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What Does the Shortage of Home Inventory Mean for Pricing?

Posted by Ed Abdou on January 16, 2020

December had the lowest number of homes for sale in the GTA in nearly a decade. With fewer new listings in the Greater Toronto Area, the number of buyers significantly surpassed the supply. It’s not just Toronto that’s facing this scenario, Ottawa and Montreal are also dealing with a shortage of home inventory. How does this imbalance affect home prices?

Prices Are Soaring

Since the demand for properties is so high, sellers have leverage when it comes to pricing. Purchasing negotiations highly favour the seller, lending them the upper hand. All categories of housing have seen substantial price increases year over year, especially one-storey single-family homes which have increased by 3.6 percent. According to CREA, Greater Toronto’s price index benchmark prices have increased by 57.4 per cent in the last five years. Luckily for sellers, prices don’t seem to be declining anytime soon. In fact, they’re expected to increase a further 6 per cent this year.

The Effects of an Inventory Shortage

Besides sweetening the pot for GTA sellers, there are numerous consequences of an inventory shortage. Fewer new listings result in higher competition among buyers. First time home buyers who want to enter the market will struggle. The government has implemented changes that make it easier for such buyers to enter the market, like the First-Time Home Buyer Incentive which makes securing a mortgage more attainable.

The lack of new home listings is encouraging developers to build new, affordable developments and condominiums for these buyers. This is to the chagrin of some Toronto property owners who don’t want to see new condos going up at the rate they are. However, the demand for developers to create housing options is strong.

A shortage of listings can be frustrating for buyers who are limited in their choices. Some will end up settling for a home they aren’t in love with simply to enter the market. Others will have to wait longer for a property that meets their needs to come up. It also means that buyers are looking outside the city limits for more variety in listings and in prices. While the increased prices are great for sellers, they aren’t great for motivating buyers to stay in the city.

The Key to Real Estate in Toronto

If you’re looking to buy or sell in the GTA, the key to your success is working with an experienced agent who knows this city well. Top agents will have access to more listings and price variety. They will also be able to negotiate the best prices for sellers amidst constant bidding wars. First-time homebuyers especially need an expert agent on their side to ensure they get a good deal and aren’t ripped off.

Ed Abdou has over 20 years of experience helping buyers and sellers in the GTA make their property dreams come true. Despite the city’s inventory shortage, he continues to find buyers their dream homes and secure sellers amazing deals. You need a reputable agent on your side, so contact us today.

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