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Real Estate Trends & Predictions

toronto real estate market trends and predictions

This Year’s Toronto Real Estate Market Update:

2021 was a wild year for the Toronto Real Estate Market!

What is in store for 2022?

More intervention and stronger headwinds will slow the growth, but the market’s underlying fundamentals remain strong. Expect price appreciation to continue but at a far less torrid pace.

Here is an insider’s look at what we at Fox Marin see as the major trend lines that will impact and shape the market conditions in 2022, with our predictions to follow.

Buckle up because 2022 is going to be anything but boring!


1/ Inflation & Interest Rates

Inflation was the major macro global economic story of 2021. The US Fed labelled inflation “transitory” over the summer and into the fall as “supply chain” related. According to CPI, inflation was raging above 5%. However, some economists believe this figure is inaccurate, with the actual inflation rate landing closer to the 15- 20% range. Whatever your opinion on the real inflation rate, you cannot deny that prices in 2021 in almost everything went up, up, up.

In a fiscal policy response to Covid, the US Fed turned to money printing presses at unprecedented levels to stimulate the economy.

Did you know that 40% of all US dollars in existence was printed in the last 18 months?

In Canada, the story was not much different.

In 2021 we wrote about inflation, the printing of money & government spending and its relationship to home pricing. For a quick refresher, click HERE.

So, where does inflation go from here?

Given the historically unprecedented level of global government stimulus and known variables like Covid, we don’t think anyone truly knows how this will all play out. But we certainly believe inflation is here to stay for some time, and it’s fair to assume that prices of everything (think food, shelter & services) will continue to rise, but hopefully at a slower pace than 2021.

In response to inflation, the Bank of Canada will be forced to raise interest rates at some point. At the end of 2021, the BOC was signaling its intention to raise rates six times in 2022. We think this is more posturing than anything, and many economists agree. While an increase in interest rates is the best lever the BOC has to combat inflation, the BOC will be challenged given the debt levels of Canadians. Raise interest rates too much or too fast and trigger a massive pullback and recession. The genuine concern is not raising rates but raising them too quickly and by too much too soon.

Most major recessions have been caused or deeply enhanced when rates get raised too quickly or too fast.

In 2022, there will likely be 2 or 3 rate increases of .25 percentage points, which will have more of a short-term physiological effect on the market, but it should not have any sustained or long-term impact. Historically low-interest rates could not last forever, and given the current macroeconomic climate, it makes sense to raise rates slowly and steadily. The last thing the BOC or US Fed would want to do is create a recession-driven by poor fiscal policy (overshooting the economy before we have even seen the end of the Covid pandemic).

2/ Condominium Strikes Back

The gap between the price of a Toronto condominium versus a detached or semi-detached home is increasing and increasing fast!

For example, in June 2021, the gap ($) between the average Toronto detached home price, and average condo price was $982K. Over the last six months, the differential is over one million dollars at $1,062,032.

The same story applies to the average price difference between Toronto’s semi-detached housing market (generally more attractive to first-timers due to affordability). In June, the price gap between a semi-detached home and a condo was $550K. Over the last six months, the price differential has been above $680,000.

The pricing gap between the cost of a Freehold property in Toronto (detached & semi-detached) versus a Condo has exploded over the last year. This has been driven by increased demand for people wanting more space through the pandemic; the majority of home buyers are high-income earners whose employment was not affected. In addition, we’ve had historically low interest rates and record-smashing savings rates.


The last time the freehold-condo price gap surged at this rate, condo prices increased over +30% for the following two years. A market is a balancing act – as freeholds become out of reach for many qualified buyers, the condo market will make its resurgence based on prices and availability of inventory alone.

Look for a solid year in the downtown pre-construction condo market in 2022 as well! Investors will be trying to beat the implementation of the impending municipal inclusionary zoning bill, which will cause reconstruction prices to stir by as much as 10% later this year.

Learn more about this here!

3/ Bank of Mom & Dad; And The Continuance of the Largest Transfer of Wealth in Canadian History

We have seen firsthand the role and impact that parents gifting has had with buyers. In a recent report put out by CIBC’s Benjamin Tal, he found that one-third of all first-time buyers received a gift of on average $80,000 from their parents to go towards their home purchase.


Furthermore, the report went on to show that 10% of “mover uppers” received as a gift on average $250,000. This trend has accelerated due to Covid, low-interest rates and parents sitting on cash!

The report went on to talk about the most significant wealth transfer in Canadian history. Money is moving from grandparents passing in their 80’s and 90’s and gifted to The Boomer’s children who need it most; essentially skipping a generation. This transfer of wealth has a significant overall impact on the market and cannot be ignored or dismissed. Here at Fox Marin, we see this will impact the market in many ways.

Many condo resale and pre-construction market investors are buying and investing for their children. They know that their kids will never be able to get into the market on their own in ten years, and they aren’t wrong. These parents aren’t typical investors looking to maximize ROI and Cap rates. They have other financial goals in mind. To quote Benjamin Tal, “it’s not about economics, it is about future affordability for the next generation.”

Expect this trend of wealth transference to be a significant market driver with a substantial impact on condo prices over the next few years. Like European feudalism, wealth was passed down generationally through real estate. This growing trend will impact how we measure Toronto Real Estate moving forward.

4/ Government Intervention: Much Ado About Nothing

In the past, Federal Election housing affordability was a hot button topic and most likely be the defining issue of the upcoming provincial election this June.

In January, Doug Ford is hosting a housing summit with the mayors of Ontario’s 29 largest cities to drive the narrative. Look for housing affordability as one of the dominating media stories this year. We at Fox Marin have been talking about this for the last two decades. The truth is that this issue is a supply-side issue and not a demand problem; it is not a short-term fix, and it requires a type of long-term thinking, patience, and progressive policymaking that will likely never happen.

The media and politicians since 2017 have been blaming foreign investment as the root cause of housing unaffordability in the GTA. As we have seen throughout history, it is easy to scapegoat foreigners as the root cause of domestic issues.

It’s always easier to point fingers at someone else, especially non-voters who don’t have a voice. We have always stated that taxing foreigners and foreign demand for our real estate would have next to no impact on bringing affordability into residential housing. This argument has lost validity with substantial price increases during Covid in a period of limited immigration and foreign investment.

So now what?

Will the government fix their sights on “evil investors” and “greedy realtors”? A recent report suggests that 25% percent of all residential purchases were investors. So the logic goes that if we can tax or penalize investors, that will slow down demand.

In 2022 the Federal Government will be looking to either increase deposits for investors or increase capital gains on the proceeds at the time of sale. Such measures may poll well and even cause a short term to slow down, but in the long term, most likely will have the same success as the 15% foreign investor tax has had – none. Investors are the drivers of the rental housing market. If you discourage investors from investing, new condos will not get built, and rents will rise. If the government wants affordable rental units, we need more supply and not less. We will never move the needle on affordability until we effectively and significantly increase supply.

After investors, how about the “greedy realtors”? Surely they must be the ones responsible for sky-high housing prices, and god knows everyone hates realtors! Look for changes in how real estate transactions take place. The Liberal government will be assessing ways to make good on its promise to end blind bidding wars. In and of itself, we have always been supporters of more transparency in real estate. However, this will not make Toronto Real estate more affordable.

An Ottawa-based think tank, SPI, conducted a study about open bidding and its effect on pricing. The results? In countries where open bidding was permitted, like New Zealand, Australia and Sweden, it was found that prices had escalated faster than here in Canada! Hard to believe but true. As quickly as prices have escalated in major Canadian cities, they have been far faster in New Zealand, where open bidding is standard practice. The study also looked at Ireland, where closed and open bidding is commonplace, and they found that auctioned properties sold to 25% higher than then list, while privately negotiated sales sold for 10% above. Figure that?

While helping first-time buyers might be politically adept at gaining millennial votes, it’s like throwing gasoline on a raging fire in practice. As part of this campaign promise, the Federal Liberal Government is creating a $40,000 tax-free first home buyers home savings account and increasing the limit to get a CMHC loan from $1M to $1.25M with less than 20% down. While this may have been a positive policy to attract young voters, it is only going to increase demand, which will in turn have the effect of throwing gasoline onto a raging fire. If you think purchasing a starter home in Leslieville is competitive today? You haven’t seen anything yet!

The bottom line is that you can expect to see a lot of Government intervention in 2022 on all levels as housing affordability will become the dominant political issue aside from Covid. All of the policies on the table will have next to no long-term impact on affordability. When changes are announced, or new policies are passed, buyers take a wait-and-see approach. Still, these changes will have a short-lived effect and are often more psychological than anything else!

5/ More Realtors, More Turnover.

Toronto has the most real estate agents per capita in the workforce than anywhere else in North America. And since Covid, these numbers are spiking! A recent article in Better Dwelling notes that in 2021 about 1 in 59 of the active Toronto labour force were realtors, up from 1 in 70 people back in 2017, an increase of 15 percent. In New York, the ratio is 1 in 164, and in Los Angeles, it’s 1 in 257. Read that again.


Equally astonishing is that the article cites that in 2021 in Toronto, the ratio of realtors for every home sale was approximately one sale for every 1.8 licensed realtors.

Currently, there are over 62,000 licensed realtors in the GTA. While this sounds like many agents, the majority of the business is carried out by the top 5 percent.

With the onset of Covid, many participants in the workforce are looking for a career change. This is spurred by the illusion of working their own hours and making an unlimited income – all but a dream for the vast majority. The chances of getting your licence and becoming an elite agent at this point are not that dissimilar to moving to LA to become a famous actor, while possible it is improbable.

Expect those seeking easy riches to be lured by the concept of making easy money in real estate to continue and the level of professionals in the industry to continue to be diluted. The unfortunate part of the story is that it is likely the largest and most important transaction of someone’s life. A realtor’s guidance, experience and professionalism should be at the highest level, but often that is not the case. We hear horror stories all the time, and it is no surprise that the general public holds the profession in such low regard. And this is most likely only going to get worse before it gets any better.

Suppose the government was looking to clean up the industry and its level of professionalism. In that case, it should increase the barrier to entry and significantly increase the cost of annual membership fees. You wouldn’t willingly go under the knife with a part-time heart surgeon, so why would you ever hire a part-time realtor to sell or acquire your most important asset? Think about it.


FUD = Fear, Uncertainty & Doubt

Fear, uncertainty and doubt, caused by the unknowns surrounding Covid and inflation may alter some of our trends and future predictions.

However, the underlying macroeconomic indicators that drive the Toronto Housing Market remain strong as population growth begins to ramp up, interest rates remain relatively low, and employment will continue to be strong.

We anticipate a solid start to the year, characterized by tight inventory conditions and buyers trying to get into the market before the rise in rates in the Spring. There will likely be rate hikes and announcements of Federal Government interventions and a provincial election in June, leading to some buyers sitting on the sidelines. We are expecting the back half of the year to be solid. So without further adieu, here are our 2022 Toronto real estate market updates and predictions.

Prediction #1

Interest rates will rise, but increases will be moderate and gradual. Expect an increase in the range of .75 to 1 percent by year-end 2022. It is estimated that a rise of 1% will increase the cost to borrow on the average mortgage by $250.00.

Prediction #2

Overall the Toronto market will appreciate by 9-10%, with year-over-year sales down by 5% due to tightening inventory levels. Condos will lead with 12% – 15% appreciation year-over-year.

Prediction #3

Outer areas, the GTA and cottage country, which saw massive gains in the +40% range, will stabilize, and growth will begin to flatten as work, life & play return to the city.

Prediction #4

Rentals and rental rates will surge in the back half of 2022.

The wild cards affecting Toronto real estate market news in 2022 will be Omicron, future variants, inflation and the Toronto Maple Leafs upcoming playoff run.

Our last prediction is that 2022 will (we hope, in our non-qualified medical opinion) mark the end of the pandemic. The one thing we know for sure is that 2022 will be full of surprises.

We at Fox Marin wish everyone a healthy and prosperous kick-ass 2022!

This article is written by Ralph Fox, Broker of Record and Managing Partner here at Fox Marin Associates. Ralph is a Torontonian native who recognized from an early age that the most successful people in life apply long-term thinking to their investments, relationships, and life goals. It’s this philosophy, along with his lifelong entrepreneurial drive and exceptional business instincts that help to establish Ralph as a top agent in the real estate market in downtown Toronto.