Toronto, a city of more than 6.5 million people, has just 3,200 homes left for sale to start the year after a real-estate frenzy fueled by low interest rates drove the market to record levels.
According to data released by the Toronto Regional Real Estate Board, more than 121,000 homes were sold in Canada’s largest city in 2021, up 28% from the previous year and surpassing the previous mark set in 2016.
Buyers competed for a limited number of properties by bidding up prices: the average selling price in Toronto for the year was about C$1.1 million (around $862,000), a new high and up 18% from the previous year, according to the board. As supply dried up in the second half, sales dropped.
There were around 7,900 houses for sale a year ago.
The figures will increase the urgency of a growing discussion over how to handle the rising cost of housing in Canada’s major cities, which is quickly becoming out of reach for many working Canadians, regardless of whether they buy or rent. Vancouver, which has traditionally been the most expensive real estate market in Canada, reported a record-breaking year.
In recent years, local governments in both Toronto and Vancouver have moved to cool off their housing markets by imposing taxes on foreign purchasers. Though these restrictions initially had some impact, the past year’s activity has revealed a larger issue: the mismatch between Canada’s population growth and the rate of homebuilding, which many believe is at the basis of the country’s housing shortage.
The only sustainable way to moderate price growth will be to bring on more supply, Jason Mercer, the Toronto real estate board’s chief market analyst, said in a press release accompanying the data. History has shown that demand-side policies, such as additional taxation on principal residences, foreign buyers, and small-scale investors, have not been sustainable long-term solutions to housing affordability or supply constraints.
While Prime Minister Justin Trudeau was re-elected last year on promises to lower home costs, the measures most readily available to the federal government — such as additional taxes on speculators and assistance for first-time buyers — affect supply. Municipal and provincial governments, who manage land use and development restrictions, have the most direct control over supply. In both Toronto and Vancouver, reforms to these processes appear to be a long way off.
Meanwhile, new listings in both cities decreased last month. The 3,232 active listings in Toronto and 5,236 in Greater Vancouver at the end of December were the lowest in decades.
Because there are so few properties available to buy, prices continued to rise. On a seasonally adjusted basis, the average price in Toronto surpassed C$1.2 million for the first time, marking the eighth consecutive monthly increase.