Sep 1 | Posted by Barry Cohen

No Chance for a Toronto Real Estate Bubble

Real estate market analysts and economists have warned of an impending Toronto real estate bubble burst for months. As GTA home values continue to rise, their dire warnings and call for government action increase in frequency. Local real estate experts know the likelihood of a dramatic crash in home values is small and their warnings unfounded.

One way the health of a real estate market is assessed is by the months of inventory, or how long on average a listing is on the market before it sells. Six months inventory is considered an equilibrium between buyers and sellers. Three years ago, Toronto’s months of inventory averaged 4.5 months, favoring the buyer. Since 2013, the new listing months of inventory has continuously declined. In January 2016, the market averaged an one month supply, indicating a highly competitive buyer’s market.

Despite a 10% average rise in sales, inventory continues to decline. Where is the new inventory in Toronto? A less educated analyst might say property owners are holding onto their investments as they continue to increase in value waiting for the market to peak. Others believe that owners are not selling for fear of not finding a property to buy in such a tight market. The truth is the inventory simply isn’t there. The increase in demand cannot keep up with the available property in the GTA. Tight housing restrictions have slowed the pace of new development in all market segments.

Demand will continue to drive average sale prices up and that desire for Toronto real estate is not expected to ease anytime soon. Toronto real estate trends predict housing demand will outweigh inventory well into the next year. 

Fear of a real estate bubble is unwarranted at this time. Even if new inventory flooded the market tomorrow, real estate values change slowly giving savvy investment buyers time to react. The Barry Cohen Group is proficient at advising buyers and sellers on the real market trends. Connect with the team today for the latest on Toronto real estate developments.