As home prices within the GTA have risen over the last year to historic highs, there is a lot of focus on the lack of supply within the market. Politicians, industry associations and media sources have made the relative lack of supply in our real estate markets well known.
The key word in the above sentence is “relative”, as while we certainly don’t have enough supply to keep up with demand, it is wrong to suggest that our levels of supply are the only lever pushing prices up. The forces of supply and demand impact price together and we feel that there has not been enough focus on the demand aspect of the equation.
The reason for this is because assessing demand is harder than assessing supply. We can easily look to see how many homes are currently for sale, how many homes are being built and other measures of supply. On the demand side, we are forced to use more theoretical numbers, such as population, mortgage pre-approvals and other imprecise or incomplete metrics.
Put simply, it is hard to know how many people are interested in buying homes at a given point, and we can only partially assess demand by looking backwards, as the number of sales is not indicative of everyone who wants to buy, merely those who managed to buy.
We looked at the number of sales for both freehold homes as well as condo apartments across the seven geographic areas within the GTA – Toronto, York, Peel, Halton, Durham, Simcoe, and Dufferin.
When we analyzed the results, one thing became very clear. We have, within all seven areas in the GTA, more sales taking place than we have ever seen. In order for these record high sales to take place, we need both record high numbers of sellers (the supply side of the equation) as well as record high numbers of buyers (the demand side of the equation).
Let’s get into the numbers so you can see exactly how this idea of low supply is not the whole picture.
First Off, Freehold Sales
Here’s the number of freehold properties (i.e. not condominium properties, but detached, semi-detached and townhouses) that sold in each of the seven areas over the past five years.
The green numbers are the highest in the area in the past five years and the red is the lowest number of sales in the past five years.
Here are the key aspects we can extrapolate from a review of this data.
- 2021 was, without exception, the busiest year for home sales in the past five years, and in fact, in recorded data.
- The average increase in number of sales across the whole GTA was up 20%, going from about 72,000 sales in 2020 to about 87,000 in 2021
- York saw the biggest increase, going up 27% on a year over year basis
- Dufferin saw the smallest increase, going up only 10% from last year
- 2018 was the slowest year of the past five years for all areas in the GTA
The most interesting aspect of this data is that, on its own, it appears to say it’s never been “easier” to buy a home across the GTA. The reality is more complex, in that from our work with buyers who are having trouble finding good options, it has been far from easy to buy a freehold home in 2021.
The key point that comes from this data is that buying a house isn’t hard because there isn’t “anything” for sale. We’ve got historic high levels of freehold sales taking place, which requires historic levels of available inventory. It’s hard to buy despite this, which tells us that we have even higher historic levels of demand.
What about condo apartments?
When we look at condo apartment sales that sold in each of the seven areas, the low end is a bit different, but the results for 2021 are the same.
Here’s what we learned from reviewing this data.
- 2021 was also the busiest year for condo apartment sales in the past five years and recorded history.
- The average increase in number of condo sales in the GTA as a whole was up a staggering 44%, going to just over 34,000 in 2021 compared to under 24,000 in 2020.
- Dufferin was technically the area with the biggest increase, going up 53% year over year, but given the small number of condo apartments in the area, we’re going to say Peel region was the biggest winner, with 50% more condo sales in 2021 than in 2020. Toronto was just behind with a 48% year over year increase.
- Durham saw the smallest increase, up only 8% compared to last year.
- We see much more inconsistency in the condo market history across the GTA. While freehold homes all saw the lowest levels in 2018, we saw the COVID impacted markets of 2020 strong impact the condo markets in Dufferin, Peel and Toronto. Overall, 2020 was the worst year of the past five years for the condo market in the GTA, with about 10,000 fewer sales than this year.
The key point from this data is that the condo apartment market is booming again after the impact of COVID on sales in 2020. We know that more and more buyers who have been priced out of the bottom end of the freehold house market have turned to condo apartments as the only “affordable” option and we saw record high levels of condo sales in 2021 as a result.
As our months of inventory have shrunk despite record high level of sales, we can confidently state that demand is exceeding supply in all markets in the GTA. While we do not have the supply do meet demand, this is far different from saying we have far less supply than is normal. In fact, we have higher levels of supply than ever before, but when demand is even higher than these historic supply levels, it still feels like nothing is available.
If you’re looking to buy or sell in the new year, you need to work with agents who understand market dynamics and what is going on for your home, in your neighbourhood, in your town. If that sounds appealing, get in touch so we can talk further. We promise we can make it happen.