Is it a bubble? Maybe. Maybe not. But you can’t ignore a 23% price increase!
I joined a real estate industry in 1999 and since that time, the concern that I have heard over and over again from buyers was the possibility of a repeat of the terrible 1989 housing crash. Prior that crash, from 1985 to 1989, the average price of a house in the GTA increased by 113%. In other words, the market experienced an unprecedented growth of 20% per year, over those five years. How did it happen? Basically, you can put it down to the low unemployment rate in the 1980s and large influx of immigrants to the area, which helped to create the bubble.
When I ask homeowners why they think it happened, the answer is always something like: “Everybody thought that they had to buy a house; it sounded like the best investment.” People were buying and selling houses, hoping to make a fortune. The consequence, however, was an artificial increase in demand.
Sound familiar? This year, the average house price in Toronto increased by 23%. Developers decided to profit on this market by building condos, mostly in downtown Toronto.
During the peak of the bubble in the mid-80s, the mortgage rate reached 12.7% (does not look like 2.8% mortgage today!) Coupled with the early 90s recession, a spike in unemployment and a drop in the inflow of immigrants to the area, housing prices in the GTA collapsed. Between 1989 and 1996, the average price in the GTA declined by 40%. Downtown Toronto was hit the worst with an over 50% decline in the value of a home. It took 13 years for the average price to recover in the GTA.
So, what’s different in today’s Toronto real estate market? Should be worry about it? Is it a bubble? You can always find warnings and red flags, but what is a real picture and why do people pay more and more for a home in Toronto ?
Reason Number 1
Our city is growing. The population of Toronto has increased by 200,000 over the last 10 years. From 2.6 million to 2.8 million, in 2016. Not as fast as we thought it would be, but it is still growing.
The population of the GTA as a whole has increased by 1 million from 5.8 million to 6.8 million people.
Reason Number 2
Toronto is evolving into an attractive city for people to live in. We have good schools, luxury real estate, job opportunities, world class hotels, restaurants and cultural events.
Reason Number 3
Toronto is the preferred Canadian city to live and work in, particularly for young Canadians. Vancouver is nice, if you’re ready to retire. Montreal is great too, but there’s a shortage of quality jobs and you have to be fluent in French.
Reason Number 4
Thank you overseas investors for your willingness to invest in our city. Overseas buyers, particularly those hailing from China, are driving the Toronto real estate market today.
A few pieces of advice from a real estate professional:
- Watch what the overseas buyers are doing and do the same. They like properties in good locations better than money.
- Keep buying freehold homes in Toronto and GTA.
- Refinance your house or condo and use a fully tax deductible line of credit to invest in your second, third or more properties in Toronto.
Give me a call for the professional advice: what to buy and where to buy it. Remember that real estate is our biggest and safest investment. Not everyone can make million in our workplaces, but almost anyone can do it by investing right.
Love you all!
Hope to hear from you soon.
What Toronto’s real estate market will be like in 50 years
The average home will cost $4.4 million
Current average: $622,000
Yes, you read that right. And yes, it sounds crazy. But if we’d told people in 1970 that the average cost of a house in Toronto would grow from $30,000 to $600,000 over 50-odd years, they wouldn’t have believed us either. Over the past few decades, housing costs in Toronto have risen by an average of 3.5 per cent every year. If demand for housing keeps growing—and it will, since the population is expected to double—so will the prices. The upshot? Toronto will become a city of renters, and home ownership a luxury reserved for our plutocratic overlords.
A One-bedroom apartment will rent for $1,600
Current average: $1,100
Right now, 45 per cent of households in Toronto are rentals, and that number is expected to swell as real estate becomes increasingly unaffordable. The market hasn’t kept up with demand: only five per cent of new builds over the past 10 years have been devoted to rentals. That’s starting to change—purpose-built rental housing in Toronto is projected to grow by 75 per cent in next decade.
How Toronto’s population will change over the next 50 years
In partnership with the Martin Prosperity Institute, we bring you a semi-scientific glimpse into the future of Toronto. Here, what’s in store for the city’s population
The 21st century is no longer young or new. Its early years are behind us, and Toronto has settled into its new identity: a hot mess success. We grapple over how to clean city streets and air-condition crowded subways and lay an inch of new track toward Scarborough, whether above or below ground. Even now, Toronto can’t keep up with its own growth. By 2066, the future will have shaped the city in ways we haven’t imagined.
Over the next 50 years, the city will continue to grow at a thrilling rate, as the population doubles and the density rises dramatically from some 4,000 people per square kilometre today to more than 7,700 in 2066. Our biggest challenge will be where to put everyone. The condo cranes will never leave the skyline but become movable fixtures within it, marching outward from the core, colonizing suburbia to its furthest reaches. By 2066, downtown Mississauga will be nearly as dense as downtown Toronto is now.
What Toronto’s skyline will look like in the near future
In partnership with the Martin Prosperity Institute, we bring you a semi-scientific glimpse into the future of Toronto. Here, the city’s most exciting upcoming skyscrapers
BY TORONTO LIFE
Where: Yonge and Bloor
Who: Mizrahi Developments
How Tall: 80 storeys
The One will be among Canada’s tallest towers at a monstrous 998 feet, with some 400 spacious condo units perched on top of an eight-storey shopping mall.
Where: Bloor and Sherbourne
Who: MOD Developments and Tricon
How Tall: 50 storeys
Built on top of the Gooderham mansion, the Selby will be a purpose-built luxury rental tower with plenty of family-sized units.