Toronto Real Estate Board President’s col­umn as it appears in the National Post

I would like to take this oppor­tu­nity to wish you all a Happy New Year. We have just crossed the thresh­old into 2010 and I think it is impor­tant to look back on the events that impacted the Toronto real estate mar­ket in 2009 and also con­sider what the future holds.

Last Thurs­day, the Toronto Real Estate Board released MLS fig­ures for Decem­ber resale home trans­ac­tions in the GTA. There were 5,541 total trans­ac­tions, with an aver­age price of $411,931. The Decem­ber results capped off what turned out to be a very impres­sive year.

Sales increased 17% annu­ally to 87,308 – the sec­ond high­est level of sales under the cur­rent Toronto Real Estate Board bound­aries (the record of 93,193 was reached in 2007). Aver­age price for the year climbed to $395,460 – a 4% increase over 2008. How­ever, sim­ply look­ing at these num­bers on their own masks the inter­est­ing ride we took over the last year.

In the first quar­ter of 2009, Canada was in a reces­sion and exist­ing home sales and prices suf­fered. In fact, sales had been drop­ping through­out 2008. Accord­ing to Jason Mer­cer, the Toronto Real Estate Board’s Senior Man­ager of Mar­ket Analy­sis, the bal­ance of the hous­ing down­turn in the GTA actu­ally took place in 2008:

“The real estate mar­ket was and is a lead­ing indi­ca­tor of chang­ing eco­nomic con­di­tions. As we moved through 2008, Cana­dian con­sumers were hear­ing more and more bad news regard­ing the dete­ri­o­rat­ing state of the US econ­omy and the prob­lems this would pose for Canada. House­holds, unsure of what the future would hold in terms of employ­ment and income, put their home pur­chas­ing plans on hold well in advance of reported GDP and employ­ment declines. Essen­tially, down­ward trend­ing home sales reflected erod­ing con­sumer con­fi­dence,” said Mercer.

With this back-drop, many peo­ple were sur­prised to see a strong rebound in resale hous­ing demand com­mence in the late spring of 2009 when unem­ploy­ment was still ris­ing. Mer­cer fur­ther sug­gests that the quick recov­ery made a lot of sense and, in fact, was a key dri­ver to broader eco­nomic recovery:

“The Bank of Canada reduced inter­est rates to record lows in response to the eco­nomic down­turn. This mon­e­tary stim­u­lus had the desired effect. House­holds that were con­fi­dent in their employ­ment sit­u­a­tion moved quickly to take advan­tage of the afford­able hous­ing mar­ket in the GTA. The spin-off con­sumer spend­ing on housing-related items like fur­ni­ture, home improve­ment prod­ucts and ren­o­va­tion ser­vices cer­tainly helped eco­nomic recov­ery,” con­tin­ued Mercer.

With broader eco­nomic recov­ery seem­ingly in place, what will the future hold for res­i­den­tial real estate in 2010? I asked Jason Mer­cer to com­ment both on the short-term and the long-term prospects in the Toronto area. Here is what he had to say: “The big story in 2010 will be list­ings. Homes avail­able for sale were in short sup­ply dur­ing much of 2009. As home own­ers react to strong sales and price increases seen in 2009, list­ings will increase over the next year. With more choice in the mar­ket, annual aver­age price growth should mod­er­ate into the sin­gle dig­its,” said Mercer.

“Long-term prospects remain pos­i­tive. Sus­tained demand for own­er­ship hous­ing is based on pop­u­la­tion growth, which in Canada comes from immi­gra­tion. The GTA remains Canada’s sin­gle great­est ben­e­fi­ciary of immi­gra­tion. With Toronto’s eth­nic, cul­tural and labour mar­ket diver­sity, this should con­tinue. Many new­com­ers will even­tu­ally find their way into the home own­er­ship mar­ket, help­ing sus­tain long-term growth in sales and prices,” con­tin­ued Mercer.

I know we will all be watch­ing the eco­nomic sit­u­a­tion closely in the com­ing year, includ­ing changes in the hous­ing mar­ket. I look for­ward to dis­cussing hous­ing mar­ket trends with you through­out 2010.

Tom Lebour is Pres­i­dent of the Toronto Real Estate Board, a pro­fes­sional asso­ci­a­tion that rep­re­sents 28,000 Real­tors in the Greater Toronto Area.

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