First quarter results are in for 2014: the average detached home in the city of Toronto has increased by 13% from the same time last year, and is now just under $1M dollars, leaving many to question: how is this possible?!
The biggest reason is simply supply and demand. The introduction of the Greenbelt Plan in 2005 to protect our agricultural lands, curb urban sprawl and encourage greater density of businesses and residences in the city means that no new detached, single-family homes can be built in the city. The stock we’ve currently got is all there is and all there’s going to be. The goal for the city going forward is to grow inward and upward. Which means any new builds will be infill (semi’s or row housing) and, more likely, multi-residential (condo townhomes and condo buildings).
We’ve also been seeing a decrease in listings for existing detached and semi-detached homes over the last two years as well. Some believe it’s due to people wanting to avoid the increasing home prices and the double land transfer tax and instead use that money toward renovating their current home. Regardless of the reason, the limited listings are creating a pent-up demand for the housing stock that is available for sale and, hence, are driving the prices of freehold homes up even further. And with the influx of approximately 100,000 new people migrating to the city each year, all needing housing, it’s another added demand on those looking to fetch a premium freehold home in the city.
There is also the factor of location, location, location playing into the mix as well. The closer the homes are to the core, the greater the demand and therefore the greater the price.
On the flip side, for those who want to live in the city (especially in the core) but are finding themselves being priced out of the freehold market, the condo market may be the more affordable alternative. Since the only place to build in Toronto is essentially up, the condo market offers a greater amount of stock and is currently a much more balanced market than the freehold market.
Here is your market snapshot for Q1 2014:
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