Back in January, I wrote some predictions about what would happen to real estate in 2016.
As the year is drawing to a close, I thought it would be fun to look back and see how I did with my predictions.
I first looked at what I predicted would happen in 2016 outside of real estate. I am afraid to say I was a bit off when it came to these predictions:
- The US will have another historic election and an informed, engaged voter turnout will result in their first female president-elect.
- Britain will continue to strengthen their ties to the EU and adopt the Euro as their currency.
- Prince, David Bowie and George Michael will finally unite in a supergroup called Pribow Geo.
When I looked at what I had predicted for real estate, this is what I said would happen.
Across the GTA, housing prices will continue to rise. Semi-detached homes will see the biggest average price increase as the increasing unaffordability of detached homes pushes buyers down the property ladder. Condos will absorb the lower budget buyers and see modest (under 5%) gain over the year. As mortgage rates rise by small amounts (up half a percent this year), some buyers will postpone their purchase until they can better afford what they want, keeping rental rates steady.
Let’s take a look what actually happened.
Across the GTA, housing prices will continue to rise.
Well, I nailed this one.
The average sale price in the GTA in January was $630,193. As of our latest data, the average sale price in the GTA has risen 23%, to $776,684.
Semi-detached homes will see the biggest average price increase as the increasing unaffordability of detached homes pushes buyers down the property ladder.
Did I mention I got my first prediction right?
Semi-detached homes were actually 3rd out of the four housing types when it comes to biggest average sale price increase. They went up by 19.8% across the GTA over the last year. Pretty impressive, but still beaten out by detached homes, which went up 27.6% and even townhouses, which went up by 23.7%.
Condos will absorb the lower budget buyers and see modest (under 5%) gain over the year.
I hate to keep harping on this, but my first prediction was bang on.
I suppose in a sense I was right here, as condos definitely absorbed lower budget buyers. My prediction for modest gains of around 5% was way off though, as the average sale price for a condo in the GTA went from $386,526 up to $443,586 now, a jump of about 15%.
As mortgage rates rise by small amounts (up half a percent this year), some buyers will postpone their purchase until they can better afford what they want, keeping rental rates steady.
For this prediction, I was right in the overall sense but wrong when it came to the details. Which is a fancy way of saying I was wrong.
In January, 2016, mortgage rates looked like this.
- 5 Year Fixed Term Mortgages ranged from 2.69% to 2.99%, with the most common rate being 2.74%.
- 5 Year Adjustable Rate Mortgages ranged from Prime minus 40 to Prime minus 10, with the most common rate being Prime minus 35.
As of December 28, 2016, mortgage rates looked like this.
- 5 Year Fixed Term Mortgages ranged from 2.59% to 2.99%, with the most common rate being 2.69%.
- 5 Year Adjustable Rate Mortgages ranged from Prime minus 55 to Prime minus 10, with the most common rate being Prime minus 50.
So, rather than going up a small amount, mortgage rates continued to remain low, and right now are even a bit better on average than they were a year ago.
I was right in that a number of buyers have postponed their purchases until they can better afford (or get approved) the home they want. This was due in large part to the continued growth of the market and the changes in October and November of 2016 to the mortgage rules, which made it harder for some buyers to qualify for mortgages.
Rental rates have actually gone up across the board as fewer people buy and fewer investors bring rental properties onto the market. (Read this article for more details on that as well as how the mortgage rule changes made it harder to get approved.)
When I look at the latest rental market report, we see a decrease in the number of units leased and a corresponding increase in the average rent. Bachelor, One Bedroom and Two Bedroom apartments all went up by around 8%, and Three Bedroom apartment rents saw a big bump, going up by over 13%.
As I look back on my predictions for 2016, I think I can be proud.
Proud that I had enough integrity to not go back and change the predictions this morning when I realized how poorly I did.
I suppose that my predictions were modest when it came to what actually happened. I thought we would see continued growth but didn’t predict it would be such a massive increase in average sale prices.
I tend to be somewhat conservative in my predictions because I think it is important that my clients don’t start to rely on such unusual growth in the housing market. Make no mistake, these huge year over year increases are unusual and there will come a time when we return to a more balanced real estate market.
I will take another try at predicting what will happen in real estate within the next few weeks, so stay tuned for that!
If you or someone you like wants to work with a Realtor who hopes for the best but prepares for the worst, please give me a call! I’d love to be responsible for what comes next.
Whenever you have windows in the roof, make dormer windows which are high enough to stand in, and frame them like any other alcoves in the building.
As house prices in the GTA continue to rise, I see many homeowners trying to do more with what they have. The cost of buying a larger home is often out of reach, even when more space would be very useful for a growing family
When staying put makes more sense than moving, homeowners look down or up for additional space. Digging out and finishing basements is popular but can be very expensive. On a number of occasions, I have seen homeowners who went up instead of down – turning an unfinished attic space into additional living space for the family.
Such renovations often involve the building of full size dormer windows, as the space to stand at a window and the amount of light such larger windows let in makes the new space much more appealing.