Waterloo area.
Job opportunities abound in the high-tech sector, and Kitchener-Waterloo’s two universities are turning out some of the brightest and best in the industry. Employment prospects and the strength of the twin cities’ educational institutions—particularly Laurier, University of Waterloo and Conestoga—have served to attract homebuyers, many of whom are choosing to live and work in the area. According to the most recent census, the Kitchener-Cambridge-Waterloo Census Metropolitan Area (CMA) has experienced significant population growth over the past decade. Between 2006 and 2011, population grew by six per cent and a further 5.5 per cent was reported between 2011 and 2016. Unemployment rates are amongst the lowest in the country, at 4.9 per cent (December 2017).
Home-buying activity is expected to continue at a healthy, albeit slower pace in Kitchener-Waterloo in the year ahead. Sales will soften somewhat, as diminished affordability levels force some buyers to put their dreams of home ownership on hold. Average price, however, is expected to climb yet again, rising another six per cent by year-end 2018.
Improved economic performance along with a steady influx of buyers from the Greater Toronto Area (GTA) has shifted home-buying activity into overdrive in London-St. Thomas recently.
Over the past decade, housing values in the London-St. Thomas area climbed 63 per cent, rising from $202,908 in 2007 to $330,037 in 2017, averaging a compounded annual rate of return of almost five per cent. The number of homes sold in London in 2017 peaked at 11,203 units—the highest on record—while average price followed in lock-step, rising 18 per cent over the previous year.
Inclement weather has the housing market off to a slower-than-usual start in 2018, with fewer homes listed for sale overall. This is not an unfamiliar scenario, as limited inventory levels have been a major concern in the London-St. Thomas market for several years. Months of inventory, which hovered between 4.5 and 5.2 months for much of the decade, fell to four months in 2015, 2.7 months in 2016 and 1.6 months in 2017. Multiple offers have been occurring across the board as a result, with the greatest activity being for starter homes priced under $300,000.
As the population increases in London-St. Thomas, so too will demand for residential real estate. According to recent Census data, the population increased 3.7 per cent between 2006 and 2011 and a further 4.1 per cent between 2011 and 2016. Those figures are expected to climb as affordability continues to draw purchasers from the GTA. Job opportunities are plentiful as well, given that the local economy has diversified in recent years. The automotive sector continues to fire on all cylinders while manufacturing has returned to the London-St. Thomas area. The tech sector has also grown at an exponential rate, led by firms such as Arcane, Voices.com, Big Viking Games, Big Blue Bubble and Zomaron. Construction is also underway in the core, with housing starts in the area up 101 per cent in 2017 compared to 2016 levels. Condominiums have seen a real push in the last five years, with local developers driving much of the construction activity.
Demand for homes in London-St. Thomas is expected to gain momentum in the coming months, as more inventory comes on-stream during the traditional spring market. While single-detached homes remain most coveted, condominium apartments and townhomes are predicted to play a larger role in the overall housing picture. The vast majority of new condo units coming on-stream are of good quality, priced affordably, ideally situated in the business core, and in close proximity to shops, restaurants and amenities—important factors for first-time homebuyers. This segment of the market will also continue to drive activity in neighbourhoods experiencing re-gentrification. London’s East End is just one example of an up-and-coming pocket as more young families move into the area, seeking war-time bungalows at affordable price points. The movement has resurrected local businesses and attracted trendy new shops and restaurants.
With solid economic fundamentals supporting the market, London-St. Thomas is positioned for another year of healthy housing activity, characterized by steady upward pressure on housing values.
Last year may have started with a whimper, but it ended with a bang as homebuyers in the Ottawa area awoke from a long slumber. By the fourth quarter of 2017, Ottawa’s balanced market had moved into classic sellers’ territory, complete with tight inventory levels and upward pressure on prices. Confident purchasers moved forward and by year-end, more than 17,000 homes had changed hands—a 10-per-cent increase over 2016 levels.
September 2017 marked the turning point for Ottawa’s housing market, which has faced some challenges over the past 10 years. After a strong run-up in home-buying activity between 2000 and 2012, housing sales in the nation’s capital softened, in large part due to an oversupply of new condominium product. After almost six years, the supply of condominiums has slowly been absorbed, prices have firmed up, and more balanced conditions have returned to the condominium market. Average price for all properties (residential and condominium) appreciated 44 per cent in Ottawa in the last decade, rising from $273,058 in 2007 to $392,474 in 2017—an annually compounded rate of 3.69 per cent.
From an economic standpoint, Ottawa is well-positioned for the future, with the stability of the civil service sector and a strengthening high-tech sector supporting continued growth. The population has steadily increased in Ottawa-Gatineau, with the Census reporting a nine-per-cent increase between 2006 and 2011, and a 5.5-per-cent increase between 2011 and 2016. Furthermore, unemployment levels in Ottawa have slowly declined, hovering at 5.7 per cent in December. A number of projects are underway in the city, including the development of Light Rail Transit System. Housing starts were up six per cent in the single-detached category in 2017. The redevelopment plans recently announced for LeBreton Flats will also create thousands of jobs in the city. The project is expected to include public green space, a major event centre, aqueducts, a community ice rink, ability centre, and public art axis and innovation promenade. Shopify’s plans to increase its workforce also bodes well for the local economy.
So far, 2018 is off to a good start. Local buyers, foreign investors and government transfers are expected to buoy home-buying activity in the year ahead. Single-detached homes will experience the strongest demand in coming months, with bidding wars erupting on well-priced properties.
First- time buyers will lead the charge for starter homes priced at $400,000 plus, but will face limited supply throughout the city. Move-up price points (ranging from $500,000 to $700,000) are also affected as shortages are coming to light in that segment of the market. Affordability will drive the condominium market, particularly in the downtown core, as prices for freehold properties grow beyond reach for first-time buyers. The federal government’s newly introduced mortgage stress test is unlikely to deter first-time buyers, many of whom would already need to qualify for financing; however, the move-up segment, those that have 20 per cent down but also have accumulated additional debt, may find themselves in a more difficult situation.
Retirees, empty nesters and relocating families in search of affordable housing have buoyed home-buying activity in Windsor-Essex in recent years. The city is one of few in Ontario where a person can still buy a single-detached home in the $100,000 range. As a result, strong demand and a limited supply of homes listed for sale continue to characterize Windsor-Essex’ resale housing market. Over the past decade, the average price of a home has increased 62 per cent—rising from $163,215 in 2007 to $264,750 in 2017—with a compounded rate of return of 4.96 per cent.
Population growth continues to accelerate, increasing at the fastest pace in the province between 2011 and 2016—up 3.1 per cent over the 1.3-per-cent decline in 2006 to 2011. According to the 2016 Census, the Windsor Census Metropolitan Area (CMA) also had one of the highest home-ownership rates in the country, sitting at 71.7 per cent. Economic fundamentals remain strong, led by a robust automotive industry. Numerous construction projects include a highway for the new Gordie Howe Bridge, Customs Plaza and new span for the Ambassador Bridge, with the federal government finally green-lighting a six-lane replacement.
New-home construction has also surged in recent years. However, inventory remains a serious issue with a shortage of homes reported in both the resale and new home markets. Demand for properties—especially those priced between $120,000 and $280,000—has been exceptionally brisk, with many homes selling at or above list price with multiple offers. Construction delays have also been reported in new home sales as a result of a shortage of skilled trades, which has contributed to the upswing in demand for resale product.
New businesses are opening, including fashionable new wineries, tasting bars and restaurants. Existing industries are diversifying, and there’s talk of Windsor becoming a transportation hub, given its close proximity to the US border. Warehousing is also a major topic of conversation.
It hasn’t all been smooth sailing. While residential real estate markets were challenged across the board in 2008, the impact of the looming recession was especially pronounced in Windsor-Essex. Against the backdrop of a faltering automotive industry, the average home price in Windsor-Essex hovered at $163,215 in 2007, falling short of that figure in 2008 and 2009, before bouncing back in 2010. Population figures declined 1.3 per cent between 2006 and 2011, and unemployment rates in Windsor-Essex were among the highest in Ontario. Sales during that period remained flat until 2010, gradually increasing until 2015 when the number of homes sold jumped 20 per cent or more for three consecutive years, in 2015, 2016 and 2017.
Employment opportunities and affordability will continue to draw homebuyers to Windsor from other parts of the province in the coming months. The number of homes sold is expected to hold relatively steady, while housing values are forecast to climb once again, albeit at a slower pace than in 2017.