Jan 21 | Posted by Barry Cohen

We’re only a couple of weeks into 2016 and the chatter has already started up about the housing market “bubble” in the GTA and it’s imminent crash.  While it’s true that prices and demand for properties has been on a consistent upward climb for many years, I just don’t see the market heading for disaster for a number of reasons.

It’s a simple economics fact that the market for anything is driven by supply and demand; when demand surpasses supply - prices go up and vice versa (remember Cabbage Patch Dolls).  In the GTA the demand is greater than the supply and has been for a while, so it is only natural (and normal) that prices would escalate.  A quick trip to the downtown area makes it abundantly obvious that there is little or no vacant land waiting to be developed.  

The population of the GTA continues to grow, and these newcomers need a place to live, preferably near schools, parks and amenities.  The highest demand for housing remains in the single-family category, which coincidentally has the lowest inventory, resulting in prices breaking the million-dollar boundary last year in the 416 geographic region.

The Toronto housing market is certainly not immune to downturns.  If you remember back to the 1990’s recession our market took a decided downswing, and another less severe dip in 2008.  Housing, like other commodities, is vulnerable to Canadian and even global economic shifts, but in both previous incidents the GTA housing market quickly rebounded.

Interest rates also have an affect on housing markets, not just in our area; but also across the country.  Canada’s top economists all seem to agree that interest rates will likely rise this year, but only very minimally, and certainly not enough to force homeowners to sell because they can no longer afford their mortgage payments.  Lending rates would have to substantially and quickly rise to have a negative affect on our housing market – and that is not on the economic radar for 2016.

The condo market was a bit tepid for a while, but has recently heated up according to statistics released by CMHC (Canada Mortgage & Housing).  First-time buyers who have almost been priced-out of the single-family home category are finding good value in the GTA condo market.  Many boomers are downsizing and giving up the sprawling family home for the ease and freedom of turnkey condo living, as a result condo prices have been on the rise, and are expected to remain on that trajectory throughout 2016.

One of the defining hallmarks of a housing market “bubble” occurs when speculators snatch up houses with the sole purpose of flipping them to make money.  This is definitely not the case with our market as our lack of inventory proves.  We hear time and again about purchasers entering into price wars for a home in the most desirable neighbourhoods, something speculators would not consider.  This in and of itself is evidence that the housing market in the GTA is not in bubble mode, and leads us back to supply and demand.

So as someone who has been involved in the Toronto real estate market for decades, I’m just not worried about the big “crash” that we constantly hear about.

If you are considering taking advantage of the busy spring market, I would be happy to provide you with a professional, accurate evaluation of your property’s current market value, answer all your questions, address your concerns and get your home sold quickly, for the most money and with the least hassle.