The Toronto real estate market is trending towards less affordability.

 

It is no secret that Toronto’s housing market is becoming less and less affordable given all the coverage that the market is getting across the media. What we’re interested in sharing today is what is being done in the midst of this trend of overvalued housing.

Affordability

A study put out by RBC Economics is showing that the affordability of housing is continually decreasing as a national average, primarily in Toronto and Vancouver. This is a function of the increasing price gap between high rise and low rise housing because of the imbalance between supply and demand. With supply lacking behind demand, homes are being overvalued by buyers (overvalued by what the Bank of Canada has cited as 30% above where it should be).

The Toronto Real Estate Board reported that, across the GTA, the average price of an existing detached home has increased 14% from a year ago, whereas the average price of a high-rise condominium has risen only by 5% in comparison. This goes to support this claim of a price gap.

Check out this graphic representation of the price gap, sourced from The Financial Post.

price gap

Finally, Royal LePage cited in May 2015, that the average number of days a Toronto home is on the market has decreased by 14% since last year, now averaging at 18 days. With the fast turnover of homes, it is no surprise that there is a lack of balance between supply and demand.

 

 

How are homeowners reacting?

Many homeowners are opting for renovations for their existing homes when they’re looking to upgrade on space (for example, for a growing family). By doing this, they are adding more value to their home (with the proper renovations that yield more positive returns on their investment), and avoiding an entrance to the market place as a buyer when prices are so high. Renovations to increase home value will position themselves for a better selling position in the future, which would help to finance an eventual move to a larger home when they have reached the limitations of the existing property.

Empty nesters  who are looking to downgrade their living space could be finding this to be the time to sell their larger homes and downgrade to a condominium in the city until retirement.

Other home owners may try to avoid the market all together in order to avoid making the trade-offs in spending patterns that would be necessary to finance buying a home in this market. These are the people that are investing their money into vacations, luxury items, and other lifestyle improvements.

owner

There is no cut-and-dried course of action for Toronto citizens to deal with what is happening with their real estate market because of how variable individual situations can be. Depending on individual demographic and economic factors, the best course of action to navigate the market is registering as unclear. Our advice is to do your own research in to the market, and assess your individual situation before jumping the gun on a decision to enter or avoid the real estate market at this time.

 

What are your thoughts? Do you think the Toronto real estate market is facing a housing bubble?

The Greater Toronto Builders team has a network of professionals to take care of your project from concept to completion. Contact us today hear more about how our project design consultants can help you or to book a free consultation contact us at 647 35 BUILD or email us at hello@greatertorontobuilders.com

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Sources:

Image Sources:

Feature Image http://www.thetorontorealestate.com/blogs/toronto-homes-for-sale/archive/2010/04/01/toronto-homes-and-kinds-of-neighbourhoods.aspx

https://www.hpo.bc.ca/building-bc-fall-2012/page/0/6 

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