Toronto has been a real estate market to watch for a long time now, especially since 2012, but we have certainly noticed a fascinating trend since 2012 in the Greater Toronto Area (GTA). For those wondering what that trend is – it’s that the number of new listings is decreasing, which means that there are buyers competing for fewer houses that are up for sale.
There are only a certain number of unique low-rise homes up for sale, and that number is decreasing every year. We also now that this doesn’t count for duplicate listings, which is a tactic that many real estate agents use for listings that have been sitting for a certain period of time and that aren’t selling.
Why are new listings decreasing in the GTA so considerably?
The area has seen over 120,000 new “low-rise” homes completed over 10 years. For many cities with the population of Toronto, this might not be considered a large number, but you might think that it at least leads to an increasing number of listings, correct? That is actually not the case.
The truth is that it is very difficult to find an exact explanation for what is happening, and much more difficult to attribute it to one factor. However, we might learn more if we examine how the rental listings have changed over the same period of time.
For those who are unsure about the MLS, it is a platform utilized by real estate brokers and agents of all kinds to list rental properties. When we notice that the number of properties listed for rent has doubled, we can assume that the number of properties owned by these investors may have doubled.
It seems as though there are high net-worth individuals that are purchasing homes with the express purpose of renting it out. This is in addition to owning their home – as they clearly view the second property as an investment, and thus advertise it to rent.
For those wondering what it means – it’s simple: it means that a group of investors are instrumental in driving up the prices in Toronto, because they are purchasing property and then renting it out to others. As a result, there are fewer homes for sale than ever in the GTA, which pushes sales prices higher. This is somewhat good news for renters, however, since more rental listings than ever also means that there is more competition than ever, and more investors have to offer moderate rent prices to compete.
The data certainly supports this theory, as the average house price has increased by 64%, while the rent has only increased by 11% since 2012. This certainly shows that house prices are increasing while rent prices are not changing by a significant amount.
It should be interesting to see what happens in the future, since house prices are not increasing much in the GTA any more. This might lead to certain investors selling their properties, which might lead to new listings, which would change the real estate market situation in the GTA.
John Pasalis is the president and broker of Realosophy Realty Inc. Brokerage, which is an instrumental Toronto brokerage regards to pro-consumer advice and real estate analytics.
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