The Toronto real estate market experienced strong year-over-year growth in both unit sales and average price for July 2014. Unit sales were up by 10% coming in at 9,198 versus 8,367 in July 2013. Average price was $550,700 which was 7.5% greater than the same month last year.
What is Driving the Strength in the Housing Market?
Population Growth and Household Formation
Fundamentally, the most important thing driving the housing market over the longer term is population growth and household formation. These factors are very favourable for the Greater Toronto Area given that about 40% of new immigrants to Canada settle in the GTA. This represents a gain in population of over 100,000 people, roughly adding a new city the size of Ajax to the GTA each and every year.
Over the shorter term, two key factors drive the housing market: employment and interest rates.
Employment in the GTA has been roughly growing at the rate of the growth in the labour force for some time now. Recently, there was some very positive data relating to the strength in the U.S. economy and the resulting increase in net exports of goods and services, many of which are produced in the GTA; the trade deficit in June declined by over $300 million going down to $468M from May 2014. This is a positive for employment growth and the housing market.
Finally are interest rates. Once someone has a job, they then need to understand how much they can afford in terms of monthly payments. Interest rates, particularly the most popular 5 year fixed term mortgages are at all-time lows. You can now get a 5 year fixed rate mortgage for less than 3.00%. This continues to be a very strong factor in the current housing market.
Should your mortgage be coming up for renewal in the next while, please call me and I can refer you to a professional mortgage representative to ensure that you get the best mortgage terms possible for your renewal.