Real estate investing in Greater Toronto. Looking for undervalued regions in the GTA.

Since the start of COVID-19, the Canadian government started the program to support businesses and the population. With that, it dropped in interest rates and rolled monetary support to businesses and families. This resulted in more affordable mortgages and higher disposable income for buying real estate. This resulted in an astonishing growth in real estate prices in Canada over the past year. The prices in Ontario and Greater Toronto grew 10% to over 30% depending on the area over the past year.


Another factor that greatly impacts the real estate market in Canada, the USA, and the world is the emergence of distance working due to COVID-19. With the ability to work from home, more people chose to move away from workplaces in search of bigger homes that are still relatively undervalued.


The last factor that impacts real estate prices in Ontario is the emerging trend of growing salaries in Ontario and the GTA in particular. With higher inflation and shortage of workforce, we have entered the employee-driven market where employees have more bargaining power.


With higher demand for bigger houses outside of the Toronto core, the prices in the east and west of Toronto have grown much more than in the Toronto core. For example, prices in Scarborough, Rexdale, Clairville grew 15% to 20%. Downtown core prices grew a mere 7% to 8%.

Real estate investing in Greater Toronto and Ontario. Average year-on-year property price change, Toronto, September 2021
Average year-on-year property price change, Toronto, September 2021

The key reason for more growth in property prices in Scarborough, Rexdale, Clairville is that these regions in Toronto are still relatively underpriced. Despite the growth in property prices over the past year, as seen in the pricing map below, the average property prices in those regions are still below $800,000 - $850,000.


It is much harder to find properties below $1 million in Toronto downtown, Etobicoke, and North York. With high prices in these regions, average property prices went up the least.


Real estate investing in Greater Toronto and Ontario. Average real estate price in Toronto regions, September 2021
Average real estate price in Toronto regions, September 2021

If we zoom out to the rest of GTA and the nearby towns, we can see lower prices around Simcoe, Stayner, Angus, parts of Oshawa where the average prices for real estate are below $800,000.


Average property prices, Greater Toronto and surrounding areas, September 2021
Average property prices, Greater Toronto and surrounding areas, September 2021

Following the similar logic we saw for GTA, lower prices attract more buyers, and the areas with the lowest average real estate prices are also the areas that have seen the most growth. Now that we have zoomed out from GTA where the average annual price changes ranged from 7.5% to 20%, we see some areas with a year-on-year growth above 25% or even 30%.

Average year-on-year property price change, Greater Toronto and surrounding areas, September 2021
Average year-on-year property price change, Greater Toronto and surrounding areas, September 2021

Given the recent trends in workforce movements and an emerging trend of growing salaries in Ontario, we may expect the trend to continue until the prices further even out around Toronto. The increase in inflation may also fuel the prices in real estate due to higher costs of construction for the new home. With that, real estate buyers and investors can still find a few areas and individual properties that are relatively underpriced.



Real estate investing in Greater Toronto. Price trends by property type: detached, semi-detached homes, townhouses, and condos.


One may find puzzling the pockets of higher and lower prices in the GTA and surrounding areas. The reason for the differences in average prices in nearby areas is the composition of the real estate market in those areas. In the areas dominated by condominiums, such as the business core of Toronto, the prices will be relatively lower. The areas and the towns surrounding GTA that are dominated by semidetached and detached homes will see higher average prices.


Deep diving into the pricing differences for the different municipalities in the GTA core reveals more details.

The below map is for your reference of GTA municipalities.

GTA municipalities map
GTA municipalities map

Real estate investing in Greater Toronto. Price trends for detached single-family properties.


The average price for a single-family detached property in core GTA is $1,349,000 and the average price increased 23.54% from September 2020 to September 2021. It is interesting to know that there is a reverse correlation between the price and the percent change. This means that the areas with the lowest prices saw the biggest increases in price and vice versa.


Current price and year-on-year price change for detached homes, Toronto, Sept 2021
Current price and year-on-year price change for detached homes, Toronto, Sept 2021

Real estate investing and price trends for semi-detached single-family properties in Greater Toronto.


The average price for attached single-family properties in core GTA stood at $1,048,200 in September 2021. The prices in this segment grew on average 22.60% over the past year. The most growth in semidetached homes is noted in C13 (Don Mills) and E10 (East Scarborough) municipalities. The prices are lowest in E08 (lower Scarborough).


Current price and year-on-year price change for semi-detached homes, Toronto, Sept 2021
Current price and year-on-year price change for semi-detached homes, Toronto, Sept 2021

Real estate investing and price trends for townhouses segment in Greater Toronto.


In the townhouse segment, the average price in GTA core stood at $762,200. On average, the prices grew by 18.15%. The price changes in this segment are even more inversely correlated to the prices, meaning the regions with the lowest prices saw the biggest increase, while the regions with higher prices grew relatively less. The areas with the most growth in the townhouse segment were C11 (Thorncliffe, Leaside), E11 (Toronto Zoo area), E08 (lower Scarborough), E10 (East Scarborough). Despite large growth in the prices of townhouses in these regions, the prices are still relatively low there.

Current price and year-on-year price change for townhouse segment, Toronto, Sept 2021
Current price and year-on-year price change for townhouse segment, Toronto, Sept 2021

Real estate investing and price trends for condominiums segment in Greater Toronto.


The average price for a condominium in Greater Toronto stood at $642,400. The average price increased by 9.08%. The price movements in this real estate market are less correlated with the price levels. There are many municipalities with middle-range prices that grew the most. On the other hand, the municipalities with the lowest prices (W09 - Richview and W05 - Jane & Finch and surrounding area) saw average price increases. Average prices in C09 (Rosedale) have actually declined year-on-year by -2.73%, the only municipality, and segment that saw a decline over the past year.

Current price and year-on-year price change for condominiums, Toronto, Sept 2021
Current price and year-on-year price change for condominiums, Toronto, Sept 2021

Overall, the real estate market in Canada in general and Greater Toronto, in particular, has seen a sharp increase over the past year. However, the outer regions of GTA and areas surrounding GTA have seen the most increase.

Avid real estate investors will look at the areas that are still relatively underpriced but hold good potential for future growth. The money currently follows the areas with lower prices as the market tries to even out the prices across GTA and surrounding areas. With distance to work becoming less of an issue, more people are preparing to move away to trade-off for lower property prices, better air, and bigger properties.



 

Data source: Toronto Regional Real Estate Board

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