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Market Outlook: Headwinds or Tailwinds in Our Future?

TRREB overall average price growth from Jan 2021 to Jan 2022 was +28.6%, while Jan 2020 to Jan 2022 (2-year growth) was +48.2%.  While this varies considerably based on property type and location (refer to various reports for details), in general these are jaw dropping results.

What’s drive the price growth?  Limited supply and continued demand.

Where do things go from here?  While no one has a crystal ball, we’ve pull together a list of “Tailwind” and “Headwind” items below that should shape the Toronto Real Estate market over the short, medium, and long term.

Tailwinds…

Numerous reports published recently indicate the need for more housing supply over the short, medium, and long term.  If these supply issues are not addressed, increased demand through population growth and generational wealth transfer are likely to keep upward pressure on prices over the long term.

  • Provincial Government’s Housing Affordability Task Force [click here for report]  – Conclusion: “Ontario must build 1.5Million home over the next 10 years”.  More than double the current pace of supply.
  • Smart Prosperity Institute [click here for report]  – Conclusion: Ontario will “require one million new homes” over the next 10 years.
  • Canada’s population growth exceeds all G7 countries [click here for report].
  • Canada’s number of homes per capita trails all G7 countries [click here for report].
  • Densification – Toronto densification (population per km) trails most large cities [click here for report].
  • Wealth Transfer – between 2016 and 2026, Canadians are expected to pass down over $1 Trillion in wealth [click her for report].
  • Family Gifting – study concluded that approximately 30% of first-time homebuyers received a family gift to purchase their home.  In Toronto, the average size gift was over $130,000 [click here for report].

Headwinds…

Even with sustained long-term upward pressure on prices, the market is always susceptible to periods of volatility.  What could trigger a slow-down or pullback moving forward?  Here are some of the items we have on our radar:

  • Interest rate increases on the way – not if, but when.
  • Government / Policy intervention.  Possible areas we are watching as they were specific outlined in the Minister of Housing’s mandate letter [click here for report]:

    – Temporary ban on foreign buyers
    – Anti-flipping tax
    – Ban on blind bidding
    – Increased down payment on investment properties
    – Other unanticipated items meant to “cool” demand providing more time for the government to address supply issues

In next month’s edition of the Monthly Outline, we’ll analyze various housing price gaps that have either widened or narrowed during the Pandemic (i.e., detached vs. condo, 416 vs. 905, etc.) as it could offer some perspective on opportunities or risks moving forward.