Until February 2022, house prices were growing significantly across the GTA. As a result of the Bank of Canada increasing the interest rate, the prices started to plateau, and now decrease. The average price for a house in the GTA in May 2022 was $1,212,806, actually cheaper than in January’s $1,242,793.
Crunching the numbers further, we can predict a 20% drop in house prices. A semi-detached in the GTA in May 2022 is $1.1M, and if we were to purchase a house at that price with a 35% downpayment, that would leave a $715k mortgage. If we consider the Mortgage amount at 2% vs. Mortgage amount at 4% (over the next 5 years over a 25 year term), budgeted with 2022 price hikes, we can see there’s a sizeable difference:
A person with a 4% mortgage would end up paying $220,000 more on their $1.1million property, that’s exactly 20% more.
Perhaps it is not too surprising that prices rose to unprecedented levels with a shortage of inventory available, in the midst of the COVID-19 pandemic. During that seller’s market, Torontonians were waiving inspections, blind bidding, and competing with 50+ other offers in some situations.
The average house prices are still more than 9% compared to May 2021. If we look across the border we can see the vastness of the disparity compared to America. For eg. a 2,576 sq ft 6 bedroom house in New Jersey is available for $270,00 CAD. By comparison to the GTA, that gets you half of a 500sq ft high tower apartment in South Scarborough.
However, the tide may have turned. Perhaps house prices won’t ever reach par with the suburban Eastern corridor of the USA, but house prices will drop significantly in the GTA. Abrar Beg, Head of Real Estate at Planulife predicts that home prices will fall over 20% in some markets, especially single houses in some inflated suburbs of the GTA.
The only sector where prices are still rising is in the Toronto Rental market, where the average Toronto rent has reached an all-time high of $2,300, with the downtown condo market increasingly popular.
“Overall, the GTA rental market has flattened out this year, however, the downtown condo rental market is hotter than any period since the fall of 2019,” said Ben Myers, President of Bullpen Research & Consulting. “GTA condo rents are up 21 per cent annually, with select projects in Toronto’s core up by over 30 per cent from April of last year.”
With no relief in the rental market either (unlike last year, when there were bargains galore), we can confidently say that as we usher in Summer 2022, that we are approaching a buyer’s market in the GTA. Interest rates have increased even further, to 1.5% with the promise of more hikes, so this is the opportune time to consolidate your Real Estate Portfolio. Get started by using Planulife’s Free Financial plan to map out your investment footpath in 3 minutes.
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