The following is a transcript of the video Toronto Real Estate Market Forecast 2020
“Hello, everybody and welcome back to my YouTube real estate channel. It’s Randy Selzer here. I’m with Sutton Group Realty in Mississauga and today we’re going to review 2019. We’re going to take a look at the state of the market for the GTA and for Mississauga specifically. Needless to say, it’s been a great year, prices are up. People ask me all the time, “Why did the market not crash? Why do prices keep rising? Why is there so low inventory? How come rents are so high?” And today we’re going to take a look at that.
2019 Market Performance
So the numbers that just came out from Toronto Real Estate Board, actually just yesterday, showed that sales overall in the GTA were up 12.6% throughout 2019. So 12.6% up in sales. Prices were up 11.6% overall and listings were actually down 2.4%. So once again, we have a situation where there’s not much inventory on the market and prices and activity still continue to rise.
If we look at detached homes in the Greater Toronto Area, we see that they were up 5.86%, condos were up 9.48%. Today we’re also going to look at Mississauga specifically. Mississauga was actually up 6.3% for detached homes and condos were up a whopping 15%, year over year, that’s throughout 2019. So 15% rise in condo prices in Mississauga and that’s actually the strongest rise, that 15% rise in condos for Mississauga, is actually the strongest rise of any asset type, of any real estate type, in the entire GTA.
The days on the market, which is the number of days it takes to sell a house in the Greater Toronto Area, was 23 and in Mississauga it was 20. So very respectable numbers. We’re still in a sellers market. And the average sale price to list price ratio in the GTA was 99% and in Mississauga was actually 98%. So once again, we’re in boom market territory here, with these sales, the actual sale price to list price ratio. And finally, the months of inventory, which is the amount of houses that are for sale, houses and condos for sale, in the GTA is 2.1. So there’s basically two months of inventory for sale throughout 2019 and in Mississauga was an incredibly low 1.6. So 1.6 months of inventory, which is again a sign of a booming market in Mississauga.
Okay. So all of these numbers are pretty positive. We look back and again, a lot of people are surprised. They expected that the market would dip and it did dip, actually, in 2018 due to government intervention where they brought in things like the foreign-buyer tax and the stress test, which did stop the market or slowed it down significantly in 2018, but 2019 seems to have recovered from those measures. And so what we’re looking at right now are healthy price increases. So as we look forward to 2020, I’m anticipating that we’re going to see more healthy price increases throughout the year in 2020. We are not expecting interest rates to rise in 2020, unless something unforeseen happens, but we are expecting them to stay low and we’re are expecting the local economy to stay strong and we are expecting immigration to continue into the GTA. I’ll talk a little bit about that later.
2020 Market Forecast
The actual forecast for the GTA, for all housing types, we are forecasting all types to rise by five percent in the GTA and six percent in Mississauga. In Toronto, you’ve got an extremely tight supply. We’ve got a growing population. We’ve got many young families who want to upgrade. They may be in a condo today and they’re looking to buy their first home. And we’ve got also increased consumer confidence throughout the market, even though there’s some significant things like the GM plant in Oshawa closing, which to many other cities would be like the death blow of the economy. Toronto just keeps rolling along. There’s so much tech industry. It’s such a dynamic place that there’s constantly creating new, high paying jobs and it’s just like a magnet for people from across the country to move here and also from internationally to move here.
Recent stats, just published, show that 51% of all Canadians are considering a home purchase in the next five years. So that’s also pretty bullish. And we continue with low unemployment rates in the GTA and economic growth is expected to continue. Now, and I recently read a report from RE/MAX, actually where they talked. I thought this was an interesting quote, “While Toronto is experiencing its busiest construction season ever, housing supply still tails the demands of the city’s rapidly growing population.” And boy, ain’t that the truth.
There are some developments that we’re anticipating. There is a possibility that the liberal government may loosen the stress test a little bit. They have recently reduced the rates from 5.29 to 5.19%. It’s still an onerous thing that buyers have to deal with, especially first time buyers. And a lot of people have been asking for them to reduce that even further because it’s unfair. People getting a mortgage at three percent have to qualify 5.19. And they’re taking a look at it, but I’m not going to make any predictions on whether or not they’re going to adjust it.
Mississauga Real Estate
So in Mississauga, let’s talk about Mississauga for a minute, the sellers market continues. We are anticipating an overall increase of somewhere between five and six percent in prices in 2020, going forward. And that’s all types, detached, semi-detached, townhouses and condominiums. So a pretty healthy outlook for Mississauga. When you talk about new construction, there is a lot. As anyone in Mississauga knows, there’s a lot of new construction in the Square One area. A lot of high rise condos have been going up and there’s many more projected to be starting up. And actually 13% of all new home construction in the GTA is occurring in Mississauga and that’s 99% of that is condos. But 13% of all new home starts in the GTA are in Mississauga. It shows you that we are in a bit of a dynamic situation here. That development is expected to continue. Certainly if they start the streetcar that they’re going to build up here in Ontario, we think that’s going to drive a lot more high rise development up and down the spine of Hurontario.
So let’s talk about current prices. Right now, and the December numbers just came out from the Real Estate Board, the average detached in Mississauga, the selling price was $1,039,700.00. So for detached it’s over a million dollars. Semi’s came in at 772. Townhouses at 615 and condos have risen up to 509,100 was the average sale price throughout 2019. So 509 for a condo. If you look at rents, they’ve also been just going through the roof. One bedroom average rent right now in Mississauga is 1,900 a month, usually plus hydro. And a two bedroom is 2,400 a month and again usually plus hydro. Even though those numbers are so high, it’s less than what it is in downtown Toronto where you’re looking at well over 2,000 for a one bedroom and up to 3,000 and more for a two bedroom rent in the heart of the city of Toronto.
Expanding the GTA
What I’ve noticed in the last little while, I worked with some people who were moving to Cambridge. And what has happened, and I got to know the market a little bit out there, we have kind of exported, people are moving further out because that’s where affordable housing still is. Places like Guelph and Kitchener and Cambridge and Stoney Creek, places like that, and a lot of people, talking to several of the agents out there, were no necessarily complaining, but they were remarking that up to half the buyers out there are from the GTA and they’re driving prices up.
We were in bidding wars on multiple occasions until we finally got the house that we got. And it’s interesting, it’s these exurban, they’re not really suburban areas, they’re exurban, are now on fire in the real estate market. We’ve exported our craziness from the Toronto area, from the GTA to further, places that are further out. And I think that’s also going to continue as we go forward because it’s still relatively affordable compared to the GTA. Niagara region, by the way, any of you are interested in Niagara, increased prices overall by 13% in 2019. So that gives you an idea that people are moving to Niagara Falls, which is quite far. But again, prices are relatively affordable and that’s where people are moving to.
Now looking forward to 2020, we can look at politics because politics often affects the real estate market. A couple of years ago they brought in the foreign-buyer tax. This was a very heavy tax for people who lived offshore, outside of Canada and it had an affect on the market. I think more so in Vancouver than here, but it was one of those sort of a basket of things that the various levels of government, that both the provincial and the federal government brought in to slow the market down. The stress test, which I mentioned earlier, that was actually a very significant one because that made it much more difficult for people to qualify for a mortgage. And again, it was reduced recently down to 5.19%. It may be tweaked down a little but more. I know a lot of people in the industry are saying that it’s not fair and this is a federal thing. And Trudeau’s government, I think, asked the minister of finance to take a look at it, but it’s hard to say whether they’re going to reduce it anymore or not.
The low interest rates, as I mentioned at the beginning, are expected to continue, low or going even lower. And the Ontario Fair Housing Plan, which was brought in by the previous government in their last days, they expanding rent controls, which is really a bad idea in terms of the market availability of condos and apartments to rent because it made it less attractive for investors to buy condos, by again, expanding those rent controls. It’s a wrong head to think that investors owning condos and renting them out to renters is a bad thing. If we didn’t have investors buying condos and renting them, we would be in a world of trouble because there would be nothing, there would be nowhere for any people to live on a rental basis. So that’s, I think, a mistake that the previous liberal provincial government did.
Now here’s the interesting thing, the wild card again, and I talked on previous videos that there are three things that drive our market, low interest rates, a decent local economy and continuing immigration into the GTA. We are a popular, popular place and there are people from all around the world who keep moving here. And the federal government has continued with a pretty open policy for immigration. I want to say that as a born and raised Canadian, I support immigration. Canada’s a big country. It’s got plenty of room for lots of people and it’s empty mostly. So we need to continue with immigration, I think, to grow.
However, there has been no management of this process. Each year, they open the doors and in 2019, the target was 360,000 people were admitted into Canada. I’m pretty sure they came close to that. We also know that out of those 360,000, approximately one third of them come to the GTA, but as I mentioned, there’s no management of that process. They open the doors and they just expect people to find a way to live. Well guess what? That works out to over 100,000 people per year moving to the GTA. It might be 110 or 120 even, moving to the GTA and this is in addition to internal migration within Canada, between the provinces and also natural growth of families and natural population growth in the city. But when there’s no management of the process, they just let them in and they say, “Well, find a place to live.” Guess what? Eventually, those numbers are going to overwhelm the existing housing stock. And so this is the situation we’re in right now.
I believe the forecast for 2020 is also around 360,000 people admitted to Canada and that’s great, but about a third of those will come to the GTA. That’s about, let’s say 120,000 and we look around and there’s not a whole lot of places for them to live. We know that the average household size in Canada is 2.5 people per dwelling. So the average, whether it’s a condo or a house, is 2.5 people per dwelling.
So if you’re bringing 120,000 people into the GTA, that’s about 45 or 46,000 new dwellings would be needed to meet that demand. 46,000 new places for people to live, whether it’s houses, townhouses or condos, 46,000. Well, guess what? The forecast for 2020 from the builders and the building association, is that in the GTA they’re only going to build 36,000 new dwellings and that’s mostly condos. So if you’ve got 45,000 demand and 36,000 being built, guess what? We have just a continuation of the shortage where there’s not enough places for people to live and that’s something that needs to be addressed.
Problems to Address
It can be addressed on the municipal level. Mississauga’s pretty much open for business, but Toronto is not. Toronto has a lot of bureaucracy and there’s a lot of delays. It takes years to get a building permit to build a high rise in Toronto. There are a lot of outdated rules and zoning regulations that restrict builders, basically, to building maybe shorter than they would like to build. If they want to build a really tall building, most of the time they can’t and I think they need to look at that. That there are overall considerations for the greater good, where we have to make it attractive for builders to build and that’s just a fact. People talk about the Greenbelt, and I support the Greenbelt 100%. We all want a green area for ourselves, for our children, for our grandchildren, but maybe it should at least be looked at. Maybe there’s some areas that should not be in the Greenbelt that are, where they’ve restricted building and maybe they should make it a little easier for builders to build.
Up, Up, and Away!
Anyways, that’s my thoughts going forward. So we are predicting a continuation of the bull market. It’s going to continue. I believe prices are going to go up between five and seven percent in the GTA and in Mississauga over the next 12 months. I think you’re going to see continued growth in the economy, unless something drastic happens on the world stage that we can’t predict. But fasten your seat belts because we’re going to keep going up, up and away with the prices and that’s where I believe we are headed in 2020.
I welcome your comments. I know these videos always attract a lot of negativity. A lot of people saying that I’m crazy and that the market will crash, but you know what folks? It hasn’t crashed. It keeps on going because those three things that drive the market, which is low interest rates, that’s staying in place. The local economy is booming, as far as we can see that’s staying in place. And immigration, again, it’s staying in place. Those three drivers of the real estate market are going to continue. And when you have those three things happening, the market will continue and prices will continue to rise.
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You can also listen to this audio on my real estate podcast.