2011 Market Recap & Forecast for 2012

The Toronto Real Estate Market has recorded its second best year on record under the current Toronto Real Estate Board ( TREB ) boundaries.  The total sales for 2011 amounted to 89,347 sales, up 4% in comparison to last year’s 2010 figures.  2011 recorded above average sales in activity in The Greater Toronto Area.  As mentioned in my December 2011 Recap, there were 4,718 transactions.   The average selling price in December was $451,436.  up the 4% compared to December 2010.  For all of 2011 the average selling price was $465,412. which is an 8% increase in comparison to the average of $431,276. in 2010.  It is interesting to note that in the last 10 years, 2001- 2011, home prices increased 90% in value, whereas in the previous 10 years, 1991-2001, the total increase was only 15%!  So what about the year 2012? What will happen to the selling prices of homes?  I think that although the Toronto Real Estate Board’s forecast is for a 4% increase in prices, I believe that they will be higher–perhaps as high as 8% – 10%.  The inventory of homes is still low, and there are more and more buyers looking for homes. It is basically supply and demand.

One example of the increase in real estate values in Toronto, is in the York Mills-Bridle Path Neighbourhood, that is part of TREB’s C12 new boundary division.  It also includes the St. Andrews, Hogg’s Hollow, Denlow ,Windfields and Lawrence Park neighbourhoods.  The average price for the year end 2011 was $2,095,668, which is a 15% increase from 2010′s average of $1,813,788.  Why the increase? Predominantely the influx of more luxury infill homes being built on larger lots, that builders have been buying up with older outdated homes on them.  The C12 Neighbourhood is one of the neighbourhood gems in the Greater Toronto Area predominately because of the larger lot sizes, good schools and access to major highways.  As a result, the price of the land has dramatically increased, and the selling prices have increased as well.

In the global real estate market, the only countries that are still growing are Japan, Brazil and China. There is a major concern as to the potential of a global recession based on the economic viability of the European and Greek governments. Politicians are working very hard to try to avoid a global recession, and because of this, the Bank of Canada’s concern over the economic situation will probably keep the interest rates at an all  time low.  One can currently get a 5 year mortgage at under 3% interest rate!  I don’t think that the Bank of Canada will change its interest rate until late 2013 and possibly into 2014.  It may fluctuate around 3% and stay under 4%  for the next year.  The biggest question is whether the rates, when they do start to rise, will rise quickly or gradually.  If it is quickly, then I see a HUGE problem occurring.  More and more houses coming back on the market as affordability may be in jeopardy as people can’t afford their homes.  The mortgage insurance rules, however, in the interim, may change and drop to a 25 year amortization rate instead of the 30 year amortization rate as is the norm currently. If this happens, those that cannot  be approved for the 25 year rate based on today’s calculations, and yet qualify to  buy a home at the 30 year amortization rate, may find themselves in trouble. 

The condo market is another area of  potential concern in 2012. In 2011 there was a 40% increase in the number of new units being built. Can we absorb the new units that will be built in 2012?  My thought…. probably.  Toronto is the Number One destination for new immigrants, as 78% of all new immigrants come to Toronto. As a result, with young adults coming into the work force, and new immigrants starting out, a condominium purchase is the first logical step into the Real Estate Market.  In many cases the cost of carrying a home is similar to the current rental rates, which encourage more people to really look at owning a home.

I don’t have a crystal ball. It will definitely be interesting  to see what actually happens to the economy and to the Real Estate Market when I do my Toronto Real Estate Recap in December 2012.

If you have any questions about  The Toronto Real Estate Market Recap for 2011 & The Forecast for 2012, please feel free to contact me,  by email: susan@susanmacarz.com