Will the Record Real Estate Markets Continue in 2017?

It’s been 20 years now. After some tough years in the early 1990s, the Toronto and GTA real estate market has grown continuously since 1996, with the exception of a small correction during the recession of 2008 and 2009.

Through it all, as each New Year unfolds, there is always wide speculation about whether the market will continue its winning ways. Like most of the previous years, 2016 was supposed to bring the end of market boom.

The internet lets us look back at some of the predictions for 2016, including from the most reputable sources, like the Toronto Real Estate Board (TREB) and the Canada Mortgage and Housing Corporation (CMHC):

Fortunately for homeowners and home buyers alike, none of these predictions came true.

And a quick look at some of the numbers for 2016 show what really happened. The following figures are from a comparison of the TREB year-to-date statistics for the Toronto and Markham real estate markets in November 2016 versus December/November 2015. They do not represent real estate performance throughout all of 2016, but just up to November 2016, the most recent month for which we have statistics.

Toronto & GTA Average Home Prices (all types of homes)

  • 2015 – $609,110
  • 2016 – $776,684
  • Increase to date in 2016 +27.5%

Toronto & GTA Number of Sales (all types of homes)

  • Year-to-date Nov. 2015 – 96401
  • Year-to-date Nov. 2016 – 107840
  • Increase: +11.9%

Toronto & GTA Sales to New Listings Ratio (all types of homes)

  • 2015 – 63.1%
  • 2016 – 72.8%
  • Increase to date in 2016: +15.4%

Markham Average Home Prices (all types of homes)

  • 2015 – $805,750
  • 2016 – $993,680
  • Increase to date in 2016: +23.3%

Markham Number of Sales (all types of homes)

  • Year-to-date Nov. 2015 – 391
  • Year-to-date Nov. 2016 – 433
  • Increase: +10.7%

Markham Sales to New Listings Ratio (all types of homes)

  • 2015 – 60.7%
  • 2016 – 69.0%
  • Increase to date in 2016: +13.7%

Clearly the numbers show, despite what many predicted, 2016 will be remembered as yet another year of incredible real estate growth, in Toronto and the GTA and in the local Markham market.

But What About 2017?

First, predictions are just guesses and no one should use them to make decisions about real estate or anything else. And while we’re not going to make any predictions for 2017, what we can do is look at current market conditions and what those conditions have meant traditionally.

  •  Sales to New Listings Ratio (SNLR)

    One of the reasons that we included the SNLR in the comparative numbers above is because it has a bearing on the current conditions that might affect the market in 2017.

    SNLR is the ratio between the number of home sales and the number of new listings of homes for any given time period. A SNLR of 50% would mean that there was one new listing for every home sold, so there were the same number of homes on the market at the end of the time period as there were at the beginning.

    The SNLR ratios for both the GTA and Markham are well above 50% and they went up significantly in 2016. It’s a sign that fewer and fewer homes were on the market as 2016 wore on. Lack of supply, or fewer homes on the market, has been cited by some as one of the reasons for the ongoing record real estate sale prices.

  • Interest Rates

    Perhaps the biggest driver of record real estate prices are the ongoing historically low interest rates on mortgages. In early December, the Bank of Canada left its benchmark interest at .50%. Canada’s economy grew by an unexpectedly high 3.5% in the third quarter of 2016. Both of these points are indications that interest rates should remain stable, which would be good for the market.

  • Foreign Investment

    It’s difficult to know what effect the Foreign Buyers Tax imposed on non-Canadian homebuyers in BC has on the GTA market. But the Canadian market remains attractive to foreign investors and Ontario shows no signs of imposing a similar tax on foreign investment.

No matter what 2017 brings, we hope the year is a healthy and prosperous one for you and your family.