Notes from a Professional: What are the Current Trends in the Toronto Real Estate Market?

The first thing people ask when they meet a real estate professional is: “How is the market?”

A group of young people. Panorama.

For most of people, real estate is the biggest investment they will ever make and we all want to know where the market is headed. Are we going to gain or are we going to lose on our biggest assets?

bird nest - real estate '08 2How do I find the trends?
I have travelled all around the world in order to gain a better understanding of the real estate trends in other big cities. Boston, Chicago, New York were ideal to study trends and to see where we are likely headed, here in Toronto. I have studied Paris and London, Rome and Sydney, Moscow and Berlin: all big cities where people have jobs and want to live.

What’s going on in the Toronto real estate market right now?
Toronto is the youngest city among those I mentioned above, it is the coldest with wind chill and it does not have many architectural masterpieces to recommend it. So why is our market hot, and expensive, all year round?

I look with horror when it takes only few day to sell, over asking, a house in the middle of nowhere, built on a small lot, and priced over million dollars. I have seen triple price appreciation on detached homes over the last 10 year period. I am sure that we all know that the average price on detached homes In Toronto crossed over the $1,000,000 mark recently, and this is an average price!

Have you seen really ugly areas in Toronto? I am sure you have. Yet even these areas have high demand real estate, where people are stuck in traffic daily to get to a job. I see multiple condo buildings in downtown Toronto, where price per sq. ft has more than doubled over the last 10 years. Where units become smaller and smaller and a huge premium is placed on the view. I see 500 units building sold within 2 days at Yonge and Isabella. It is all happening in downtown Toronto, where the roads and public transportation have become a national embarrassment.

Who is moving to Toronto and why?
With intelligent immigration policies, respectful attitudes towards new immigrants and English as the primary language, Canada is one of the preferred counties to immigrate to for people with education and ambition. Every year, almost 200,000 students arrive in Toronto to get an education and with hopes of staying on as citizens. The biggest condo buyers on the market are parents looking for homes for their only child.

Another big trend in central Toronto is parents moving to be nearer to their children. That said, most condo deals made with our clients children involve properties in downtown Toronto. I have not met many young professionals who wants to stay in their parent’s neighbourhood. The younger set do not want to drive; very often, they do not even have a driver’s license. They value their time and money and prefer to walk everywhere. Our city is changing to satisfy this trend.
Toronto is the biggest city in Canada and Canada is the second best country to live in the world, after Germany. We all know how many people now want to live in Germany, so it’s hardly surprising that many Germans (150,000) move to Canada, Australia and New Zealand, every year.

By 2035, the population in Toronto will be 6 million people and 12 million people in GTA. Our city will be taller and apartments will be smaller, like in Asia or Europe. Canada accepts more than 250,000 immigrants every year and half of them settle in our city. We need at least 30,000 homes every year to accommodate them. More and more young people from Vancouver, Montreal and Calgary are moving to Toronto for a better lifestyle and solid jobs.

FamilienausflugWhat should we expect from investing in the Toronto real estate market in the near future?
In my opinion, we should expect a hot market and continued price appreciation in 2016 and 2017 because, compared with other countries and cities, our real estate is still very affordable due to low interest rates. My clients used to pay the same monthly mortgage payments for $400,000 homes when the interest rate was 6.5% as they pay now for $620,000 homes, with an interest rate of only 2.2%.Happy  sweet couple walking in city

At the same time, Canadians have more than $200 billion dollars sitting in GIC accounts with negative or zero appreciation, thanks to inflation. What is a better alternative? Almost any rental property with 20% down payment will bring the owner at least a 5% return on capital, without price appreciation. With average price appreciation at 7% per year, the return on capital could be 25% and more. Last year, the average price went up 9.4% in GTA.

Call myself or Nikolai if you would like to get together and discuss an opportunity to invest in or sell your property. We haven’t done any advertising for years: our business is strictly word of mouth referrals from satisfied people clients.