What a complete turnaround we have seen in the Toronto real estate market since the beginning of 2022. We started with one of the most competitive sellers’ markets in recent history. For buyers hoping to enter the market, the situation was pretty challenging.
Even if you had access to the finances to afford the soaring prices, precious few listings were available. Many people put their plans on hold indefinitely, from first-time buyers to downsizers and those looking to upgrade to larger homes. A few interest rate hikes later, and the market looks completely different. More listings are becoming available daily, and prices are lower than they have been in months. Conditions are finally favourable to buyers in Toronto!
Should you consider upgrading to a bigger house even if you don’t feel ready? If you think you might want more space in the next few years, there are many good reasons to act sooner rather than later.
Prices are Down, but for How Long?
Toronto housing values have been falling steadily since March. And just like we started to believe that the fierce seller’s market would never end, it now seems like there’s no bottom in the prices. However, history tells us this will not be the case.
Real estate values constantly fluctuate. Global events like inflation or the war in Ukraine will have an immediate impact, but falling prices won’t last long. Over time, housing values always increase, especially in a high-demand city like Toronto.
Upsizing your home can improve your life in so many ways, but it can also be a big decision. Here are some more informative posts that can help:
- Upsizing in Toronto? Here’s What to Know so You Don’t Overpay
- Another Real Estate Hike? What Will Happen to Toronto’s Market?
- What You Need to Know About Buying or Selling on the Waterfront
The Unprecedented Growth of Toronto Real Estate–Is it Sustainable?
According to the Toronto Regional Real Estate Board (TREBB), the average cost of a home in Toronto in 1998 was $218,815, which seems unbelievable today. By 2021, that had increased to $1,095,334, an average annual increase of 17% over 23 years.
Of course, those percentages are skewed by the rapid increase during the pandemic years, and you may think double-digit growth is unsustainable for the long term. However, the typical price in 2019 was $822,510 just before the housing boom, which still represents an average growth rate of 13%.
Housing values are down compared to earlier in the year but are still more than double what they were as early as 2012. Even if they drop again, it will likely be minimal, and there’s no reason to think housing values will not begin to appreciate again.
In fact, the average cost of a Toronto home has already increased slightly from August to September.
This could indicate that the market is starting to rebound as people adjust to the new reality, or it may simply be due to a busier Fall market. We can never know when prices are as low as they will get until they’ve already started to rise.
The Best Time to Buy or Upgrade
Since the market is so unpredictable, it may be better to rely on other factors to determine when it’s the best time for you to make a move. Your financial resources and personal goals are a better indicator of whether or not you should enter or reenter the market.
Since prices will almost certainly keep going up in the long term, the best time to act is as soon as you can. If you’ve been dreaming about more space and a bigger backyard and have the funds, the current market makes it an excellent time to act.
Ready to upgrade but not sure where to begin? Downloading our Move Up Guide is a great way to start!
How Will Higher Interest Rates Impact Your Decision?
A considerable part of Toronto’s real estate market growth has been the historic low-interest rates the Bank of Canada set to try to stimulate the economy. Now that rates are back up, it can be more challenging for buyers to get approved for the financing they need.
First-time buyers and those with issues in their credit history are often hard hit by rising interest.
As a current homeowner, you are less affected because you have been building equity every time you’ve made a mortgage payment. When you’re ready to upgrade, you have two advantages.
- Your current home is certainly worth far more than you paid for it. When you sell, you’ll have a significant amount of money to put toward your upgraded home.
- You will have to borrow less, making qualifying for a loan easier. You will also pay less interest over time, making your new home more affordable even at a higher price.
The Toronto real estate market is changing fast! Signing up for our newsletter is an excellent way to stay informed.
What if You Buy and then Prices Drop Again?
Many potential buyers are holding off on making their move because they’re worried prices will fall again after their purchase. It’s an understandable concern. No one wants to pay more than they should. If it were possible to get the timing perfect, everyone would buy when prices reach the bottom.
Unfortunately, perfect timing is rare in real estate. The good news is that you don’t have to worry about these minor fluctuations in price. Why? Remember that real estate values have been going up an average of 13% for over 20 years. Upgrade your home now, and you stand to earn a massive return on your investment over the long term.
What if the worst happens and appreciation levels fall to 7% (their lowest point in 20 years)? Even at that rate, you will quickly recoup any losses you incur from a temporary fluctuation in prices. And such a low appreciation rate is unlikely ever to happen again, given the demand for housing in Toronto.
Another factor to remember when considering whether or not to upgrade is that high-priced assets increase in value very quickly at these percentages. The more valuable your home, the faster your equity will grow as time goes on. By upgrading to a larger home now, you’re not just giving yourself the luxury of extra living space–you’re investing in your financial future and security.
Selling your home to upgrade during an uncertain market can feel daunting, but it can be the best decision you’ll ever make. Expert guidance is the key to a successful transition. Why not book a free, no-obligation meeting with us below?
