Estimating the Value of the Housing Market

Over the last decade the Toronto and Canadian housing markets have made vast amounts of money for home owners.  Individual stories are frequently told in Toronto of people who have seen their house value double in just the past few years.  This post will discuss the current on paper value of Canada’s and the GTA’s housing markets, how much they have grown over the last ten years and frame the context for a discussion we will examine over our next couple articles.

Two figures will be used to determine the potential value of the GTA and Canadian housing markets.  First, we will leverage census data to understand the total number of dwellings that existed ten years ago compared to today.  For these figures the 2006 and 2016 census data will be used.  Second, we will use the average home price from 2008 and the average price now (source: Better Dwelling).  This creates a small time gap between the two figures (2006-2008 and 2016-2018); however, census data will enable the most trusted totals with respect to dwelling counts, and thus we will use these numbers calculating against 2008 and 2018 values.

This method to calculate the total value of the housing market is imperfect, however, it will provide insight into just how much money Canadian home owners have made as a group, at least on paper, over the past decade.

For Canada

Year Home Prices

Total # of Dwellings

Total Market Value

2008 $300,000 13,576,855

$4,073,056,500,000

2018 $487,000 15,412,443

$7,505,859,741,000

For the Greater Toronto Area

Year Home Prices Total # of Dwellings

Total Market Value

2008 $365,000 1,894,436

$691,469,140,000

2018 $765,000 2,235,145

$1,709,885,925,000

Using these figures, we can estimate the value of the Canadian housing market to be just over $7.5 trillion today, with the GTA’s value more than doubling over the past decade to $1.7 trillion.  In the past 10 years the Canadian housing market has increased its estimated total value by just over $3.4 trillion; $1 trillion of which comes from the Greater Toronto Area.  By percentages, the Canadian housing market has increased its value by 84% and the GTA’s has improved by 147% (of course, it’s important to remember Toronto’s housing market is also factored into the Canadian totals).  For both the GTA’s and Canada’s housing markets, 26% of the estimated total market value increase can be attributed to the new dwellings added to the market, while 74% comes solely from the price gains.  It is the latter figure that has created so much wealth for so many home owners.

To help put these gains in perspective, Canada’s GDP for 2018 is anticipated to be around $2 trillion, and the GTA’s is estimated at roughly 20% of the national output, so $350-400 billion is a safe figure.  Meaning in the last 10 years the housing market has, again at least on paper, given Canada nearly two extra years of output from housing value rise alone, and Toronto has faired even better.

Before anyone reads into these estimates too much, it is important to point out the actual complexity of calculating the real value of the housing market.  Our numbers should be considered high level estimates for discussion purposes.  Many other factors including taxes, mortgages and fees would need to be considered in formulating a detailed estimate.    This is an important point for people to understand because even if your home value has doubled since you bought it, it does not mean you will be in a position to reap the full rewards of that increase.

This post was designed to illustrate the perceived wealth creation that has occurred due to the massive gains of the housing market.  Certainly, in raw numbers, the Canadian housing market has done incredibly well for any long standing home owner; however, it is important to understand that not all gains are that simple.  Our next article will look at how mortgage debts, other financing options, taxes and on-going housing needs impact the net gain home owners may realize from the market increases.

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