Greater Toronto real estate experienced record activity in 2020 and based on the data and market conditions in these first few months of 2021, we’ll likely see the trend continue. While some are saying Toronto is in a “housing bubble,” a RE/MAX executive is calling it a “housing affordability crisis” attributed to a perfect storm of factors including low inventory, high demand, and recently increased purchasing power thanks to rock-bottom interest rates and Canadians’ higher rate of household savings over the last year. All this has resulted in the current market conditions: “hot,” and that’s putting it mildly. With more people being vaccinated and immigration expected to pick up over the next three years, there’s no relief in sight without adding more housing supply to the Canadian housing market.

“Housing bubble? I prefer the term ‘affordability crisis,'” says Christopher Alexander, Chief Strategy Officer and Executive Vice President, RE/MAX of Ontario-Atlantic Canada. “The demand level is at an all-time high and inventory is very low. I don’t see how we’re going to be able to keep up with the demand with population levels expected to rise to new heights.”

Greater Toronto Real Estate Data (February 2021)

Greater Toronto real estate saw double-digit price and sales growth in February. Sales were up 52.5% year-over-year, with the Toronto Regional Real Estate Board (TRREB) logging 10,970 transactions. Average price rose 14.9% to $1,045,488. Overall, new listings were up 42.6% compared to February 2020, but sales are still outpacing any new supply coming on market.

Toronto has long been the hottest Canadian housing market, so while the continued growth in the 416 is certainly notable, it’s not entirely surprising. Then there’s the suburbs. Markets outside of Toronto really heated up in the wake of the pandemic, as homebuyers’ newfound flexibility due to remote work arrangements allowed them to look outside of the city core for homes offering more indoor and outdoor space with a lower price tag. Thus, real estate markets such as Halton, Peel and Durham experienced marked increases in sales and prices between 2020 and 2021, and the trend continues.

Here’s a quick look at the trends across these regions, according to TRREB’s February 2021 data (compared to their February 2020 stats):

CITY OF TORONTO

February 2021
Average price (all property types): $995,201
Average sale price to list price ratio: 105%
Months of inventory: 1.9 months
Average days on market: 20 days

February 2020
Average price (all property types): $989,218
Average sale price to list price ratio: 104%
Months of inventory: 1.6 months
Average days on market: 17 days

PEEL REGION

February 2021
Average price (all property types): $1,023,552
Average sale price to list price ratio: 106%
Months of inventory: 1.2 months
Average days on market: 10 days

February 2020
Average price (all property types): $861,537
Average sale price to list price ratio: 102%
Months of inventory: 1.5 months
Average days on market: 13 days

DURHAM REGION

February 2021
Average price (all property types): $895,441
Average sale price to list price ratio: 114%
Months of inventory: 0.8 months
Average days on market: 7 days

February 2020
Average price (all property types): $657,788
Average sale price to list price ratio: 101%
Months of inventory: 1.9 months
Average days on market: 17 days

HALTON REGION

February 2021
Average price (all property types): $1,212,303
Average sale price to list price ratio: 107%
Months of inventory: 1.2 months
Average days on market: 10 days

February 2020
Average price (all property types): $977,617
Average sale price to list price ratio: 100%
Months of inventory: 2 months
Average days on market: 16 days

The “Perfect Storm”

While some were forecasting a decline in housing prices last year due to Covid-19 and its impacts on employment, the economy and people’s ability to buy homes, industry insiders knew a downturn was highly unlikely. It never did materialize, and as we now know, Canadian real estate weathered that initial pandemic storm. What we’re facing now is unprecedented price growth and an affordability crisis prompted by the following factors.

  • Supply & Demand
    Tight markets and rising prices are expected to continue, with severely limited housing inventory and growing competition. With borders expected to open later this year, and the federal government’s plan to increase immigration to 1.2 million people over the next three years, housing supply will become an even more pronounced issue unless more supply materializes.
  • Interest Rates
    Rock-bottom borrowing rates have prompted many people to get into the market. In March of 2020, the Bank of Canada lowered its benchmark interest rate to a record-low 0.25% in an effort to boost the economy. Big banks followed suit by lowering their mortgage rates. That meant people who were still in the market to buy a home could now buy even more home for the same price, thanks to the lower cost of borrowing.
  • Covid-19
    Canadians saved record sums of money during the course of the pandemic, which they can stretch even further given these low interest rates. With few other diversions to spend their money during lockdowns, real estate became a place to sink those savings both as an investment and for lifestyle reasons.

“We’ve experienced some unexpected market shifts in the wake of Covid-19,” says Alexander. “Many Canadians suffered serious financial setbacks due to widespread job loss and lockdowns, largely across the service sector. Meanwhile, those who were able to transition to remote work environments saved an unprecedented amount of money last year. Urban condos lost some of their lustre last fall, while larger suburban and rural homes gained traction. These savings, coupled with record-low interest rates, have prompted many Canadians to invest in real estate – or at least try. The problem is that new listings are falling short of demand, and these tight market conditions across Canada are causing serious buyer fatigue. Demand is driving up prices, and as I’ve always maintained, a national housing strategy is sorely needed to boost supply and ease the housing crunch.”

What’s Next for Toronto Real Estate?

The Toronto housing market is experiencing a shortage of single-family detached listing inventory, while the condominium segment is flooded with supply. We expect balance to be restored, to a degree, when homeowners (potential sellers) feel more confident listing their homes for sale and feel safe in the current pandemic environment. Widespread vaccinations and eventual immunity will help.

Once this does happen and we reach that immunization target, how will this impact the economy? Preliminary reports have a positive outlook. Will the large Millennial cohort affect housing demand more so than what the Baby Boom cohort did back in the 60s and 70s? Do all three levels of government have a plan to address supply issues? Or might they continue to try to control buying activity with taxes and policies? Time will tell.

Some Final Words

Regardless of market conditions, always buy and borrow within your means. Do not use a “speculator philosophy” when buying a principal residence.