With the media rife with reports that Canada’s condo market is correction-bound and the housing market is fragile, it can be hard for purchasers, both investors and end users, to make sense of fact and fiction. In fact, it can leave many would-be buyers sat on the fence, asking the question:
Should I buy a condo in Toronto this year?
The short answer is, yes. If you sift through scare-tactic headlines and study the market fundamentals, you’ll find that 2013 is shaping up to be very lucrative indeed. The recently-released Baker Report honed in on a few facts about the market, collected from various sources, which prove that 2013 is poised to be a great year for the Toronto condo market. Not just reading but understanding the reports from media outlets is the first step to figuring out what the market’s actually doing, and how to analyse key factors you should take into consideration before buying a condo.
I’ve made a list of market fundamentals that will help you weed through the dramatic headlines and get the facts about what’s happening in the T.O. market – take a look...
- People love condos. Or put otherwise, there’s tangible demand for condos in Toronto. An increasing number of tenants and investors alike are choosing apartments and condos as opposed to single family homes, and affordability is a big reason for this. In 2000, 23% of sales in the GTA real estate market were apartments. Last year, it rose to 51%.
People love Toronto. When looking at market fundamentals, you want to consider population growth drivers in the area. What use is buying a condo if no one’s there to live in it? Toronto has always been a popular settling spot for newcomers to Canada and domestic immigrants – in fact, last year 120,000 residents arrived in the city. According to the Government of Ontario, the GTA is poised to grow a whopping 44.6% by 2036. By this time, there will be an estimated 9.2 million residents in the GTA!
Toronto skyline – 1976 – the city was missing many of its defining landmarks...and condos
- Condos are the future. In keeping with provincial intensification policies, urban areas such as the GTA have been encouraged to move up, not out, meaning the number of high-density condo buildings springing up across the area is increasing. The government affirms this type of development is more sustainable and economically friendly, so the urban “sprawl” is becoming a thing of the past.
- Asset prices are affordable. Getting your hands on a high end, sought-after condo in some of the city’s trendiest districts doesn’t have to be expensive. The average price of a condo in the city in Q4 2012, according to the Toronto Real Estate Board, was just $332,410.
- Interest rates are low. The Bank of Canada hasn’t budged from keeping the overnight rate at 1.0% since September 2010, and shows no signs of changing pace any time soon. This is good news for borrowers, who can enjoy rates as low as 2.74% on five year fixed mortgages.
Toronto skyline – present day – shows the upwards development and demand for central city living
- Vacancy rates are tight. The amount of new, purpose-built rental accommodation in the GTA is slim to none, so investors are snapping up units in condos instead. As the population continues to boom, so too does the demand for living space. This has resulted in record-low vacancy rates in Toronto and surrounding areas. In the GTA, the vacancy rate sits at 1.2%, and in Toronto it’s at an all-time low of 1.4%. According to stats from Urbanation and RealNet, condo rental activity is particularly high; last year 15,355 units were leased, while 15,292 were resold.
- People make money through real estate. Stocks and bonds may come and go, but real estate will remain a solid investment even when the market fluctuates slightly. In fact, numbers in the Bakers Report reveal that over the past 30 years, the worst decline in home values across Canada was only 4.6%. Over the past six years, the TSX is down almost 9%!
Supply vs demand. With limited space and increasing immigration rates, the supply still doesn’t meet the demand for condo city living. Just 32,824 units (high rise and low rise combined) entered the market in 2012, which has gone down year over year. Investors would be wise to snap up a unit to enjoy tight vacancy rates and increasing rents.
Completions - Greater Toronto Area Low Density & Other High Rise Condo Total Units 2004 34,069 9,890 43,959 2005 30,130 12,607 42,737 2006 27,561 14,103 41,664 2007 25,791 7,944 33,735 2008 25,407 13,499 38,906 2009 17,713 12,587 30,300 2010 16,445 14,948 31,393 2011 15,953 17,878 33,383 2012 14,069 18,755 32,824 Production of Low Density homes have decreased year over year. Total units entering the market are not sufficient to fulfill the growing population/demand. Data compiled by Sunny Batra
Mark Twain famously stated, “Buy land, they’re not making it anymore.” Real estate has always been a wise investment – people will always need somewhere to live! Toronto is no exception. Market fluctuations are inevitable, but the fact remains that putting your money into a condo in Toronto will yield big returns, in a short and a long term.
Slowdown may have occurred in sales, but prices have been increasing across the GTA especially in the condo market. Any real slowdown that has occurred in the early months of this year has been minimal, and can largely be attributed to tightened mortgage rules and negative media reporting. When you look at the numbers on paper, it’s clear that the market fundamentals are there for an amazing 2013. Mark Twain also said, “If you don't read the newspaper, you're uninformed. If you read the newspaper, you're mis-informed.”
For help understanding these and other market fundamentals to know what the market is really doing, get in touch with me. I can help you wade through the numbers and find the perfect home and/or income-generating Toronto condo for you.
Enjoy the warm weather!
Your friend in Real Estate,
Sources: The Toronto Real Estate Board, Baker Realty Report, RealNet Canada, and Urbanation