These are questions I get asked all the time as a Realtor in the GTA and the answers aren’t that simple, because nobody really knows what will happen in the next 12 months to 5 years. I like to look at the numbers to see what type of real estate market we just came out of and what direction the market is currently trending toward. Yes the average price of real estate in the GTA did drop at the beginning of 2009 when the economic downturn hit the globe, but nobody saw that coming. By early 2010 the average sold price in the GTA was on the upward track, back to where it was before the recession. After the recession hit the Greater Toronto Real Estate market, the amount of homes listed on MLS far outweighed the amount of homes being sold; giving buyers more options to choose from and sellers more homes to compete against, making the market a buyers market.
The buyers market changed towards late 2009/early 2010 when the GTA saw record highs in the number of “real estate sales transactions”, but not the actual price of homes. Buyers who were hesitant to purchase a home when the recession first hit in late 2008, took action in late 2009/early 2010 changing the market dynamics from a buyers market to a sellers market. In the sellers market the number of real estate sales transactions relative to the number of listed properties on MLS were a lot tighter, meaning buyers had fewer options as the number of available homes on the market decreased. This usually drives prices up as buyers now have to compete with each other because there are more buyers in the market than there are quality homes for sale. Let’s look at what has happened in the first quarter of 2011 (Jan, Feb, Mar) within the Greater Toronto real estate market.
Number of Sales – 2010 vs. 2011
In the first quarter of 2011, the total number of real estate transactions in the GTA was 19,865 which is a 12.5% drop when compared to 22,707 real estate transactions in 2010. Although there is a 12.5% drop from 2010, the 22,707 mark was a record high for real estate transactions and 19,865 real estate transactions in 2011 is still considered a strong number.
Real Estate Sales Transactions by Home Type
If we look at the 19,865 real estate sales transactions in the GTA, you will see the top selling type of homes were Detached at 46% followed by Condo’s at 25%. If you drill down further you’ll see that in the 416 area Condo’s actually accounted for 45% of the real estate sales transactions vs. 10% in the 905 area.
Average Selling Price
As of March 2011, the average selling price was $456,147 in the GTA and one of the reasons for this was buyers competing with each other for properties that sold in the first quarter of 2011.
Average Price by Type
When we break down the average selling price in the GTA by property type, Detached homes are at the top end with an average selling price of $567,187 while Condo’s have become the new starter home with an average selling price of $322,312.
So why are prices so high in the GTA? Because people can afford to pay the prices, it all comes down to affordability. The debt ratio for people in the GTA continues to stay around the 30% mark regardless of the price of Greater Toronto Real Estate, as it has for more than a decade. We are making more money every year and interest rates are at record lows. So unless some drastic market changes occur, I expect to see more of the same for the next few quarters, but always remember that the real estate market dictates its own price.