The price of an average London home could hit $450K in 2020
While sales aren't expected to match the frenetic pace of 2017, tight inventories will cause prices to rise
Analysts say the price of an average home in the London area could hit $450,000 in 2020, as continued strong demand for homes is predicted to outpace supply in the New Year.
The prediction for 2020 follows a year characterized by double-digit gains in London real estate, thanks to a steady influx of people moving from the Greater Toronto Area looking to buy a relatively small amount of homes available for sale.
As of November 2019, the price of an average home in the City of London has risen more than 12 per cent over the previous year, according to Earl Taylor, the president of the London and St. Thomas Association of Realtors (LSTAR).
"2019 was definitely what we would call a sellers' market," he said. "There's definitely more buyers than there are sellers right now."
"I think 2020 will be very similar to 2019," he said of London's real estate market. "We went from a high of over almost $427,000, which was up 12.7 per cent over November of 2018, so that's probably similar to what we're going to see in 2020."
Within the greater London area, which includes the City of St Thomas, the numbers are slightly less dramatic, but no less buoyant, according to LSTAR. In Nov. 2019, home prices rose 10.7 per cent over last year to $416,116, putting the year in real estate on course to break records in terms of price.
Existing home sales to remain steady in 2020
According to data from the Canadian Mortgage and Housing Corporation (CMHC), while 2019 sales in the London area didn't reach the record-breaking volume of 2017 where 11,247 homes traded hands, Nov. 2019 sales numbers were on par to meet or beat 2018 figures with about 9,700 homes bought and sold.
For 2020, the CMHC predicts market activity in terms of existing home sales will be steady, with about 9,200 home sales on the low end and 10,200 on the high end.
It's for that reason home prices are expected to again reach new heights in 2020, according to Anthony Passarelli, a senior market analyst with the CMHC.
"On the high end $450,000 and on the low end $430,000," he said. "The average price in the City of London, the range for that you would bump it up a little bit higher."
With average prices in the city already hovering around $430,000 as of November 2019, it could mean home prices in London could easily close in on the $450,000 threshold in 2020.
"That ties in to why you're seeing some extra demand going to areas like St. Thomas and Strathroy because some people are going out a little bit further from the city centre to afford the home they want."
Average rent expected to climb to $1,160 in 2020
High real estate prices are also having an effect on London's tight rental market, according to Passarelli, who said the area's double-digit price gains have kept the overall vacancy rate hovering at around two per cent since 2016, which is about half of the city's historical vacancy rate of about four per cent.
"Our research shows a lot of first-time buyers come from the rental market," he said. "The rental market is affected because some of those renters that would normally have left the rental market to buy may stay an extra year and that causes the vacancy rate to be low."
The average rental price for a two-bedroom unit in London is expected to climb to about $1,160 a month, up from $1,130 the year before, according to CMHC data.
The reason behind that, according to Passarelli, is London's strong economy, which includes good job numbers, steady wage growth and plenty of immigrants settling in the city.
"Immigration has been high in recent years, a lot of immigrants tend to rent when they first come to the country, especially the first year," he said. "Census data consistently shows that."
Passarelli notes that while a number of new highrises in the city have just come online or are being built, Passarelli said it's not enough to offset an average rent increase in 2020.