The Elusive – and Exclusive – Art of Buying in Toronto
We all know the deal: buying real estate in Toronto can seem next to impossible unless you’ve got an inheritance, started your own successful tech company, or got really into that GameStop stock.
From increased asking prices for properties, to homes being sold within a day of being on the market (sometimes even hours), to homes going for hundreds of thousands over list, buying a home in Toronto can seem as difficult as, say, getting your hands on a limited-edition purse.
1. Supply and demand: the exclusivity price
Home prices are directly related to supply and demand within an area. When demand for a property is high, and supply is low, prices will be higher – it’s why homes in NYC, Toronto, and Vancouver are always high. We’ve seen this expand to other markets, like Hamilton, as well. When people get priced out of their first choice (living in the city), they look to buy where they can afford. Since they’re obviously not alone, this inevitably drives up the prices in those expanding areas as well – think of Brooklyn, NYC!
The same goes for that precious Birkin bag you’ve had your eye on: there’s only so many, and they cost a pretty penny. Thousands of other people just like you have got their eye on it, so unless you’re willing to put everything on the line, you may have to settle for something different. (Note: this isn’t necessarily a bad thing! The people who bought early in cities like Hamilton are feeling pretty good about what they paid to be the early adopters!)
2. Can I interest you in low interest rates?
Even if your parents gave you an early inheritance, chances are, you’ll still need a mortgage to purchase a new home. And with rates at less than 2%, the low cost of borrowing a lot of money is very appealing if it means you can enter the real estate game. This means more people are clamoring to buy homes, even if they may run into trouble financially.
Credit card-funded expensive handbags are no different. Sure, that $5,000 price tag seems a bit high, but spread out over 24 easy monthly payments, why, it’s nothing at all! Until, of course, those interest rates start to sneak up on you …
3. Is new always better?
When there’s a mismatch between real estate supply and demand, new homes can help fill the gab. But of course, there needs to be enough new homes built to keep up with demand. Since most of the land in Toronto is already spoken for, land available for new home construction is really a suburban phenomenon. However, new homes built in the suburbs can reduce pressure in the city’s housing market, as people who have the option or interest in leaving for the suburbs can be accommodated. Having said this, due to COVID-19 and the rising prices of raw materials like lumber, there’s been a decrease in the number of new homes being built (not to mention an increase in furniture costs), meaning they’re going faster than – well, than a designer handbag.
Top-end designers usually only make a set number of items, and they’re no strangers to the scarcity of certain supplies. But just like that 5-bedroom Victorian with a claw-foot tub, the vintage editions are extremely sought after.
4. We all need a little space
When COVID-19 hit, we weren’t sure how long we’d all be stuck at home. But a year has gone by, and many of us are still working from a 1 + den with a partner, or conducting online school in the kitchen. The need for space became more and more important, and people who were in no rush to leave the cushy condo life were suddenly in the housing market along with everyone else who was still waiting to buy a house.
Depending on what’s hot in the market and on-trend, what you need in a purse changes as well. We all know that feeling when we buy a cute little purse, but our enormous new iPhone won’t fit inside. Suddenly, you’re back in the game with everyone else, trying to catch a deal on that roomy tote that can fit your laptop, lunch, and yes, even that tiny little purse.
5. Fear of missing out (FOMO)
Following the acceleration of house prices and drop in condo values, many renters began to fear missing out on the opportunity of ever buying a home. Even though prices were still high, that long-awaited bubble-popping began to feel like just a fairy-tale, and the best time to get into the market was as soon as possible.
Well, you guessed it: expensive handbags are no different. When that limited-edition L.A.M.B. purse that you were so excited about first hit the shelves, did you jump at the opportunity to buy it because you were afraid Gwen Stefani would get out of the handbag game forever? I get it … FOMO is real.
6. More condos, fewer houses
Purchases are up in the condo segment, where there’s more listings vs. houses. There are fewer buyers for condos (most people with kids living at home are looking for more space or yard access), and the condo supply is plentiful, especially downtown.
But think about where Toronto is: bordered to the south by a Great Lake, and protected by the Greenbelt to the north, east, and west. The city is kind of boxed in, isn’t it? While living even further afield than the Greenblet is an option, I’m assuming most of you aren’t interested in living year-round in a boat on Lake Ontario. This was certainly a viable option during the work-from-home times, but as more and more people return to the office this fall, either by employer request, a change of scenery, or the collaboration benefits that come from working together in-person, people will find this commute long and intolerable. Further, these extra commuters will only further exacerbate traffic and commute times, not-to-mention the ever present construction delays in the city.
Look at it this way: condos are the purse that many people have, as they’ve been more quickly and plentifully produced. There’s more on the market with fewer buyers. On the other hand, houses are the super-lux LV bag; the price is going to be more expensive, as the supply is lower, and the demand is higher.
I think we’ll be seeing a rebound of interest in small condos in and around the city centre once people start to experience their lengthy and unpredictable commutes firsthand: people are going to want their small properties in the city back. The Toronto condo market has historically ebbed and flowed, but has always rebounded, and is still a solid investment.
7. Opening the borders
As the global health situation is seemingly (fingers-crossed!) coming under control, we’re going to see travel and immigration to Toronto ramp back up. Along with their luggage and personal belongings, these new neighbours will bring further demand on the housing market here.
And it won’t just be a spike in the demand for home purchases: international students returning to the city will put pressure on rental inventory. Rental prices in the city have been increasing since the spring, and we’re starting to see multiple offers returning as the norm.
With new students, there may be less demand for ultra deluxe items – like that limited-edition PRada bag – and more of a demand for small, functional, yet still expensive items. Either way, opening back up for business is going to lead to a busy fall with limited home and rental inventory at the end of 2021.
8. COVID-19 strikes again
Even though your Uber-Eats bill may not show it, people have been spending less money – fewer trips, no expensive bar nights, and those new sweatpants cost less than a splurge pair of heels. As a result, many of us have extra funds saved up for our housing or construction budgets that allow us to make a large purchase. We’re also much more sensitive to the fact that anything can happen, so saving our cash for a rainy day may not be the best option – better to purchase or renovate that home now to enjoy it longer, and go a little wild on that expensive satchel.
So, there you have it! Buying a home really is like buying a limited-edition purse (which doesn’t explain why I have several bags in my closet …). Which one are you going to choose for your next big purchase? The lovely waterfront condo, or that Birkin bag you’ve wanted for years? Remember – if you choose the condo, I’m here to help you find your perfect home!