The Greater Toronto Area’s (GTA) real estate market is flashing signs of the overheating we saw in 2017, as supply shrinks and prices climb higher.
Home sales rose 15.4 per cent year-over-year in January according to new statistics from the Toronto Regional Real Estate Board (TRREB).
Active listings fell 35 per cent, leaving buyers to duke it out with each other because there were fewer properties available to satisfy demand.
John Pasalis, president and broker of record at Realosophy Realty, says there are some misconceptions around the dwindling supply.
“A common explanation for declining inventory is that people aren't upsizing - but the 23% year-over-year growth in detached home sales (the highest increase across all house types) should put that theory to rest,” Pasalis told Yahoo Finance Canada.
As a result, the average price of a home is $839,363, up 12.3 per cent compared to the same period last year.
“Tighter market conditions compared to a year ago resulted in much stronger growth in average selling prices,” said Michael Collins, TRREB’s president, in a release.
“Steady population growth, low unemployment and low borrowing costs continued to underpin substantial competition between buyers in all major market segments.”
Condos led the way with a 15.1 per cent price jump, even though sales were only up 8 per cent.
“The condo market, more than the other segments, appears to be more impacted by extrapolative expectations.” said Pasalis.
“Strong demand from investors and a real anxiety from buyers that they have to buy now or they'll never be able to afford one.”
Pasalis says he’s seeing some condos selling for 10-15 per cent more than similar units 6-9 months ago.
It’s a different story when it comes to the condo rental market, where inventory is soaring. There’s a simple explanation for the disconnect.
“Many people upsizing from a condo to a [house] are holding on to their condos which is resulting in a shortage of sales inventory but is not leading to a surge in rental inventory,” said Pasalis.
It’s not just condos, prices are up across the board. Detached homes are up 10.5 per cent, semi-detached are up 6.5 per cent, and townhouses are up 8.5 per cent.
Collins expects economic conditions, population growth, and low borrowing costs will keep buyers coming.
“Market conditions will become tighter, as transactions will continue to outpace the growth in available listings.
“The resulting increase in competition between buyers will likely result in an acceleration in price growth across all major market segments” said Collins.
Cameron Forbes, general manager and broker, RE/MAX Realtron Realty agrees.
“The most important factor in the market is the lack of homes available for sale: as of January 31, 2020, only 7,772 homes were available for sale on the TREB MLS, down 35% from the same point in 2019,” he told Yahoo Finance Canada.
“This represents a supply of only 1.7 months versus the 21 year average since 1999 of 3.5 months of supply.”
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.