Home prices in the Greater Toronto Area (GTA) are on the rise again, with the median price of a two-storey detached home expected to increase 4.5 per cent year-over-year in 2020, finishing the year off at nearly $1.03 million.
The median price of a condominium, meanwhile, is forecast to increase six per cent to $600,000, according to the Royal LePage Market Survey Forecast. “Inventory is critically low and it is possible that we could see a return to accelerating high price appreciation in the near term without new supply becoming available,” says Kevin Somers, Chief Operating Officer, Royal LePage Real Estate Services Limited. “Areas such as Richmond Hill and Markham, which were among the hardest hit by the recent market correction, have already shown signs of a recovery, while areas closer to the city centre are showing significant momentum heading into 2020.”
The national picture suggests home prices will appreciate at single-digit rates in most regions. The aggregate price of a home in Canada is forecast to rise 3.2 per cent year-over-year to $669,800 in 2020. The median price of a condominium and two-storey detached house is projected to increase 3.6 per cent and 3.1 per cent to $506,100 and $785,400, respectively.
Healthy buyer demand is one of two factors credited with driving those numbers upwards. A segment of potential homeowners who put home purchasing on hold beginning in January 2018 because of the introduction of the mortgage stress test started returning to the market in the second half of 2019, driving competition and demand, Royal LePage explains.
Canada’s healthy immigration rate is another significant driver. According to the Royal LePage Newcomer Survey released in October 2019, newcomers are expected to purchase one in every five homes on the market over the next five years. They have high consumer confidence in Canadian real estate (86 per cent) and arrive with savings to put towards the purchase of a home (75 per cent).
Between 2014 and 2019, the national median price of a condominium increased 48 per cent, but most of Canada is seeing a shift in demand from condominiums to detached houses as millennials aged 26 to 32 – the largest cohort within the powerful millennial consumer demographic – is looking for more space and a yard.
“With kids in hand and dog on leash, these parents are now eyeing the suburbs that their baby boomer parents so coveted,” says Phil Soper, president and CEO of Royal LePage. “We predict that the period of disproportionately higher price appreciation in the condo segment is drawing to a close as interest in detached homes is reborn.”
Condominiums will remain in demand in regions where affordability restricts choice of housing types. While many young families are growing out of their condominiums, moving into a larger property is not an option that many can afford, Somers reminds.
The First-Time Home Buyer Incentive may benefit single first-time condominium buyer but is unlikely to benefit buyers looking for a property suited for a family unless modifications proposed in the Liberal election platform increasing the qualifying purchase threshold to $800,000 take effect, he notes.