Will GTA Home Prices Double in 6 Years?

As part of my Client Appreciation Program, I pass on information that I think may be of Value to you.

Yesterday I had 3 conversations with people about what the market is doing, and discussed why. It is my job to stay on top of the market, interpret the data, wade through it and separate the wheat from the chaff, the chicken from the feathers, the... well you get the idea. We are inundated with information but short on accurate interpretation and the Media posts headlines that generate clicks and impressions for their advertisers.

I could talk all day, and would love to discuss the details with you over a coffee, but; I thought I should take a moment to summarize it for you because I think it's important that you realize what is happening.

The Rule of 72It has been said that Einstein referred to Compound Interest as the 8th Wonder of the World. The formula is remarkably simple. Interest Rate X Time = 72. So if you invest for 10 years compounded annually at 7.2% interest your total investment will double. 10% takes 7.2 years. 3% takes 24 years. At 12% it takes 6 years for your investment to double. 24% actually doubles in only 3 years.

What the market is doingThe year over year average price for the GTA is up 12.1% (Aggregated - Toronto Real Estate Board), which means a doubling effect every 6 years.
Here are some specific highlights for March 2016 over March 2015:

The average price of all homes sold in Oakville: $1,027,834.
55.78% of homes sold in Oakville were over $1M.

Price increases from OMDREB, RAHB and TREB for March 2016 over March 2015:
Oakville 26.5%
Milton 12.6%
Hamilton East 26.2%
Hamilton (combined) 14.8%
Burlingotn 9.5%
Ancaster 23%
Stoney Creek 16%
Grimsby 24%
Toronto Real Estate Board Composite Index 12.1%
City of Toronto Detached 11.05%, Attached 10.29%, Apartment 6.77%
Mississauga Detached 11.42%, Attached 10.29%, Apartment 9.5%
Brampton Detached 13.09%, Apartment 7.87%
Vancouver Aggregate 21.6% (RLP Housing Survey)

Why
Interest rates? Yes. People are quick to say interest rates but that is not entirely accurate. It helps, but we also know that when rates were 12%, or even higher, people still bought homes.
Employment? Yes. Employment is more important than interest rates. If people have a job, they will invest in a home. Employment is still relatively good in the GTA.
Green Belt? Yes. The green belt does force homes to be built higher, and increase density, but we are seeing prices increase in Guelph and London as well.
Migration? Bingo! This is the one that economists that analyze the stock market always overlook. People need somewhere to live! As I have mentioned before, the GTA brings in "about" 100,000 new people every year (depending on the year and which report you read). This year we also seeing Canadians moving "back" to the GTA from out west.

The FutureWhen will it crash?
Who knows. 
We do know prices do go up and down. Let's look at a few things. Interest rates will eventually go up - but that won't cause a "crash". Employment goes up and down - but the GTA is pretty stable and we have a mixed economy - so that shouldn't cause a "crash". The Green Belt is protected. GO Train service should be improving commute times.

Ok, but; what if we DO have a crash?..., a major crash?... ok, let's say... for example Oakville dropped 26.5%?... that would drive prices way down to what they were... way back in March of 2015!

So that really brings us back to Migration - without getting in to any specifics of Geo Politics - does it make sense to say, and can we agree, that people will continue to want to move here?

Do you think the rest of the world will continue to be a rougher place, and that Canada will continue to be a better place; a great county to invest in, do business in, and raise your family in?

If you answered YES, then you need to buy more Real Estate!

"Operators are Standing By" and I'm never too busy for your Referrals.

Rob