Investors fuel Toronto real estate to new record-high prices

An old Scarborough home listed for $3 million pretty much sums up this market: it's not for people who want to live here


Toronto real estate prices went through the ceiling again in November as investors scoop up properties and continue to inflate the market.

The average selling price reached $1,163,323, according to the Toronto Regional Real Estate Board (TRREB), which is a 21.2 per cent spike over this time last year.

TRREB also notes that supply dipped, with new listings falling 13.2 per cent year-over-year. Detached homes in the 416 averaged $1,807,983. Semi-detached homes were up to $1,431,988. The average for Toronto townhomes are nearly cracking the seven-figure district at $981,759. While all those condos in the sky aren’t doing much to bring the prices down. They averaged $745,951.

In this market, a lot of sellers aren’t even bothering trying to lure in people who want to actually live in this city. Instead, they’re looking for investors. It’s not uncommon to find detached homes selling at ungodly prices, expecting investors to rush in expecting to cash in on escalating prices and demand.

Take for instance the nearly $3 million listing for an old three-bedroom Scarborough home at 752 Midland. The listing provides no pictures because the sellers expect investors and developers to be lured in by the large lot that could potentially house new townhomes or a midsize apartment. They’re leaving it to the buyers to check if any of that is even possible.

Most potential investment property owners are flocking to the relatively more affordable condo market. They can easily find realtors directing them towards pre-construction condo sales, promising similar price growth that we’ve seen in the last five years, which would simply leave even more people priced out.

Last month, Bank of Canada deputy governor Paul Beaudry said that investors are leveraging their equity to purchase investment properties, relying on the already sky-high prices in Toronto real estate to escalate further when immigration opens back up.

But investors are driving up the prices by competing against first-time homebuyers for limited supply. According to Teranet’s market insight report, a quarter of the people who bought homes from January to August were multiple property owners.

Earlier in the year, economists at RBC and BMO warning made proposals that would ward off some investment property buyers fueling a housing bubble. Their proposals included doubling the minimum down payment for investment properties and increasing capital gains taxes for investors and speculators. But representatives in the real estate industry continue to dismiss proposals that could hurt commissions.

“For far too long, governments have focused on short-term band aid policies to artificially suppress demand,” says TRREB president Kevin Crigger, in a statement predictably calling for less red tape and more action to build more housing. 

“Governments at all levels must take coordinated action to increase supply in the immediate term to begin addressing the supply challenges of today, and to work towards satisfying growing demand in the future.”

@justsayrad

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