The real estate market in the GTA has performed very strongly in the first quarter of 2016 with both sales and prices rising. Sales in the first quarter and in the month of March were up by 16% from last year. This strength is also reflected in prices with average prices increasing by 12% to $688,181 from March, 2015. Prices for the first quarter rose by 14% from the same quarter last year.
With spring upon us and warmer weather around the corner, this strength will continue into the summer and into the balance of 2016.
So why is the market so strong?
There are three main drivers of the housing market: employment, interest rates and population growth / household formation.
Employment in the GTA and Ontario is being helped right now by the U.S. economy (greater imports of goods and services from Ontario), by the currency exchange rate (improved profitability and investment levels by Ontario firms that earn their revenue in U.S. dollars) and by increased household consumption (as a result of the wealth affect associated with rising real estate prices and by the stabilization and increase in Canadian equity markets from last year).
The second driver of the housing market, interest rates, are also strongly positive with the current discounted rate for a 5 year fixed rate mortgage running at about 2.70%. If you do not have a mortgage, what a great time to borrow and purchase an investment property.
Finally, the housing market is impacted by population growth and household formation. Each year, about 100,000 new immigrants move to the GTA from outside of Canada. Up until last year, the GTA had a net outflow of about 25,000 to 30,000 residents that moved to Alberta or British Columbia for work. This second trend has reversed in the last year with the decline in the oil industry. Not great for Western Canada, but positive for housing formation and the demand for rentals and purchases in the GTA.