In the last 25 years we may have seen minor dips and moments of plateau; but if you look at the big picture,  Toronto home prices have been going nowhere but up! While on average the year over year price increase is 6%, we have much exceeded that figure, seeing over 20% growth this past year.

With records breaking left, right and centre, we have been hearing a lot of the “C” word; CRASH. While many people don’t believe that Toronto home prices are sustainable and anticipate that there is an inevitable crash looming; they may want to think again. It is easy enough to look at the numbers in todays market and believe that they cannot continue to rise, simply because the numbers seem crazy high; but if you educate yourself as to all of the factors that contribute to these prices, you will see that they are likely not going to stop anytime soon.

THE CLASSIC RULE OF SUPPLY + DEMAND.

While it may appear that there are new developments popping up at every turn; you would be surprised to know that current development is struggling to keep up with the demand for housing. It is estimated by a number of sources that the GTA will need to deliver 50,000 to 70,000 new units per year in order to keep up with demand; while in reality the CMHC reports that the GTA produces between 33,000 to 36,000 new units annually.

While many cities are trying to bridge this gap through new initiatives such as allowance of Laneway Housing and Garden Suites, ultimately the larger development is needed to fulfill the necessary quantities. With the current gap between demand and supply, competition comes into play, driving up Toronto home prices through the infamous bidding war.

IMMIGRATION.

Immigration is a key factor in the Toronto Housing market. Our city is the landing spot for 50% of all immigrants who come to Canada; making immigration and increasing population, a driving force in the need for further housing. In the next three years, the Canadian Government intends to permit 1.2 million immigrants into the country by the year 2024. This could mean an increase of over 600,000 people in the next three years alone.

While this means fantastic things for our city, culture and economy; these hundreds of thousands of people will need somewhere to live. This further drives the issue of supply and demand and a need for faster development in the GTA.

THE LIMIT OF LAND.

There has been much controversy over properties such as the $800,000 garage and million dollar tiny homes in the city. But ultimately, it is important to understand that the primary value of these properties is the land. In the GTA and Toronto in particular there is only so much land, and beyond that,  only so much buildable land! This is why a ratty garage with a bit of land can exceed the price of a sleek new 2 bedroom condo.

Moving further away from the core of the city, there are various restrictions and conservation initiatives that limit the amount of buildable land. 2 million acres of farmland, forests, wetlands, rivers and lake lands around the GTA are protected to limit urban sprawl and preserve these natural lands. Between the restrictions on building and development and the work from home movement, the high prices of the city are spreading further and further throughout the GTA.

Seeing as there is minimal land available for development, land prices have gone up substantially. Those prices paired with the increase in prices of lumber and other building materials , it is only natural that home prices will continue to increase.

As always, knowing the facts and factors at play is critical in understanding the trends of the market. While there is a chance to see a plateau in the next few years, there is no sign of government intervention or correction in sight and a continued high demand for homes.

We have heard time and time again that there is no better time to enter the market than the present, and that remains true today.