Canadian Real Estate market has been on a roller coaster ride for many years. As a full-time realtor working with sellers and buyers on daily basis, I always believe that people can make wiser decisions if they can better understand the market, even though no one can predict the future.
Today, let's take a look at the average sold price of detached houses in GTA over the past 5 years.
Figure 1
We can see in Figure 1 that the average sold price of detached houses in GTA stayed fairly stable, mildly fluctuating around $1 million from January 2018 to April 2020. However, from May 2020 to February 2022, the price soared to $1.8 million. In the following five months, from March 2022 to July 2022, the price saw a 24% decline, from $1,797,922 to $1,361,482. The price didn't drop any further from August 2022 to December 2022.
During the early stage of the COVID-19 outbreak, the average sold price of detached houses in GTA was $982,178 in April 2020. The price then had kept climbing for 22 months, reaching $1,797,922 in February 2022, an increase of 83%.
In December 2022, the average sold price of detached houses in GTA was $1,384,587, down 23% from the peak in February 2022. However, the average sold price of detached houses in GTA still increased 41% in 32 months, compared to April 2020 when this round of price hike started.
Why has the house price kept on increasing? Will the price rise or fall in the future? A basic way of understanding a market is to look at the demand and supply dynamics.
As shown in figure 2, the population in Ontario has been constantly increasing since 2018. Over the past 5 years, the population increased 1,075,830, from 14,467,552 in the first quarter of 2018 to 15,262,660 in the fourth quarter of 2022. According to Statistic Canada, the population includes the permanent and non-permanent residents.
Figure 2
As for the supply side, the quarterly units completions in Ontario have been stabilizing between 15,000 to 20,000 units over the past 5 years. The total units completions reached 354,141 during the same period. According to Statistic Canada, the units types include detached, semi, row, multiples, apartment and other unit types.
Figure 3
Over the past 5 years, population in Ontario increased 1,075,830, while units completions totaled 354,141. Are these newly completed units sufficient to accommodate the newcomers?
Data from Statistic Canada shows that the average household size in Ontario during this period was 2.6 persons per household. If we use this number as reference, on the demand side, we need 413,781 new units. While on the supply side, there are 354,141 new units available, a shortage of 59,640 units. This should be the key driver of house price rises.
If you want to predict the market, the best try is to acknowledge the fact that Ontario housing supply has been falling behind the population increase for years. There is no sign in the near future that supply and demand will strike a balance. As long as the imbalance continues, the current price drop may be a short-term correction. The market will eventually get back to its track of price rocketing, regardless of high interest rates, foreign buyer ban or people's intentions. It will follow the law of supply and demand ruthlessly.
There are various topics to address on real estate market. I will continue to share my observations to add a piece to the puzzle. The readers can help me improve in the following ways.
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Author's bio.
Yi Hong is a real estate broker with One Percent Realty Brokerage. He helped hundred of families sell their properties in Ontario, and saved tens of thousands of dollars in commission for them. He also helped many buyers purchase their dream homes. Yi works in an ethical, objective and transparent manner. He only cares how to best secure his clients' interests.
Yi holds an MBA degree from Fordham University, New York. After becoming a Canadian resident in 2008, he had worked for four years at RBC as an Account Manager. He started his real estate career in late 2014.
Yi currently lives in Toronto with his family. He has two dogs. Apollo, a GSD and Luna, a Teddy Bear Dog. Outside of work, he enjoys reading, teaching English to new immigrants, kayaking, fishing, and woodworking.