Photo: James Bombales
After a lengthy run-up in the prices of an asset like real estate, a question emerges: will the market crash, or will there be a soft landing?
In the case of Toronto real estate, Realosophy founder John Pasalis suggests the latter has already unfolded.
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“To answer whether Toronto’s housing market made a soft landing, we need to look back at how house prices have changed over the past few years,” Pasalis writes in a Realosophy blog post.
After peaking in March 2017, the average price of a Greater Toronto Area home collapsed by 18 percent in four months. However, from that point Pasalis notes the market stabilized with the exception of seasonal swings.
The move surprised the Toronto broker given downturns tend to be more prolonged, lasting more than 12 months as inventory continues to build and puts downward pressure on pricing.
Inventory did spike throughout the spring and early summer of 2017 but then it began hovering around the same level. In fact, since that time, there has consistently been around three months of inventory (at the current rate of sales, that’s how long it would be before all homes listed sold).
As of December 2018, there were 2.7 months of inventory available on the GTA market and the average price of a home was $750,180, according to the Toronto Real Estate Board.
Considering average price declines didn’t break the 20-percent barrier and inventory has flattened for more than a year, Pasalis suggests the GTA market avoided the crash some had predicted was inevitable.
“There is little doubt that up to now the GTA has achieved a soft landing,” he concludes.