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The average selling price of a home in the Greater Toronto Area has more than tripled since 1996, and RE/MAX, a major North American realty franchise, sees no end in sight.
“Moving forward, there is no reason to expect the upward trend to end,” said Ken McLachlan, a RE/MAX Hallmark Ltd. broker-owner, in a statement.
Going over numbers from the Toronto Real Estate Board based on MLS transactions, RE/MAX found the average sale price of a home in the GTA across all property types was $622,217 for 2015, up 214 per cent from 1996, when it was $198,150.
Looking ahead, the realtor predicts the volatile stock market and uncertain economic conditions will drive investors to shore up their portfolios with property purchases, further propping up home prices in the GTA.
“We anticipate an upswing in home buying activity as investors look to tangible assets like bricks and mortar to ride out the storm,” said McLachlan.
Foreign investment — which the Canada Mortgage and Housing Corporation recently said was on the rise in the condo segment of the Toronto market — in particular is expected to play a part in price appreciation.
“The strength of the US dollar will also contribute, serving as an impetus for greater investment in the Greater Toronto Area throughout 2016,” McLachlan added.
During the past 19 years, low interest rates and strong population growth have been major factors driving price appreciation, according to RE/MAX.
“Immigration’s a major factor in this whole thing,” McLachlan told BuzzBuzzHome News. “I think that’s the magic fuel for everything,” he said, adding new immigrants to the city tend to purchase a home within five years or arriving.
From 1996 to 2014, the Toronto Census Metropolitan Area’s population climbed 42 per cent to 6,055,724, and in the mid-90s the average five year mortgage on a home was eight per cent, compared to under three per cent today, RE/MAX points out.
However, McLachlan did outline one element that could have a slowing effect on home price growth.
“The only caveat that I’d throw in there, and I’m observing it, more than anything else, is the affordability factor that will impact (prices) from time to time, but I don’t think it’s got to that stage yet,” McLachlan said in an interview.
McLachlan estimated it would take a two to three per cent spike in interest rates to have an impact on home prices.
His forecast for home price growth in the GTA this year is six per cent. “There’s certain pockets that won’t have it of course,” he added, citing commercial-residential condos.
“The overall strength and stability of Toronto’s housing market is a global anomaly,” said McLachlan, a realtor of 37 years, in the statement. “Very few large residential housing markets can compete with the GTA’s performance over the past two decades.