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What Causes Ontario Real Estate Prices to Increase? – RE/MAX News

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The Canadian housing market outlook for 2020 started strong. Ontario, the country’s most highly populated province, continues to attract homebuyers. While the coronavirus pandemic may shift this expectation in the short-term, the market will rebound quickly.

For buyers who want to purchase a home in Ontario, it can be challenging to decide where to settle down. Home prices vary across the province, and external factors can affect how much these prices increase. In 2019, among cities in Ontario, Oakville was the housing market with the most expensive sale price while Cornwall was the housing market with the least expensive sale price.

Here are some factors that determine Ontario real estate prices:

Low-interest rates

The Bank of Canada has reduced interest rates to 0.25%, from 1.25%. This new rate will stimulate more demand in the market to help lift the economy. However, low inventory will cause price increases, since sellers will want to get the best possible price.

The positive is that homebuyers are able to borrow more money at a reduced rate. This could lead to huge cost savings over time for buyers.

Some first-time buyers were challenged in entering the market previously due to the mortgage stress test. However, the lower interest rate can help buyers qualify for a mortgage and buy a larger or better home in areas outside of the Greater Toronto Area (GTA), which are more affordable.

Differences between Ontario’s housing markets

In Ontario, various housing markets outside the GTA are generally less volatile. Many people start their home search outside of the city, where greater affordability can be found.

In February, the average residential selling price in Toronto was up by 16.7%, to $910,290. A year-over-year double-digit price increase was seen in detached houses and condominiums. Great news for homeowners and sellers, but challenging for buyers on a budget.

Price-conscious buyers are thus choosing to live in the suburbs or rural areas of the province and commute to Toronto for work. The closer you get to the city, the more expensive housing becomes.

In other parts of Ontario, house prices are lower, since they don’t experience the level of demand seen in Toronto. This means homebuyers can take advantage of lower mortgage rates and less expensive property prices to purchase homes in these areas.

Yet, there are other cities in Ontario that are now showing similar trends to Toronto. For example, Ottawa and Windsor were experiencing seller’s market conditions, showing substantial year-over-year increases in average residential sale price at 11.7% and 11% between 2018 and 2019. Both cities continue to attract young professionals, especially with improved transportation features such as the Ottawa LRT.

The Niagara region also saw strong growth between 2018 and 2019, with average residential sale price increasing almost 13%.

Supply and demand

Especially in large cities like Toronto and Vancouver, it is challenging to purchase an affordable home because of high demand and low supply. In Toronto due to land shortages and the influx of immigrants, more people need homes to live in. At the start of 2020, the Toronto Regional Real Estate Board (TRREB) shared that shrinking inventory had led to a double-digit jump in housing prices.

Whether homebuyers move to Toronto for job opportunities, better amenities or to be closer to transit, as this city continues to develop, it is expected that demand will grow alongside it.

According to a recent report by the Ontario Ministry of Finance, the population in this province is expected to increase by 38% by 2046. This is a jump from an estimated 14.3 million in 2018 to almost 19.8 million.

Yet, the number of listings continues to dwindle in the Toronto market. These market conditions result in bidding wars and more competition for desired homes. A seller’s market continues to prevail, making it difficult to enter this market as a buyer.

Seasonal real estate trends

Seasonality trends in the Ontario market can also play a role in real estate price increases.

During the winter, many people pause home searching to avoid poor weather conditions. If sellers are intent to sell during the winter season, the decrease in demand may require sellers to lower their asking price.

Spring and summer are when Canadians come out of “hibernation” to purchase homes. For sellers, the good weather can boost curb appeal to make their homes look better to homebuyers. Therefore, sellers can increase prices because of demand.

When the fall season rolls around, it can bring less inventory on the market because of the busy home purchasing activity which happened during the spring and summer seasons. Yet, demand remains stable, so homebuyers can expect competition when trying to secure the house they desire.

Ontario’s real estate prices haven’t shown signs of decreasing. Trends from earlier this year show that market activity continues despite social distancing measures from the coronavirus pandemic. Many housing markets in Ontario are considered seller’s markets. Yet, homebuyers can leverage low-interest rates to qualify for mortgages, purchase homes in areas with less demand, and use seasonal real estate trends to try to get a leg up on the competition.

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Despite the challenges, Edmonton area real estate values 'have held up extraordinarily well' – Edmonton Journal

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I have to say the Edmonton area real estate market has surprised me.

When you consider the onslaught we have had in the past five years — oil price crash, more than 100,000 job losses, fires, floods, domestic and international trade disputes and then COVID-19, I would say the Edmonton and area real estate values have held up extraordinarily well.

Since 2014, we’ve only seen modest declines in prices, with single family homes declining the least. Edmonton remains Canada’s most affordable major city with one of the highest average incomes.

Other Canadian cities have seen significant price gains in the same time period creating a bigger difference in real estate values between regions. We have had clients who can work anywhere and chose Edmonton as they can afford much nicer living quarters here for the same money.

Given the lower prices and interest rates combined with rising rental demand, it is easier for investors to get positive cash flows. We are seeing investors looking at condos for their positive cash flow. This fact will help to support our real estate values.

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Toronto and Vancouver Real Estate Inventory May Get A Boost From AirBNB Slowdown – Better Dwelling

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Canadian real estate markets may be getting another inventory headwind soon. National Bank of Canada (NBC) research estimates AirBNB hosts may contribute to oversupply later this year. As the slowdown impacts hosts, many may be incentivized to sell. By their estimates, just a quarter of hosts selling would cause inventory in cities like Toronto and Vancouver to swell.

AirBNB and Housing Inventory

AirBNB helps homeowners take existing housing stock and convert it to short-term rentals. Rather than staying in hotels, travelers can now stay in existing non-hotel stock. At first, it wasn’t a big issue when just a few people were doing it. As the platform expanded, people began buying additional housing just to operate short-term rentals. By repurposing housing that would otherwise be long-term units, cities now need additional housing. Basically, short-term rentals lead to an inventory squeeze, pushing rents and prices higher. Temporarily at least, for as long as the squeeze persists. That squeeze could end as quickly as travel did.

The Travel Industry Expects A Big Slowdown

The travel industry doesn’t expect travel to recover quickly from the pandemic. The US has approved some routes cutting plane traffic up to 90% until September. The IATA, the trade association for international airlines, also doesn’t see traffic returning to 2019 levels until at least 2023 – at the earliest. What does this mean? Fewer users of short-term rentals, and more competition from hotels for those travelers. All of this can have a big impact on real estate inventory, according to NBC numbers.

Canada’s Biggest Real Estate Markets May See Inventory Spike

If just a quarter of AirBNB inventory is sold off, NBC sees a lot more real estate listings on the market. In Vancouver, the bank estimates real estate listings would rise 12%. Montreal would see an increase of 27% in resale listings. Toronto is another story though, with inventory forecasted to rise a whopping 34%. That’s with just 25% of AirBNB exiting as hosts.

AirBNB Boost To Canadian Real Estate Inventory

The potential increase in real estate listings if 25% of AirBNB properties were listed for sale.

Source: National Bank of Canada, Better Dwelling.

The boost is another headwind for inventory rising later in the year. Inventory was already expected to rise in the coming few months. NBC economists believe this would be “exacerbating oversupply in the coming months.”

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How Is The Real Estate Market In Muskoka Post COVID19 – Hunters Bay Radio

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In a brand new video podcast series, Gerry Lantaigne with Sutton Group – Muskoka Realty discuses the world of real estate in Muskoka during the Coronavirus pandemic.

Join Gerry every month as he updates you on The State of Real Estate

Watch the inaugural episode here:

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