A handful of Ontario houses have been the subject of online conversations as of late.
The homes -- and the Twitter banter -- share one common trait: nobody can believe they sold for their final price tag. The bottom line is that a lot of very normal, typical, basic, etc. Ontario houses in historically affordable cities are selling for prices that were once reserved for the luxury market in their region's priciest neighbourhoods.
In Toronto, where the average price for a single-family home is now over $1.1M (a figure that includes houses, townhomes, and condos), sky-high price tags are nothing new. The city's house-hunters will be hard-pressed to find a detached home with half-decent interiors (i.e. not in need of imminent renovations) for less than $1.7M. Even a tiny old bungalow in need of a major facelift is now $1M in the infamously expensive city.
While prices are higher than ever, buying a home in Toronto has stretched thin the pay cheques and bank accounts of first-time homebuyers for years now -- even those with decent paying jobs. That's no surprise.
But -- in a seemingly inevitable ripple effect that's been further compounded by a newfound remote work culture -- it’s becoming more difficult than ever to find a single-family home for less than $1M in Ontario's smaller cities too. From smaller (but still big) GTA cities like Mississauga, to further away locations like Hamilton and Waterloo, increasingly unattainable home prices are becoming the norm across the board -- especially as buying a home in Toronto becomes a pipe dream for more people.
Judging from the past few weeks, it doesn't take long for some of these aforementioned homes, and their shockingly steep price tags, to make their way to social media. Once posted, the reactions can vary from mockery to defeat to total disbelief.
The year kicked off with the sale of a completely basic cookie-cutter home in the Kitchener-Waterloo for over $1.2M. Then, in Durham Region, it was Oshawa’s time to shine in the social media spotlight with the near $1M sale of a freehold townhouse. Not to be outdone, a home in nearby Bowmanville recently found its way to social media following its $1,605,000 sale -- after selling just 30 months prior for $794,000 (with no upgrades made).
East of Toronto, Durham Region -- once seen as an attainable and affordable alternative to the big city market for middle class families -- has seen prices climb like never before. Local Durham realtor Zain Jafrey says he’s not surprised by the recent home prices. Like many parts of the country, the region is characterized by extremely low inventory and unwavering demand.
“Durham Region was one of the most under-appreciated real estate markets within the GTA prior to the pandemic, and because of relative affordability it has been catching up in terms of average price with the other regions,” says Jafrey. “There have been almost no properties available on the market, and those that are for sale are getting 50 to 100 showings and dozens of offers. This just shows that buyer demand is still strong within the Durham Region.”
Further from Toronto, the Kitchener-Waterloo market is also on fire.
“In December, the average price of a detached home surpassed the million-dollar milestone for the first time in the Kitchener-Waterloo market. While this number is shocking to many, we knew this day was coming," says Megan Bell, president of the Kitchener-Waterloo Association of Realtors. "In our market, the months of inventory reached an all time low of 0.2 months of inventory last month, and has been extremely low for fourteen consecutive months. Outside the Toronto CMA, Kitchener-Waterloo had the distinction of being the tightest market in all of Canada during the 3rd quarter of 2021, and the third lowest inventory overall.”
Of course, the story of low supply isn't just the case in Ontario. In fact, across the country, the inventory of homes for sale fell to an all-time low, according to the Canadian Real Estate Association (CREA). The number of newly listed properties for sale fell by 3.2% month-over-month on a seasonally adjusted basis in December to 68,252 listings -- resulting in the tightest market conditions ever recorded, says CREA.
While some would-be first-time homebuyers may have lofty dreams of a bubble burst and subsequent price drop in Ontario’s housing market, this likely won’t happen -- even in the event of Bank of Canada rate hikes -- thanks in part to this relentless lack of supply, especially in the GTA. Demand only continues to outpace supply like never before. And the return of widespread immigration will only compound this -- both in the GTA and in surrounding areas.
"Communities outside of the GTA definitely have seen some of the most rapid growth in house prices," says John Pasalis, president of Realosophy. "More importantly, when we see home prices growing 40% per year, the right response is not to celebrate this and assume this is completely rational and simply due to a 'lack of supply.' We should be concerned about how rapidly home prices are rising, this type of price growth usually leads to more volatility in the future."
Pasalis suspects we will see the housing market start to cool by the second half of this year. "But, by cooling, I mean a less competitive market -- not a decline in prices," says Pasalis. "I'm not convinced prices are going to fall (at least not by much) in 2022; the federal government still has plenty of tools to keep the housing market booming."
The ramifications of this $1M home reality will undoubtedly impact everything from lifestyle and career choices -- for example, whether or not to have kids, or to follow the pay cheque over the passion in the career department (we may see fewer freelancers and entrepreneurs) -- to the changing nature of homes of the middle class once families and condos become the norm.
The solution to cool the market, says TRREB’s Chief Market Analyst Jason Mercer, is to increase supply -- something that’s not always as simple as it sounds, due to an infamous abundance of red tape.
“Tight market conditions prevailed throughout the GTA and broader Greater Golden Horseshoe in 2021, with a lack of inventory noted across all home types. The result was intense competition between buyers, pushing selling prices up by double digits year-over-year,” said Mercer in TREEB’s December market report. “Looking forward, the only sustainable way to moderate price growth will be to bring on more supply. History has shown that demand-side policies, such as additional taxation on principal residences, foreign buyers, and small-scale investors, have not been sustainable long-term solutions to housing affordability or supply constraints.”
Whatever the solution, the problem with prices persists. And with it, a lot of would-be first-time homebuyers are losing sleep across the province. But hey, at least people have something to tweet about.