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Ontario House Prices – Will They Keep Rising?

Written By: Jeff Gilbert

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The real estate market continues to surge in Ontario. Ontario house prices continue to rise month over month. So what’s next for real estate prices as we head towards 2022? Your guess would be as good as mine, but let’s look at some real data and see if we can pick out any trends.

Record increase in house prices in Canada.
JeffGilbert.ca
Annual Change in Real Estate Prices – jeffgilbert.ca

One of the largest contributing factors as to why sales prices have increased the way they have is the lack of available inventory/supply. In other words, there are not enough properties listed for sale to keep up with the demand.

My favorite statistic to analyze this is known as months of inventory. Months of inventory takes an average rate of sales for an area and when you divide this into the current amount of active supply, it will give you an idea of how many months it would take to sell all the current active listings.

A balanced market would see approximately 4 to 6 months worth of supply or active listings.

In Canada, and more specifically in the Simcoe County region of Ontario, we are no where close to a balanced market.

Sellers real estate market in Ontario, Canada.
jeffgilbert.ca

Inventory is down across the country and with such strong demand, it put’s considerable pressure on re-sale prices.

Here is a snap shot of the months of inventory for four of the major centres that I practice real estate, Barrie, Orillia, Innisfil and Midland.

Barrie has 0.3 months of supply right now, which essentially means that all active listings would be completely sold within 9 days!

Remember what a balanced market was? Yes that’s right, approximately 5 months and Barrie is sitting at 9 days, let that sink in.

Orillia has 0.6 (18 days).

Innisfil has 0.5 (15 days).

Midland has 1.2, which is just over a month and the most supply of the 4 areas covered.

This equates to a very tight real estate market.

Bidding wars are still the normal.

Two of the latest properties I have worked with clients on, they both had over 25 offers which as you can imagine really pushes the sales price, in most cases beyond what the property is realistically even worth. Then again, what is any property really worth right now lol.

The other statistic I like to reference is the sales to new listings ratio. This ratio can give you some insights into what should be coming down the pipeline in terms of demand and price growth.

Home Sales to New Listings Ratio - Canada
Home Sales to New Listings Ratio

Across Canada the sales to new listings ratio continues to climb. Locally here in the Barrie area it looks something like this:

Home Sales to New Listings Ratio - Barrie
Home Sales to New Listings Ratio – Barrie, ON

Yes the ratio for Barrie is above 1%, meaning we are selling more properties then new listings.

At the end of the day, we’re going to have to see an awful lot of supply come online or we are going to have to see demand start to diminish to get anywhere close to a balanced market.

One positive is the number of building permits that have been issued over the past year. There is a considerable amount of supply in the pipeline.

Residential Building Permits.
Residential Building Permits – Canada

However, much of this newly created supply is most likely already spoken for:

Unsold Developer Inventory
Unsold Developer Inventory – Canada

So, by taking into consideration what we’ve learned so far, It’s my professional opinion that there’s no end in sight to the high month to month sales price appreciation.

We would have to see a TON of new supply come onto the market and at the same time a huge change in buyer behavior to which the demand cools.

Perhaps 2022 will bring an increase to the Bank of Canada’s overnight lending rate which could possibly curb some of this demand. We will see.

Thanks for reading. If you would like to talk real estate on a more personal level, we can take a closer look at the segment of the market you are interested in to see where any possible opportunity may lie.  

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