We are beginning to see activity in the Toronto market as prospective homebuyers and sellers navigate a real estate market affected by the Bank of Canada’s consecutive interest rate cuts.
Recent reports suggest that lower borrowing costs are drawing those who had been waiting on the sidelines to re-enter the housing market.
In October, the City of Toronto experienced a significant uptick in home sales. The Toronto Regional Real Estate Board reported a 37.6 per cent surge in annual home sales in October 2024 compared to the same period last year. This uptick follows a quieter spring and early fall market, indicating a shifting real estate landscape.
As prospective homebuyers and sellers look to enter the real estate market, here’s what they need to know about property values.
Why value matters
For many, a home isn’t just a place to live — it’s their single biggest asset, and its value can have a significant impact on how they live their lives.
Understanding why value matters can provide insights into the real estate market that may impact potential decisions around buying, selling or investing in real estate. It can also help existing or potential new homeowners make informed decisions and anticipate budgets for items, including property taxes.
How assessment value and market value differ
Whether property owners are looking to buy or sell, understanding the difference between a property’s market value and assessment value is essential.
The final sale price of a property is what is negotiated between the buyer and seller, each with their own motivations. Factors such as supply and demand, how long a property has been on the market, and individual preferences all contribute to determining the final sale price.
According to the Toronto Regional Real Estate Board, the average home sale price in the City of Toronto for October 2024 was $1,165,660.
A property’s assessed value is an unbiased estimate of its worth, determined through analysis of market data, including sales. Earlier this year, MPAC reported that the median home value in the GTA and Hamilton area was $1,031,000.
Based on property type, more than 78 per cent of detached homes in this same area were estimated to be worth more than $1 million, compared to almost 12 per cent a decade ago.
In the City of Toronto specifically, over 28 per cent of properties were valued between $1 million and $1.5 million while 20 per cent were valued above $1.5 million.
Property assessments are shared with municipalities to help calculate property tax rates. Each of Ontario’s municipalities decides how much money is needed to build and operate their respective communities, and then decide on the municipal tax rates and policies.
MPAC’s property data is used to determine how much you contribute based on the assessed value of your home and the tax rate.
Property owner’s tax is calculated by multiplying the property’s assessed value by the total residential tax rate.
How residential property value is determined
When assessing a property’s value, more than 200 factors are considered, including five key factors:
- Location - the neighbourhood where a home is situated significantly influences its market value. The desirability of the area often plays a crucial role in determining how much a buyer is willing to pay.
- Lot size - the area of a property’s lot is calculated by multiplying the frontage by the depth.
- Square footage - the exterior of the home is measured to determine the total area of the building. This measurement excludes areas like basements, decks, porches or garages.
- Building age - property value is adjusted to reflect renovations or additions, considering the actual condition of the house rather than its original construction year.
- Construction quality - the type of building materials used and the quality of finishes also play a role in determining a property’s assessed value.
Every property owner in Ontario can access information about their property using MPAC’s free online tool, AboutMyProperty™. It provides owners with access to learn more about how their property was assessed and compare it to others in the neighbourhood.
How sales affect property assessments
While sales prices are considered in property value assessments, there are other factors also taken into account.
Property assessments for Ontario’s 4.8 million residential properties are determined through a method known as mass appraisal. This process values a group of properties at a fixed date, using common data and standardized methods.
MPAC conducts mass appraisals by examining sales and property information from open market transactions to determine the assessed value of each property.
To find more information about home values and property assessments, visit: mpac.ca/valuematters.
