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Price Growth in the GTA: A Decade in Review

November 6, 2020

The Greater Toronto Area (GTA) is notorious in the Canadian real estate market for strong sales and ever-increasing home prices. Described for the last 10 years as a “housing bubble,” the market has shown itself to be surprisingly resilient: through the country’s ups and downs, the desire for homeownership in and around the country’s largest city remains fierce.

To see how buyer demand plays out in the numbers, we’re taking a look back at the last decade of residential sales in the GTA, which includes the City of Toronto and the surrounding areas covered by the Toronto Regional Real Estate Board (TRREB).

Between 2010 and October 2020, the average price for all home types in the GTA has grown by 115%. The decrease in the average price in 2018 reflects rising borrowing costs and the expanded stress test of 2018.

A decade bookended by resurgence

Interestingly, the Canadian housing market at the outset and close of the last decade were marked by disaster and recovery.

2010
In 2010, the country was in the process of recovering from the global financial crisis of 2008-2009, which was sparked by the collapse of US housing prices the preceding year.1 By the end of 2008, the GTA’s sales finished 20% lower than the year prior, and the average sale price for the month of December was 9% below the previous year’s average.2

Signs of recovery in the real estate market didn’t come until the late spring of 2009, making 2010 the first full year of post-recession sales. And by that time, ultra-low interest rates intended to stimulate consumer spending were helping to reinvigorate the market. At the close of 2010, total sales came in 1% below 2009 after a slow summer (largely the result of widespread confusion over the new HST rules for newly built homes), but demand was intensifying: the average days on market for the year had fallen from 32 days in 2009 to 27, and the average sale price was up 9%.3 

2020
On the other end of the timeline, 2020 has given us a condensed disaster-and-recovery scenario as a result of the novel coronavirus pandemic. In January and February, analysts expressed hope for a strong year of sales, but just as the spring market was revving up, the State of Emergency was declared and home sales slowed to a crawl. By the close of April, residential sales in the GTA were down by 67% year over year, and the average home price fell by 9% compared to the previous month.4

However, like much of the rest of the province, the GTA quickly rebounded. By May, sales were starting to regain momentum as interest rates were again lowered in response to the economic crisis. As a result, more buyers were able to enter the market and compete for the already-low inventory of homes, pushing the average price for all home types up 3% year over year.5

Now, with only a few weeks left to round out the year, sales numbers and prices are reaching new records: year-to-date sales for October edged ahead of the first 10 months of 2019 by 4%, and the average year-to-date price has already topped the average price for all of 2019 by 13%, coming in at $926,600.6 Read our latest State of the Market Report for more details on real estate in the GTA.

New listings shown for 2020 represent only those added to the market between January 1 and October 31, 2020, while the other stats are for full calendar years. Although April 2020 saw a dramatic 64% year-over-year decrease in new listings following the lockdowns, by October, the year-to-date new listings numbered 139,358 – only 1% lower than the new listings reported by TRREB for the first 10 months of 2019.

Driving factors behind price growth

There are a number of reasons why the GTA’s home prices have almost continuously risen over the last 10 years, but most are tied to the fact that as the largest city in Canada and fourth most-populated city in North America, Toronto attracts thousands of people each year from within Canada and elsewhere. As of the 2016 census, there were 6,417,516 people living in the GTA, up 6% from the 2011 census, while almost half of the 7,540,830 immigrants to the country settle in the region.7

Because homeownership is still highly prized by many Canadians who view it as both an investment and life achievement, demand for housing (particularly for low-rise detached homes) within and around the city has been a constant. For much of the past decade, this demand has been coupled with low inventory resulting from limited availability of land,8 an increasing trend among aging homeowners to remain in their homes,9 and speculative investment purchasing.10 All told, buyers have been in a constant state of competition for the last 10 years, compelling them to shell out more if they want to own a home.

Attempts to control price inflation

Between 2016 and 2018, the federal government attempted to stymie dizzying price increases by reducing the number of qualified buyers competing for homes and making housing more affordable to residents of Ontario.

In 2016, new “stress test” rules required that all insured mortgages (that is, mortgages with less than a 20% down payment) be able to withstand interest hikes as high as the five-year standard rate of 4.64%; in 2018, the tests were expanded to include uninsured mortgages.11 Given that the first phase of stress-testing mainly targeted first-time home buyers who were already having trouble entering the market, it didn’t have a considerable impact on yearly price growth. The second phase appears to have been more successful, however, as the average price for 2018 dropped for the first time since the recession.

Still, the effects of the stress tests are intermingled with the dramatic effects of April 2017’s Fair Housing Plan. Among 16 edicts related to renting and purchasing property, the Fair Housing Plan placed limits on rental price increases and imposed a 15% tax on foreign buyers and non-resident speculation purchasers.12 The immediate result was a substantial decline in sales and a deceleration of price growth for the next two quarters,13 followed in 2018 by a 16% drop in yearly sales and 4% decrease in the average home price.14

Despite these measures, the demand for homes buoyed up again in the second half of 2019, and many sidelined buyers re-entered the market as a result of the strong regional economy and declining mortgage rates. By December 2019, sales were up 17% over the previous year, and the average price was again nudged up by 4%,15 setting the stage for further projected increases in 2020.

Looking at the last 10 years, it’s clear that price increases in the GTA owe much to the tenacity of a huge population of buyers who’ve been met with consistently low inventory levels. As 2020 draws to a close with no end in sight to the upward trajectory of sales figures and average prices, one thing is certain: it’ll take more than a pandemic to quell the desire for homeownership in the 416.

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Interested in how real estate in Toronto has changed over the last 100 years? Click here for a deep dive!  
Wondering if you should sell your GTA home during the second wave? Read on.

Sources
1. The Canadian Encyclopedia: Recession of 2008-09 in Canada
2. TRREB December 2008 Market Report
3. TRREB December 2009 Market Report & TRREB December 2010 Market Report
4. TRREB April 2020 Market Report
5. TRREB May 2020 Market Report
6. TRREB October 2020 Market Report
7. Wikipedia: Demographics of Toronto & Toronto.ca: Immigration
8. BNN Bloomberg: Toronto housing supply shortage driving skyrocketing prices, studies say
9. Financial Post: Rich, aging baby boomers will make it even harder for millennials to buy homes over next 10 years
10. Macleans: How Speculators Inflated the Toronto Housing Bubble
11. CBC News: OSFI Mortgage Rules
12. Financial Post: Ontario slaps 15% tax on foreign buyers, expands rent control in 16-point plan to cool housing
13. TRREB December 2017 Market Report
14. TRREB December 2018 Market Report
15. TRREB December 2019 Market Report