What does 2014 hold for the Toronto Real Estate Market?

What does 2014 hold for the Toronto Real Estate Market?

2014 should be a very good year for real estate in Toronto, Canada’s largest city. The start of the year has already shown encouraging signs. However, there are factors that could affect the market later in the year, and their impact cannot be fully assessed at this time.

Recap of 2013:

2013 was a banner year for the Toronto real estate market. Total sales at 87,111 were up by 2% compared to 2012. Prices increased on average by 5.2% relative to 2012, which is by more than inflation. The average sale price for all of 2013 was $523,036.

The sales growth actually accelerated in the later part of 2013, particularly after the banks announced that they would be increasing some of their mortgage rates in mid August. This spurred many home buyers with Canadian mortgage pre-approvals who were sitting on the fence to buy, fearing that their rate guarantees would expire and they would eventually have to buy at higher mortgage rates if they did not do so now. The impact was most pronounced in the Toronto condo market, where sales increased as the rates went up. 2013 started off quite slow compared to 2012, but picked up in the latter half of the year to finish with more sales overall.

The Market in 2014:

I believe we are most likely going to see a very strong home sellers market  for spring 2014, as low-rise housing inventory remains in very short supply, particularly in relation to demand. In January, we have already encountered instances of homes selling for over $200K above asking price in some prime areas of Toronto, even in the depths of one of Toronto’s worst winters in years! Despite there being relatively more inventory of condos compared to low-rise homes, expect to see healthy demand for condos as well, as many would be purchasers take the plunge in 2014.

Mortgage rates will stay low during the early part of 2014:

The prime rate (the rate on which variable rate mortgages are based) will stay low for the foreseeable future, according to recent comments by the Bank of Canada governor. This should keep short term variable rates at low levels too, spurring the market forward. In the next couple of months, the longer term rates (3-5 years) should also stay relatively stable. Royal Bank recently announced some borrowing rate reductions across the yield curve in January, perhaps an early precursor of things to come.

US Bond Buyback Reduction could increase rates in the latter part of 2014:

Later on in 2014, other factors may influence the market, namely what happens in the US. After many years of quantitative easing (or bond buying) by the US Federal Reserve Bank, to keep US rates at historic lows to spur the economy, the Fed recently announced that it will gradually begin scaling back this bond buying program this year. It is anticipated that the bond buying program will be completely stopped in October 2014. This is a good thing, as it means the US economy is improving, and does not require ultra-low rates to grow. The impact of this policy change by the US Central Bank will be to increase US bond yields, which in turn will increase long term interest rates in the US. Since Canada is a relatively smaller export driven nation that is dependent on the US economy, our bond yields will also face some upward pressure later this year, as will our longer term interest rates. If rates increase later in the year, it may have some deflationary impact on our real estate market at that time.

Toronto Housing Market should remain robust despite increased rates

I believe that we should continue to see a healthy Toronto real estate market even if & when the mortgage rates increase, most likely in the latter half of 2014. We have a shortage of available homes relative to demand in Toronto, & immigration into this city continues to drive demand for quality housing, which should keep condo demand stable too. The Toronto market has faced down a series of barriers over the past few years, including rapidly increasing prices/lower affordability, the introduction of the City of Toronto land transfer tax, lower allowed amortization periods on mortgages, higher down payment requirements & higher mortgage qualification requirements. None of these have stopped the real estate market from growing and prices from continuing to increase. As long as people want to move to & live in Toronto, its real estate market will continue to be very robust!

Your Toronto Century 21 realtor should be able to advise you on current market conditions, and assist you when you're ready to move forward with either selling or buying a home or condo. Good luck!



Ram Rajendram is a Toronto Real Estate Broker with Century 21 Harvest Realty Ltd. He sells condos and houses throughout the GTA, and assists home and condo buyers with their purchasing needs. He is also a Canadian Chartered Accountant and holds a Bachelors Degree in Economics from the London School of Economics (LSE)

Ram Rajendram

Ram Rajendram

Real Estate Broker
CENTURY 21 Harvest Realty Ltd., Brokerage*
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