Amid his rising pop-stardom, rapper Drake reportedly unloaded his swanky Toronto condo in 2013 for C$3.75 million—back when housing prices in the Canadian city were rising at an annual rate of about 4%.
That was near the bottom, now we’re here.
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The Canadian city has watched housing prices skyrocket over the last four years, thanks to tightening inventory, low interest rates and population growth (including steady immigration). In December, the average sales price was 20% higher than a year earlier, and Toronto saw the strongest sales gains of any Canadian metropolitan area in 2016, according to the Toronto Real Estate Board (TREB).
Meanwhile, the luxury market saw prices increase around 32% in 2016, says Richard Silver, senior vice president of sales at Sotheby’s Realty International Canada.
"We have a lack of inventory, and like a lot of cities, like New York and Chicago, there’s only so much space for new developments," Mr. Silver said. "There are a lot more people coming into the market than there are people leaving the market."
To put the growth in perspective, had the Canadian rapper held onto his 3,600-square-foot, three-bedroom bachelor pad at the One St. Thomas condominium until today, he might have made another half-million or more on the property. Prices in the swanky building by New York City-based architect Robert A.M. Stern now hover around C$1,200 per square foot, according to data from 2016 sales.
City of Neighborhoods
District Map of Toronto
Toronto Real Estate BoardToronto is made up of nearly 250 officially and unofficially recognized neighborhoods, which have earned it the nickname "City of Neighborhoods." That can be daunting to buyers who don’t know the lay of the land and to sellers trying to decide if their homes fall into one locale or another.
To remedy that, TREB has simplified the web of communities by breaking the city down into 35 larger property districts that each encompasses five or six different neighborhoods.
In 2016, six of those districts had an average sales price above $1 million. For instance, Drake’s old stomping grounds, a district encompassing affluent neighborhoods like The Annex, Summerhill and Deer Park, has seen prices jump roughly 13.5% since 2014, according to data from TREB.
The posh district, defined as C02, is just north of Queen’s Park and the beautiful 19th-century building housing Toronto’s legislative assembly, and includes Yorkville, Toronto’s high-end shopping neighborhood, said local agent Elli Davis of Royal LePage.
The Yorkville neighborhood of Toronto, known for it's high-end retail options.
Klaus Lang / Getty Images"Bloor Street in Yorkville is like your Fifth Avenue, with Tiffany and Louis Vuitton and all the name brands," Ms. Davis said. The bustling area is filled with luxury high-rises, such as the Four Season Private Residences, owned by Saudi real estate mogul Prince Alwaleed Bin Talal.
The Bloor Street area is flanked by two other tony neighborhoods, The Annex to the west and Rosedale to the east.
The Annex also hosts a number of very popular Victorian attached and semi-attached townhouses, which have attracted celebrity owners such as actress Rachel McAdams. In 2016, the average attached home was on the market for less than two weeks before selling, according to Sotheby’s 2016 top-tier real estate report.
Another notable district at the edge of downtown Toronto and adjacent to the C02 district features neighborhoods Rosedale and Moore Park. Together, they comprise the second-most expensive district in the city, C09, where the average sales price hit $1.68 million in 2016, according to data from TREB.
Mansions in the city
Removed from the city’s bustling center, however, lie the bulk of Toronto’s luxury properties—single-family mansions and estates to the northeast of downtown.
C12 is the most expensive district in the Greater Toronto Area, with an average sales price of $2.5 million, according to TREB. It includes posh neighborhoods like Lawrence Park, Windfields and a collection of estate-lined blocks called the Bridle Path, residents of which have included late singer Prince and former newspaper mogul Conrad Black. The neighborhood was also used to film the home of "Mean Girls" queen bee Regina George.
As recently as the 1930s, the Bridle Path was mostly farmland, which developers and the city’s wealthy subdivided into large estates to house tennis courts, swimming pools and privacy hedges.
"In that area there are massive houses selling for huge prices. That seems to be very popular for those who want an acre or two-acre estates," said Mr. Silver, of Sotheby’s.
This expensive district also happens to have some of the fastest-growing prices. Since 2014, average sale price has climbed 31% and median sales price has jumped 40%, according to data from TREB.
No slowing down
The city’s real estate board predicts that overall growth across price points will stay in the double digits in 2017 and will fall somewhere between 10% and 16% overall—driven mostly by Canadians and permanent residents.
January figures underscore just how tight supply is the in the city. The number of active listings was less than half of what it was a year ago, down to a paltry 2,230.
"Statistics tell us there is a serious supply problem in the greater GTA, a problem that will continue to play out in 2017," said Jason Mercer, director of market analysis at TREB. "The result will be very strong price growth for all home types this year."
More:Toronto Home Prices Surge in January
Local buyers have fueled most of the growth thus far, though foreign investors have played a role at the top of the market—particularly those taking advantage of the weaker Canadian dollar against the U.S. dollar and dollar-backed currencies, said Taimur Khan, a senior analyst at Knight Frank.
"In early 2016, currency also favored foreign buyers," Mr. Khan said. "The Canadian dollar was below its 10-year-low against most major currencies, although as oil prices have recovered." At its lowest point, a home priced at C$1 million cost just USD$683,000.
A growing number of foreign students from places like China and Saudi Arabia have also bolstered high-end home sales, as parents invest in properties for their kids or second homes for themselves, local real estate agents said. In 2016, 55% of sales to non-resident foreigners in the Greater Toronto Area, which include suburbs, were for a primary residence or a home for a family member.
But the significance of foreign buyers in Toronto is much more limited than in fellow cosmopolitan, luxury hubs like New York or London, experts said. Foreigners accounted for only 5% of the city’s home buyers in 2016, with the average home costing them just under $1 million, according to TREB.
In the final months of 2016, some suggested that a 15% tax on foreign investment in Vancouver would steer more foreign investors to Toronto. But the city’s real estate board strongly contests that assumption.
So far, there’s little empirical evidence to suggest Toronto has benefitted from the fallout of Vancouver’s tax hike, which was enacted in October, TREB said in its 2016 year-end report released at the end of January.
Rather, local buyers who’ve benefitted from a growing economy have driven Toronto’s impressive price growth.
"Toronto’s strong economy, with low levels of unemployment and low borrowing costs, had been one of the reasons behind the performance we have seen in the prime market," Mr. Khan said.