As Q1-2022 comes to an end we look back and see what a roller coaster of a ride it was. I predicted in early 2021 that we would see price growth north of 15% and most likely in the 20-23% due to tight supply levels, and then see prices pull slightly back from a peak created by a “fear of missing out” mentality to a more balanced market. Unfortunately when there is a “fear of missing out” mentality this usually leads to a peak where prices pull back a bit and then we see normalized price growth. Very similar to what we have seen in past cycles. 

The forecast for the Toronto real estate market for the rest of 2022 is lower than before due to government policy and negative media spin, with prices expected to increase 5-10% this year. I expect most of the price growth to happen later in the year in Q3-Q4, with prices lower for low-rise homes and higher for condos. 

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Regardless of government intervention and rate increases there is a fundamental issue with supply and demand, which in Toronto, demand far outpaces supply. In fact the supply and demand conditions are the tightest we have ever seen them, really with no end in sight. Canadian immigration numbers have increased to 400,000 per year up from 180,000 just a few years ago. A recent CMHC report list Toronto at the top of the list for cities needing the most new household formations but at historic lows of new housing supply. 

 There are many factors like immigration, consistent price and rent appreciation, to name a few, that make Toronto a desirable market for investors, and probably top of that list is the amount of employment in the city and the diversified nature of employers that call Toronto home. While it is very well known that Toronto has a strong financial sector, viewed as one of the largest in North America, the city is also emerging as a serious tech hub rivaling the likes of Silicon Valley.

While companies like Google, Amazon, Apple and Shopify already call Toronto home with offices in the city, Microsoft has recently opened a new office and Meta, which is the parent company of Facebook plans on opening a new hub that will result in the creation of 2,500 new tech jobs. Toronto has in recent years emerged as the third-largest tech hub in North America and is home to more tech workers than Chicago, Los Angeles and Seattle and only trailing New York and Silicon Valley.

Toronto is the fastest growing city in the world and consistently ranked as one of the greatest cities to live and work in the world. Government and media will add fear to a red hot market letting some of the much needed steam out of it. Much of the new policy is nothing but rewording of existing policy. The media will report and people will wait on the sidelines to see what happens and then jump back into the market. Interest rates will make their way upward, but this will in no way fix supply issues. The affordability gap in Toronto has never been bigger. Detached homes average $1,947,975 and the condo average is $820,835 creating a $1,127,140 price gap.

April 2022 Condo Rental Market Update

The GTA rental market continued heating up during the first quarter with rents really taking off in Toronto proper and slowing down in the 905 in April as demand outpaced new supply.

Rent inflation rose to its fastest quarterly pace of the past 10 years, raising condo rents in Q1 above pre-COVID levels. 

• The volume of condominium lease transactions at 3,522 units reached its highest level since August 2021 and outnumbered new listings of 2,760 units last month, which declined 19% annually.
• A further reduction in inventory from already low levels in Q1-2022 resulted in a 2.2% monthly increase in average rents.
• At $2,498, average rents in the GTA increased 19.7% year-over-year and returned to the record high average reached in Q3-2019.
• Vacancy rates in stabilized buildings completed since 2005 fell from a high of 6.4% in Q1-2021 to 1.8% in Q1-2022, nearly returning to the 1.0% level recorded before the pandemic.

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April 2022 Condo Resale Market Update

• As interest rates began to move higher and buyers became more cautious, resale activity declined 34% annually in April from last year’s record high.
• The annual decline in condo sales was less than the 41% decline reported for all housing types in the GTA. 
• The sales-to-new listings ratio fell to 46% in April from 63% in March and 66% a year ago. This caused inventory levels to rise from 0.9 months in March to a 16-month high of 1.7 months in April, which was still below the 10-year average of 2.2 months.
• The shift in market conditions and increased share of activity in the lower-end of the market during April caused average prices to dip by 2% from March to an average of $789,869.
• The monthly price decline was largest in the 905 region at 5%, compared to a 1% monthly price decrease in the City of Toronto.
• On an annual basis, prices were still up the most in the 905 region with 18% growth, compared to 13% growth for Toronto and an overall GTA average annual increase of 14%.

The long-term outlook for Toronto condos as an investment is extremely positive. 

Contact me or a member of my team to discuss investing in condos to build multi-generational wealth

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