July saw a record number of Toronto-area homes sold, with an average selling price of $609,236 for the month.

According to Mark McClean, Real Estate Board President: “9,880 homes sold in the Greater Toronto area in July 2015, representing an 8 per cent increase from the sales in July 2014.”

According to a recently released report, the sales broke the sales record for July, a month that’s typically slower for the real estate industry. “It is important to point out that home ownership demand has been driven not only by low borrowing costs, but also by the fact that the GTA economy has been performing quite well,” McLean said in the report.

Sky High Real Estate Prices in Toronto

The TREB report found that the average sale price in the GTA was $609,236 for the month of July, up 10.6 per cent from July 2014, when the average was $550,625. Even though the average sale price reached a record high in July, prices are actually lower than the average price in June.

According to these findings, the city of Toronto is set to break the record for number of homes sold in a year, previously set in 2007. The previous record was 93,193 homes sold, with an average selling price of $327,236. With this report, TREB has recorded 64,514 sales in 2015. Records have consistently been broken across the year, with April, May, June and July all exceeding expectations. Additionally, monthly sales have been higher year-over-year every month of 2015, when compared to last year’s sales.

Expensive Condos

The Canada Mortgage and Housing Corporation have stated that a surge in condo construction pushed Canada’s housing starts figure to its highest level of the year in August, at 196,565.

We’ve all heard the stories about crazy house sales in Toronto, like the eight feet wide three storey property that features a garden, balcony and a sauna that’s currently on the market for $750,000. Or the dilapidated house on the Beaches that sold for more than a million, despite not being hooked up to hydro, with holes in the roof and animals inhabiting a few floors and just generally being deemed “uninhabitable.”

The fact is, the Toronto real estate market is heating up, with no sign of cooldown coming any time soon. According to TREB, the rate of sales growth is outpacing the rate of listings growth by a wide margin. In a release, Jason Mercer, TREB’s director of market analysis, stated: “As long as this situation persists, expect home prices to trend strongly upward.”

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One of the biggest drivers of the Canadian economy has been the constant growth of the biggest real estate markets in the country. Toronto, Vancouver and Calgary have seen massive gains spurred by international investment in real estate.

During the past decade, compared to other countries, the Canadian economy has been relatively stable due to the strength of our banks, which weathered fluctuating economic conditions admirably.

However, as the Canadian dollar dives and housing prices continue to shoot through the roof, many experts worry about the impending burst of Toronto’s condominium bubble.

Skyrocketing Prices

Despite a real estate market that already features runaway prices, the costs of purchasing a home continues to rise beyond expectations. The Toronto Real Estate Board released numbers that showed a 10 percent rise in Toronto house prices.

However, the price of a single family home increased by 15.9 percent, implying that the demand for this type of housing is much greater than the demand for condos.

Economists at TD Bank agree, projecting a price reduction of three or four percent for condos over the next couple of years. Currently, they note that when measured on the basis of price per square foot, the Toronto condo market has already stopped. In fact, the gap in prices between condos and single-family homes reached a record of $289,000 over the last year.

As a result of these price trends, purchasing a condo in Toronto appears to be the riskier bet in the near future when compared to single-family homes.

Record Rate of Building

In addition to price uncertainty, the Toronto real estate market will experience additional stress due to the rate of new units becoming available, increasing stock as prices fall.

During the first two months of 2015, three times more units than average were completed, consistent with the pattern of frenzied construction over the past decade or so.

Many of these units are sold to investors who initially plan on renting the units out, although experts believe that many will change their mind and simply sell their investments, further pushing prices down.

Relatively few new single-family homes are built, which means that their value as an investment will be secure in the near future. Condos, on the other hand, will witness an excess of tens of thousands of units.

Avoiding the upcoming condo bubble in Toronto is key to ensuring your real estate investments remain profitable. Builders such as Previn Court provide an excellent option to escape the madness of the Toronto real estate market.

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