Toronto Real Estate Speculators Causing a GTA Market Bubble?

There has been much talk of a “real estate bubble” in the greater Toronto real estate market. Many experts speak of speculators – domestic investors fueling an already overheated market. RE / MAX investigated just over 5,000 individual property incidents in the GTA between March 15, 2019 and March 14, 2021 and found that Less than 2% of the conversion was repeated during this periodThis leads to the conclusion that speculators are not a major factor in the current market and rising prices.

RE / MAX surveyed home buying activity in six metropolitan areas of Toronto – C03, W05, E01, Erin Mills, Aurora and Northwest Ajax Home prices between $ 500,000 and $ 1,499,999.

Of the 1.58% transactions between March 2019 and March 2021 that were repeat sales, only around 20% said renovations were carried out between sales.

Wrong conditions for speculators

Investors tend to wait for hot markets, preferring to buy when prices fall and sell when prices rise again. Those looking for short-term investment opportunities in the Toronto (and many other areas of Canada) real estate market are unlikely to be able to find them under current conditions.

Face-offs and bidding wars are the order of the day in the current market Demand exceeds supply In virtually all areas of GTA and the winning buyers pay top dollars. The current environment is simply too hot for investors and builders.

Investment / speculation can certainly occur in the GTA condominium market Prices fell in line with condominium salesBut investors have always played a role in the condominium market, so this isn’t entirely surprising. It’s unlikely to end anytime soon.

RE / MAX brokers say home buyers aren’t speculators

RE / MAX brokers in the GTA were well aware that there is no speculation in the market at this point. We went a step further and conducted an online survey of RE / MAX brokers and agents in Western Canada, Ontario, and Atlantic Canada. A landslide 96% said the majority of homebuyers are end users, while only 4% were classified as speculators. In an end-user driven property market, upward pressure on property values ​​is often a function of limited supply.

If not speculators, who (or what) is driving Toronto property prices?

Toronto real estate average prices

There are many other factors that can add to the dramatic price growth in the Canadian real estate market. Covid-19 resulted in an increase in single family home sales At a time when condominium sales have been falling and single-family home prices have traditionally been higher than condominiums. We have also seen an upward trend in the luxury home market Revenue of over $ 3 million after the best year on record in 2020. All of these factors tend to lead to higher prices.

To illustrate This data table shows the average prices for single family homes and condos from January 1 to February 28, 2021, according to the Toronto Regional Real Estate Board.

The market regulates itself

After some overheating concerns early in the year, market activity has shifted over the past few weeks and more standalone stocks have come on stream. In areas north of the 416, the surge in new supply appears to meet demand. with fewer bidding wars. Proof of this is the number of listings that have been canceled and put back on the market at a higher price. The 416 also reported growing stocks.

Covid-19 fatigue also plays a role. Some buyers are taking a step back from the hot market conditions in the second half of 2020 and the first quarter of 2021.

The future of Canadian real estate

What can you expect for real estate in Toronto and Canada as a whole? While it is difficult to predict the market with the uncertainty surrounding Covid-19 and the economy, we expect domestic buyers to remain active in the market due to a number of factors.

interest play an important role in promoting home purchases as buyers strive to take advantage of the benefits. The government advocates low interest rates until the “economic doldrums are settled”.

Equity gains inspire existing homeowners to deal with bigger homes or better neighborhoods – both in and out of town.

Pent-up demand is also a going concern. For every bidding war there are a handful of disappointed buyers. You’re still out there still hoping to buy a home.

savings have grown year after year, and some buyers are sitting on a sizable amount of money. With traditional “safe” investment vehicles like GICs that do next to nothing and stock market risks, many choose to invest in their primary residence. According to the Bank of Canada, the savings rose to $ 180 billion in 2020. Statistics Canada says the The household saving rate was 14.6% in the third quarter of 2020 and economists Estimates that this number will be 13% in the fourth quarter and will last through 2021. To put that number into context, the average savings rate in 2019 was 1.4%.

Strong economic growth is expected when the vaccine is launched and confidence returns to the market.

immigration will boot up with an expected 401,000 new Canadians are coming this year, another 411,000 in 2022 and another 421,000 in 2023. In the February 13 drawing, nearly 28,000 candidates were invited to apply for permanent residence.