Housing Market Update & Outlook for 2020
Highlights from latest TRREB Report
As per the latest TRREB report, active listings across the GTA sank 35% year over year in January, while sales climbed a little more than 15% as 4,581 properties traded hands. That lift combined with fewer homes on the market resulted in the average selling price rising 12.3% to $839,363.
Sales in detached home category surged 23.3% year over year in January, while their average selling price in the GTA rose 10.5% to almost $1.04 million.
“A year seems to have made a big difference. It is clear that many buyers who were on the sidelines due to the OFSI stress test are moving back into the market, driving very strong year-over-year sales growth in the detached segment,” says TRREB’s Jason Mercer.
Price growth was more significant in the condo market, with average selling price climbing to 15.1% year over year.
2020 Outlook calls for overall average selling price to climb to $900,000, which is a 10% increase from 2019. However, if detached homes continue to sell well, the overall average price could be higher.
“The key issue will be the persistent shortage of listings. Without relief on the housing supply front, the pace of price growth will continue to ramp up. Policy makers need to understand that demand side initiatives on their own will only have a temporary impact on the market.”
GTA Mississauga Housing Market 2020. What does the latest housing data tell us?
We are in a situation where we have a tight housing supply and rising prices. The average home price in the GTA is now up 12% year over year. A lot of people are comparing the current market to what happened in 2017, and are quite anxious. The same mood exists for the condo market even more so.
There are two big contributors for this rise in prices and anxiety. Many real estate investors have jumped into the housing market and then there are many hopeful buyers who feel like that have to buy a condo right now or they will never be able to afford one. This has accelerated demand. And so we are seeing really rapid increases in prices.
Condos are selling for 10% – 15% more than what similar units were selling for about six months ago. And then lack of condo inventory for sale is an issue. Existing investors who own condos are just holding on to them instead of selling them.
What happens when there is demand & people don’t want to put their home or condo on sale?
Basically people sell to up-size, downsize or to cash out. If you look at detached home sales, there are up 23%, so people are up-sizing. Some people do have the means to up-size and that is helping drive the increase in detached home sales across the GTA. The problem is that they are not selling their condos or existing properties. So a disproportionate increase in the inventory has become available in the rental market. If we only look at year over year condo rentals for the month of January, those inventories are up over 50%.
What might the future hold?
As the condo market is witnessing a double digit appreciation in prices, this increase might not be sustainable. A 15% to 20% increase in property prices is not healthy, is not balanced, and presents a difficult situation for buyers. In 2017, the government already tightened credit rules and put in the stress test. So now if the banks reduce rates a little (which is expected), it could further add fuel to the fire and market prices can keep going higher. As per TRREB report above, the average price is bound to go up by 10%.
Our Take on Mississauga, Brampton, Milton, & Oakville Real Estate Market
It is a word of caution for First time buyers who are bidding for properties or condos. There are more than 5 or 10 offers on one property. Most offers are being put without any conditions because of fear of losing the property and the getting into another property which will sell for higher than the first.
The word of caution is banks will not loan you an amount more than the appraised value. The difference you will have to shell out in cash. Sometimes you may back out because you may not have that kind of cash available, you will certainly lose your deposit in this case, plus the added risk of being sued by the seller because of not closing the property. So there are many risks involved.
Caveat Emptor When Buying Condos
Another caution is when you are removing the condominium building’s status review conditions without getting the lawyer to review the status certificate. You do not know the situation of the condominium. The reserve fund study is done every three years. Sometimes new problems can surface in condominiums like kitec plumbing, issues with external structures like windows, balconies, chiller units, underground parking lots etc. which can eat up a lot of the reserve fund. Situations like this are sometimes common and the condominium can put special assessment to bring up the reserve fund which can effect the monthly condo fee outflow and also the saleability of the condo in the future.
So it is prudent to work with realtors who are honest, reputed and come referred by friends or family, someone who knows the market and will not hesitate to tell you the fair market price of the properties you are interested in before you get excited with the crazy bidding wars.
Why Sellers Are Not Listing Like They Used To?
Many investor sellers are not putting their properties for sale on the market. There can be a few reasons for this:
- Sellers might be waiting for prices to move up more and planning to then offload their properties in the spring/ summer time, perhaps around April, May, June when maximum number of properties are listed as compared to any other time of the year.
- Sellers who have bought their properties post Dec 2016 are enjoying positive cash flow returns and don’t want to sell. Mississauga offers quality tenants and managing real estate investments is easy.
- As the lower condo segment has appreciated a lot in the last two years, the profit on sale is very high. This translates into a huge capital gain tax on half of profits, when it comes to investment properties. Sometimes these sellers do not want to pay so much in taxes. They are deferring selling until they retire by choosing to hold their investments as rental properties.
What does the Market Hold for Renters
While we have witnessed a 12%-15% increase in home and condo prices, the average rent in Mississauga has gone up by 8%. Rents are generally going down compared to just a few months ago, given the current increase in rental supply from investor-held properties.
However, Ontario is still facing an acute housing shortage as so many newcomers are regularly coming to the GTA, especially Mississauga. In 2020, many new condo towers are being added to Mississauga to the Square One area, Hurontario area and Erin Mills area.
In addition, the recent Square One District announcement promises to address both housing market and rental market issues in the GTA starting this year.