Investment Condo & HST REBATE – What Every Investor Must Know
December 25, 2018
Arthur Berlin Podcast
01 – Mortgage Financing, Interest Rates & More with Arthur Berlin
January 22, 2019

Happy New Year ladies and gents and welcome to January 2019.

Since the new year has arrived, the most frequently-asked question any Realtor gets, including myself, is what we think will happen to the real estate market in 2019. I hate to disappoint you guys but I do not have a crystal ball which reveals the future and tells me where to invest my money. However, what I do have, is the Toronto Real Estate Board historical data which can give us a glimpse of what we could expect in 2019.

In this post I am going to give you my version of the Toronto Real Estate Market outlook for 2019.

To summarize 2018, it was a fantastic year for condominium investors. The average price for condominium apartment sales across the TREB market area was up by 8% per cent year-over-year. Yes – that’s right, the condo market is incredibly resilient and was able to withstand not only the stress test instituted in January 2018 but also 3 interest rate hikes.
The detached market took the brunt of the impact with overall prices dipping approximately 11% on average. As you can tell by the infographic included to the right, there was also a 13% drop of total listings entered on the MLS system and as a result we saw a total of 16% less transactions in 2018. This could be credited to a combination of factors some of which include homeowner’s reluctance to sell their home due to a great fixed interest rate they’ve locked in at, or the unwillingness to confront the significant value decrease of their freehold property. Remember, Spring 2017 saw incredible and unsustainable price appreciation throughout the freehold detached sector. It is only normal and healthy to see the prices adjust and retreat somewhat.

Now that we have a clear picture of what took place in 2018, let’s take a look into the future. The two biggest factors influencing market activity today in my opinion are: the stress test, and the interest rates. There has been little talk regarding the stress test and revising the qualification criteria or the qualifying rate. Buyers themselves have had a year to get acquainted with the stress test and learned to realign their expectations. With this is mind, the stress test will not make a significant impact in 2019 or cause markets to shift as it did in 2018. This leaves us with the Bank of Canada and the benchmark rate. At the last finance meeting that took place about a week ago on January 9th, BOC elected to stay put and keep the benchmark rate at 1.75%. The discussions centered around a slump in the world price of oil, a dip in Canadian oil, and decreased overall GDP growth in 2019. It is difficult to imagine that the interest rates will by increased further. Some analysts are even saying we could see a rate cut towards the end of the year! If this turns out to be true, you can expect the Fall market to be HOT. My bet is that interest rates will remain unchanged and stay at 1.75% for the entirety of 2019.

The way I propose we approach the forecast for the 2019 market is take a look into the history of Canada’s interest rates and see if we can find a similar trend to the one we experienced in 2018 – a year of significant interest rate increases followed by a year of stability. After carefully examining the interest rates over the past 20 years I am able to see that from January to July 2006, BOC increased the interest rates 4 times (In July 2006 the interest rate levelled out at 4.25% – more than double that of today’s rate). Late 2006 and throughout all of 2007 we saw nearly a year and a half of stable, unchanged interest rates. The images to the right will indicate TREB market summary for the entirety of 2007. We saw a year-over-year price increase of 7% for all home types.

As the famous quote by Carl Sagan reads – “To Understand the future we must study the past”. This is the approach I chose to take and will forecast that 2019 will be a year of modest price growth for all home types. Freehold market will recover but ever so slightly with appreciation of 2-4%. Properties over 1M will unfortunately continue to suffer due to the stress test and most of the appreciation will be attributed to homes under the 1M mark. The condo market will continue to be the driving force of the real estate market and I would not be surprised to see similar growth numbers to those of 2018 – between 6-8%. In pre-construction, small suites will continue to sell out immediately after launch, leaving builders with large 2Bs, 2B+D’s and 3B’s poised for a gradual selldown.

I am forecasting an appreciation of 5% on average for all home types in the GTA in 2019. Lets see if my prediction comes true in 12 months but in the meantime, Toronto Real Estate continues to be my choice for a safe, proven & reliable investment vehicle.