Home prices in Toronto are expected to rise by 3 per cent this year, according to a forecast by the National Association of Realtors.
While that’s lower than last year’s pace of more than 9 per cent, it’s still enough to raise the average price of a home in the city to $1.9 million, according the NAR.
That’s up from last year when it was $1 million.
Prices will likely continue to rise as builders and developers push more of the country’s homes to the market.
The city’s new home-building boom is expected to continue for at least another decade.
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The new-build boom is projected to keep growing.
That includes the $2.5-billion Ontario government has committed to building 6,400 new homes.
But the total of new homes being built in the province will likely drop further as builders look to build smaller, more affordable homes.
And that’s already happening.
Last year, developers in Toronto, Calgary and Vancouver began building less expensive homes in an effort to meet a national demand for homes with smaller footprint, according, to the NART.
With new housing comes a lot of competition.
That means developers have to do more with less.
And developers are seeing the impact of this on their prices.
In 2016, the average home price in Toronto was $732,500.
That was up by more than $100,000 from a year earlier, according a report by real estate website Zillow.
While the average house price in Vancouver was $824,900, it was down by $30,000.
It’s worth noting that prices in the other cities surveyed in the report were higher than those in Toronto.
While it’s unclear if this is a result of the economic downturn, or the city’s current housing situation, NAR’s John Hall says the city is starting to see a price appreciation in homes.
“People are really starting to look at this and they’re starting to realize that this is not sustainable,” he says.
But that doesn’t mean the boom will last forever.
“In many ways, the affordability is going to accelerate.
I think that will become more and more important as the housing market gets more expensive,” he said.
A lot of people in Toronto aren’t buying a house because they can afford to, he says, but because they’re trying to save for a down payment.
“And they’re not just buying a condo, they’re buying a home.” “
You’re going from a 30-year-old that’s sitting on a $5 million dollar house to a 30 year-old who’s sitting at $600,000,” Hall said.
“And they’re not just buying a condo, they’re buying a home.”
He also says the new supply of houses could keep prices down for years.
“There’s more supply than demand, which means prices are going up,” he explains.
The NAR predicts that as new homes come on stream, prices will likely go down.
That is because builders will be able to charge a premium to get a home built, because the home market is already flooded with older, smaller homes that have better resale values, he said, adding that builders may want to look elsewhere for a new home.
“I’m not going to see prices go down,” he added.
But even with the rising cost of buying a new house, it won’t be cheap.
The average price for a home with a 5-year mortgage is currently $1,917,000 in Toronto but could easily reach $1-million by 2025, according Zillows.
For comparison, that’s $3,000 more than the average monthly mortgage payment for a typical family.
And for new homes, the price tag for a $1-$2 million home in Toronto is expected in 2019 to be about $2 million.
The report says that by 2025 that number could increase to $3.3 million.
As builders are able to build more affordable houses, people will be more likely to buy.
And the number of buyers for those homes could keep rising, too.
“The supply of new home starts is not going away.
People are buying because they are seeing affordability is here,” Hall says.
“So it’s going to be a challenge for the builders to make sure they are getting a price on the market.”
The NART’s report is based on data from the most recent Canadian Mortgage and Housing Corporation (CMHC) Home Sales Reports, released on Tuesday.
CMHC is a part of the Bank of Canada, which manages the national mortgage market.