Toronto is known for many things. It’s home to the Maple Leafs, Blue Jays, and Raptors, is one of the most multicultural cities in the world, and hosts the world-renowned Toronto International Film Festival (TIFF). Now, you can add one more thing to T.O.'s list of accomplishments – its housing market is officially a “global anomaly.”
RE/MAX has released numbers that find Toronto home prices have experienced two straight decades of price appreciation; the average price of residential housing in the Six is up a whopping 214% since 1996, driven by low interest rates, population growth and a strong economy.
“You can't save at the rate real estate appreciates,” says Laura Cooper of Royal LePage Estate Realty Brokerage. “Clearly evident through analyses of the steady upward trend over the past two decades, real estate is one of the most consistently profitable investments one can make. With no signs of the market cooling down any time soon due to such factors as consistent population growth, foreign investors, empty nesters downsizing, first time home buyers coming into the market, combined with affordable mortgage rates, all feeds the ever-growing market and creates competition among them along the way.”
2016 to be no exception
And there's no slowdown in sight. It may only be January, but it’s shaping up to be another banner year for real estate in Canada’s most populous city as Toronto celebrates its 20th straight year of price appreciation after a record-setting 2015.
Back in 1996, the average price of a home in the GTA was only $198,150. Fast forward to 2015 and the average price of a home broke the $600,000 barrier for the first time, reaching $622,217. When we do the math, that results in an impressive 6.21% annual increase when compounded annually over the last 19 years – not bad!
A history of rising prices
So, what are the factors behind T.O.'s seemingly endless price climb? Steady population growth has played an important factor in Toronto’s real estate market success.
In 2014, Toronto’s population reached above 600,000 for the first time (6,055,724). That’s 8% higher than just three years ago in 2011 when our population stood at 5,583,064 and 42% higher than in 1996, when 4,263,757 called the GTA home. The low interest rate environment has also helped contribute to Toronto’s real estate market success. Back in 1996 the average rate on a five-year fixed rate mortgage was 8%. Fast forward to today and the same mortgage can be had for less than half – under three percent in today’s highly competitive real estate market.
Demand just won't quit
Despite home prices skyrocketing in the GTA, homeownership rates have been rising steadily.
From 1996 to 2006, homeownership rates were up about 10 per cent – from 58.4% in 1996 to 67.6% in 2006. The most recent stats peg homeownership rates at an impressive 71.4% in 2011. What makes this even more impressive is the housing market has been consistently on the rise, despite facing several bumps along the way.
Toronto has dealt with several recessions, the SARS scare and the aftermath from 9/11, to name a few. The resilience of the Toronto real estate market has been called “nothing short of remarkable.”
Is there any slowdown in sight?
But all good things must come to an end or do they?
RE/MAX says there’s no reason to expect the housing market to slow down. In fact, the recent turbulence in the stock markets might encourage investors to sink more money into real estate, as it’s seen as a rock-solid investment by many.
“2015 finished off at an all-time high & with the above factors always increasing there's no doubt 2016 will be any different,” says Cooper.