There is a persistent housing supply deficit in Canada and so the amount of homes available for sale right now in Toronto is the lowest it has ever been in Canadian history.

 Data from the Canadian Real Estate Association, revealed that in January 2022 only 2 months of inventory were available on the market, and it was predicted then that based on demands for houses,  Canada would probably be entirely sold out of homes if no new units were listed. The fact is that the present supply deficit of housing won’t disappear until new supply is added to the market. In light of this, low inventory continues to constrain the market.

 It must be noted that the national historical average for housing inventory is normally  5 months. However from the year  2020 to present, the inventory has vastly declined. For instance, in November 2020 the year-to-date average was 3 months of inventory, however in 2021 this inventory fell to 2.

 In 2020 Scotiabank reported that Canada had approximately 424 housing units per 1000 Canadians. When this is compared to other G7 countries which at the time had 471 housing units per 1000 residents, Canada would need another 1.8 million homes to catch up to the G7 average.

 Now that the children have resumed school attendance, the coronavirus pandemic has passed its peak, and lockdowns are over, it is predicted that a lot more inventory is expected to hit the market.

 What does this mean for potential sellers in Toronto?

 Sellers can now take advantage of the present market conditions as now might just be the best time to list in all of 2022. Reasons being, since the supply of houses are low on the market presently, such market conditions are creating the highest demand, and the most intense pricing pressure so far in 2022. Buyers are aware of this and so they are shopping and putting in offers. Additionally, it is anticipated that price growth will continue throughout 2022.

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Toronto boasts a great standard of living, so it comes as no surprise that Toronto’s real estate market is one of the most lucrative worldwide. While the demand for real estate in Toronto continued to increase prior to and during the coranavirus pandemic, inventory tightened. This resulted in a heightened increase in prices way beyond what coud be deemed as normal.

At the onset of the coronavius pandemic, there was a two months respite in the Toronto real estate market, however detached and semi-detached residential properties have earned monumental gains. Condominium prices in Toronto fell due to the influx of supply. This left new homebuyers stuck with negative equity. Condominiums are however now experiencing a resurgence.

Experts are now postulating that the Toronto real estate market is returning to pre-pandemic levels, however there are still record-high valuations. Essentially, what the Toronto real estate market is experiencing these days are a lack of supply, steady demand, and high prices. This has resulted in increased competition among buyers.

With inter provincial migration, demand continues to be unwavering. Additionally, it has been forecasted that Toronto’s real estate market will remain strong throughout 2022. It is also expected that Toronto could be aligned for further long term growth given a relaxation of covid-19 restrictions, a rebounding condo sector, increased detached properties and the competitive nature of homebuyers in the area.

Another critical factor impacting Toronto’s  real estate market these days is interest rates. Toronto, like many places worldwide is experiencing increased annual inflation rates. Borrowing costs could therefore increase should central bank decide to increase same. This will result in buyers having fewer options in the Toronto real estate market nowadays. For instance, with an increase in borrowing costs, homebuyers will no longer be able to expand their real estate choices, such as purchasing larger properties.

The average price for a home in Toronto is approximately $1 million, so an increase in the mortgage stress test could prove challenging for many homebuyers to be approved for a mortgage to purchase a home in Canada’s largest city, bearing in mind that  a family’s maximum affordability could decline to $618,000.

Research has shown that the real estate market in Toronto was overvalued by approximately 40 per cent in 2021. This pretty much double the national average. Those persons expectant of a possible crash of Toronto’s real estate market in the future, to more affordable levels may be disappointed, since the numbers are forecast to hold steady in 2022 and beyond. This is clearly bad news for new homebuyers. Alternately, those persons who are looking to sell a Toronto property this year can expect to enjoy the same generous profits sellers did last year ( in 2021).

From inadequate inventory levels to bidding wars, there are a multitude of factors that still supports elevated pandemic-era prices. For first-time homebuyers, this reality of sky-high home prices may be enough to forget about purchasing property on the Toronto real estate market all together. However, those selling property in Toronto will certainly enjoy generous profits.

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