Toronto-area home prices to surge by 10% this year — average to surpass $1 million by end of 2021

The Toronto Regional Real Estate Board expects the average price of a resale home in the Toronto area to climb about 10 per cent this year, surpassing the $1-million mark for the first time.

That would bring the average home price across all housing categories, including condos, to about $1.025 million in 2021.

Real estate board officials said on Monday that the forecast is based on a strong sales and prices at the start of the year, record low interest rates and the prospect of economic recovery in white-collar employment.

With immigration expected to increase as the year goes on, newcomers will add further demand on the housing supply, said TRREB chief market analyst Jason Mercer.

Average home prices rose 15.5 per cent year over year in January to $967,885. That followed a 13.5 per cent year over year increase in December.

“Just looking at the momentum we had based on a strong recovery in many sectors of the economy, especially those with above-average earnings that cater to housing demand, it makes sense the demand for housing generally will remain strong as we move through this year. On top of that you’ll also see a resurgence in the condominium apartment segment as well,” Mercer told reporters following a web presentation.

If December and January sales levels continue through the year, that supports the board’s forecast of 105,000 sales this year, he said: “We’re expecting to see listings creep up a little bit but not on the same track as sales are. We’ll see 160,000 listings in 2021.”

A soaring detached house market, especially in the 905 areas outside the city, set the traditionally quiet winter real estate market ablaze. Outside Toronto, GTA detached house prices soared 36.6 per cent to about $1.3 million on average. Inside Toronto’s city borders prices climbed a more modest 16 per cent to an average of nearly $1.6 million.

Investors set sights eastward

Forget Toronto—it’s rare to find a condominium in the GTA that’s selling for under $1,000 per sq ft, but a project in Scarborough is doing just that, making it one of the few affordable condo developments in the region.

East Pointe Condominiums, an 11-storey, 114 unit mid-rise, slated for development in the Kingston Rd. and Morningside Ave. area, is selling for around mid-$800 psf, and there’s hardly any rental competition in the area despite being nestled next to the University of Toronto’s Scarborough Campus.

“We’re about 1 km away from UofT at Scarborough, and Centennial College is nearby too,” said Mike Bowering, president of Mutual Developments, East Pointe’s builder. “The university there is drastically undersupplied with housing. UofT has 15,000 students and only 850 beds, and it’s slated to increase enrolment up to 30,000 in the next 10 or 15 years.”

It’s true that the COVID-19 pandemic chased international students out of the country and domestic students back to their parents, but that is very likely to change by summertime. In 2019, according to the federal government, there were 828,356 international students in Canada, the majority of whom studied in Ontario. For most in the province, Toronto was their choice city.

“Our universities are suffering because foreign students are major contributors to them, because they pay more than domestic students. Domestic students are also missing because a lot of them are taking classes online,” Phil Soper, president and CEO of Royal LePage, previously told CREW. “The federal government paved the way for students to return to Canada, and a lot of them came back in January, but most won’t be back until September when the school year starts.”

As a result, residential property investors will have plenty of opportunity to fulfil student demand, although with most units in the region don’t carry well. But Bowering says East Pointe might allay some of their concerns.

“For investors, it’s the same old story: buy low and sell high. At $1,500 psf, you try to get as much rent as you can, but there aren’t many condos that carry if you pay over $1,000 psf,” he said. “Our prices are mostly between $400,000-600,000, and 10% of our units will have three bedrooms, which are considered family sized.”

Investors gain the most when they jump in early because they can ride a high wave of appreciation, particularly in up-and-coming, and therefore desirable, neighbourhoods. The Kingston corridor underwent some revitalization around a decade ago, which also saw maximum property heights rezoned to eight storeys, but there hasn’t been much residential development in the area. Mutual Developments is looking to capitalize on the gap in the market.

“There are a lot of advantages to that area, with a GO Train right there, the beach and a lot of other amenities,” said Bowering. “Scarborough is a bit less expensive compared to the rest of the city. If a condo in downtown Toronto costs well above $1,200 psf, you can get one in Scarborough at $850 and get about $2,000 a month in rent.”