2020 Real Estate Market Report

1 The yield curve and its possible inversion will not lead to a recession and will have no impact on the economy (overall rates are already low).
2 A minority Government will lead to increased spending to stimulate the economy. Toronto and the GTA will lead economic growth again.
3 In 2019 we entered the year with a ‘balanced’ market. In 2020 we will start the year with a ‘sellers’ market.


1 For those in the industry, the focus is always on sales numbers. For 2019, we forecast 87,000 units when everyone else was much lower. We turned out to be correct with a year-end estimate of 89,000 units. Our estimate was based on sales per adult population. The long-term average for our current population is about 93,000 units. We think final sales will be 95,000 units reflecting pent up demand from 2018.
2 For the public, everyone wants to focus on prices and in particular price increases over 2019. Economists come up with a single figure for the GTA when in reality this market represents 20-25% of all sales in Canada. Hence, you need to look at a number of sub markets. 
3 Price increases for 2020 will range from 1% to 12+% depending on the property and its location. See Figure 2.
4 The possibility of a Real Estate Bubble in 2020. NONE. Price bubble theorists talk about the average real estate price versus the average income of the population. Tracking this figure over 20 years suggests that Toronto is in trouble. But there are three reasons why this figure is no longer meaningful. First, it was based on an economy where most people were employees. Today, we have a significant self-employed population whose income is difficult to measure. Secondly, the number of non-resident buyers with no income in Canada is significant (many also send money to family in Toronto to buy). Finally, we are seeing a generational wealth transfer from ‘baby boomers’ to their children to help them buy.
So, what is a real estate bubble and how does it burst (price crash)? At some point, demand decreases or stagnates at the same time supply increases, resulting in a sharp drop in prices—and the bubble bursts. Has demand for housing in Toronto dropped? No, we have about a 100,000 people a year moving to the GTA and that is not stopping in 2020. In fact, the Government wants even more immigration to Canada and most come to the GTA. Has supply increased, yes, but not enough. Read our section on the Pre-Construction market.


1 About 33% of all condo completions enter the rental market. That’s about 6-8,000 units each year. Still the vacancy rate will remain at 1%. The Stress Test has forced more millennials into the rental market.
2 Rental prices currently start at just over $3 psf per month to $4 psf per month on average. For premium buildings and locations, it is over $5. For a 500 sf unit, that is a monthly rental of $2000 on average.
3 Rent increases were in the 10% range in 2018. For 2019, it moved down to about 5-7%. For 2020, we expect increases to slow further to 3%.While the average real estate price to average income is not a good measure on the sales side. Average rent to average income is a good measure to project future rent increases. That’s because most renters have salaried jobs (that is the preferred tenant for investors) and annual wages are only increasing by 2-3%.


Supply is not keeping up with the demand for new housing. See Figure 3 for details. The annual shortfall has been 5,000 units on average. Completions for 2019 are low due to regulatory changes early in 2017. Preconstruction prices rose by 10% on average in 2019. The average price for the 416 area is over $1,000 psf. For the 905 area it is about $900 psf. Prime areas are now $1200 psf with Yorkville at $1700. These prices have eliminated resident investors from this market. Buyers are predominantly non-residents or residents with non-resident family money. In addition to demand, increased construction costs and more taxes from various levels of government have added about $400 psf to the current price structure. Our forecast for 2020 is that the price gap to the resale market (about $300) will slow future price increases to below 3%.

Stats from CHMC, Condos are 75%-80% of the total

The GTA requires 40,000 new units each year to accommodate population growth. There are currently 71,000 units under construction with an average two-year delivery schedule. Note that preconstruction sales are not a reliable factor. It is difficult to verify this number independently from the developer. As well, projects can be cancelled through a lack of sales in a particular building or by the developer who no longer feels the project is viable.