TD study says Toronto real estate prices to keep rising
Toronto homeowners should see about the same level of price appreciation in existing homes in the next 25 years as they have experienced in the last quarter century, once inflation is taken into account, a TD study says.However, the price gains in the city are expected to continue to beat the national average. Resale home prices in Toronto are forecast to rise more than 4% annually in the next 25 years, according to the TD Bank Financial Group report released yesterday.
The national average is expected to be less than 4% in comparison.
Still, the forecast for Toronto is below the nominal price gains of the prior 25 years. From 1981 to 2005 Toronto resale home prices hit 6.7% annually.
However, once inflation is factored in, real gains works out to be about 2.8%.
Nationally, the average annual increase in prices over the last quarter century has been 5.6%. After factoring in inflation, gains were 1.9%.
One reason for the slower price appreciation is the declining trend in inflation over the past several decades, says the bank. Since the mid-90s, the Bank of Canada has been aggressively fighting inflation and this should continue, the bank says.
History it seems, is bound to repeat itself based on TD’s study.
The principal determinants of housing prices include demographics, personal income growth, interest rates and supply, TD said.
The bank sees an increasingly aging population, expanded by immigration, particularly in the larger cities. Personal income is expected to rise, while interest rates are expected to stay low. The bank also is forecasting less new building in the future.
One important issue to remember is that location still plays a major role in determining housing price appreciation.
Cities are big generalities since you can have huge differences within neighbourhoods, so location can have a tremendous impact.
In the short run, housing price growth is cooling considerably in the Toronto market. Resale home prices should end up less than 5% higher for the year at the end of this year according to housing economist Will Dunning. Last year house prices increased by 6.7% and 8% the year before.
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