Once again articles of the Canadian real estate market are flooding the news. Sadly, most of these articles are negative. Experts are making statements on the overvaluation of the market, the increasingly harsh conditions for buyers and the supposed impending market crash. It’s important to separate the Canadian market from the GTA/Toronto real estate market. Most buyers often think of their home buying transaction as one with a lot of upside. They get a roof over their head, they get to invest in themselves and at the end of a undefined period of time they will sell and most likely have generated some tax free income.
For the past 15 years, despite numerous comments that the Toronto Real Estate market is over-valued and is going to crash we have continued to see prices rise and inventory levels lower From where I sit this is all really positive. Below are a some true facts about our housing market. While I recognize I may not be able to pull all the doomsayers over to the bright side of the road I personally will continue to swim upstream and be very happy and positive about my real estate investment.
7 Reasons to Feel Positive About the Toronto Real Estate Market
1. Interest Rates Will Continue to Remain Low
We have been enjoying record level low interest rates for the past several years and predictions are, while they may rise a bit by the end of this year, it won’t be anything dramatic.
2. Strong Mortgage System
“A number of new federal regulations have been implemented over the past couple of years to ensure consumers are protected in the case of a rate increase. What this means is that any consumer applying for a mortgage* needs to qualify at a significantly higher rate to ensure they could withstand increased payments due to potential rate increases”, says Lena Ohanjanians, Mortgage Broker with Ultimate Mortgage & Finance Solutions (mortagewithlena.com)
*5 yr. fixed excluded
3. Limited Land
True fact – we are running out of land on which to build homes. With the protected Greenbelt region to the north, Lake Ontario to the south and an already dense area in between the most logical way to support the continued demand for homes is with high-rise condominiums. I predict most street level parking lots will become a thing of the past as more and more condo projects are built. Even in the suburban areas of the GTA newly planned communities often include one or two condominium buildings.
More and more people are looking to live downtown. Immigration levels to the GTA are up from 100,000 /year to over 150,000/year. There has also been an increase in:
– the number of couples downsizing and returning to city life
– corporate head offices returning to the downtown core in order to recruit the employees who no longer wish to make the commute to the ‘905.
5. In Comparison
Vancouver has the highest average sale price in the country.
For a world-class city, Toronto’s real estate is much more affordable in comparison to both domestic and international cities. Take the average selling price in Vancouver, $819,336, and compare it to the average selling price in Toronto of $587,505. If you consider the prices of similar properties in cities like New York, London and Hong Kong, Toronto real estate is a bargain! This explains why foreigners are eager to buy in the Canadian market.
6. Scarce Sellers
The two key words in 2014 were: Low Inventory. The reduction in the number of sellers in the market is something we’ve seen for the past few years, basically since the land transfer tax increase. I have noticed more and more people are staying put in their existing homes and doing renovations or adding additions to suit their changing needs. They are already familiar with the neighbourhood, they love the schools and economically it just makes more sense. This trend will continue into 2015, further driving up the price of homes in the GTA.
7. Low Vacancy Rates
Recent stats have shown that the rent control laws in the GTA deter developers from building rental apartment buildings. But a city filled with young professionals who need a place to live means that vacancy rates of condo units will remain low – around 1% in Toronto. If the units are occupied the prices cannot crash. There are also statistics that point to less turn over within the rental sector – simply put tenants are moving less.