We’ve passed the half year mark and it looks like the rise of home prices in Toronto is not going to slow down anytime soon. Ever wondered why? Here are 5 reasons home prices in Toronto won’t crash in 2016.
Take a Look at the Supply and Demand
Population in Toronto has been steadily growing, partly because of people moving into Toronto and the existing population growing by having children, building families, and the like. Demand for homes is at an all-time high with supply not currently able to meet the demand. This means sellers can increase their prices or homes are being sold to the highest bidders or whoever comes up with the best offer.
There is no truth that Toronto’s condo market is oversupplied either. First time buyers who cannot find homes or can’t afford homes just yet are happily swooping down to take on any newly available condo unit. With this trend, prices are bound to remain high or keep climbing.
The Economy is Stable
Home prices usually go down when there is a recession. When people lose jobs and can’t afford to keep their homes, a surplus of homes becomes a trend and prices go down. There is no recession in 2016 nor the near future in the GTA, although Ontario’s economic growth is a bit on the sluggish side in recent years.
Mortgage Rates Are Still Buyer-Friendly
No housing price crash is in sight for Toronto because although interest rates are increasing, it is only doing so in manageable increments that can be met by the income GTA residents are pulling in. A crash is only likely to happen if we are to see a spike in unemployment while interest rates soar to astronomical figures.
There is No Bubble to Burst
Some people are speculating that the GTA bubble will burst soon, but what isn’t there can’t burst. Housing experts do not define what is going on in Toronto as a bubble effect because that only happens when people are buying homes for purely speculative reasons or to make money. People are buying homes in Toronto because they need to be in Toronto; meaning, they make a living in Toronto. They’re not going anywhere soon.
There are Still Affordable Housing Options
Although buying a home may not be within everyone’s reach in Toronto, buyers who do not have the economic ability to purchase homes have no problem buying condos instead (they cost about half what a home costs on average). Even with that, it says that the average Toronto buyer is in good financial shape, given what the price range of a small condo in Toronto is, let alone a home.
With household wealth increasing more than household debt, people who have the means will want to have their own homes and those who have homes will either want to upgrade or keep their existing ones, bringing us back to reason number one, lots of demand with little new supply.