The Toronto real estate market has been a source of anxiety for many city dwellers for several years. Condo owners are thinking of selling because of tight margins with investments, and fewer people are buying houses due to skyrocketing prices that demand nearly 72% of one’s income for mortgage payments. There’s a seemingly never-ending fear of a bubble, and concerns about whether or not a condo will appreciate in value. While no one can ever predict the future, research by Ipsos and Altus Group point towards 2019 being a year of moderate growth.
So what is really happening with the Toronto real estate market? And what are some of the trends we can expect to see in 2019?
It’s important to recognize that Toronto’s market is in the middle of a crisis of supply versus demand. In 2017, condo vacancies were at approximately 0.7%. What this means is that we have a lack of inventory – there’s very little supply.
In theory, the solution should just be to create more supply (build, build, build!), but it’s not that easy. Construction limitations make this difficult and often impossible within Toronto. There are severe physical constraints, especially in regards to a limitation on trades. An example of a physical constraint is that there aren’t enough excavators, for instance, to be able to clear viable sites in time. On top of the shortage of supply, there’s a steady increase in demand that’s only going to grow. As a result of the aging Baby Boomer generation, the government is committed to bringing in roughly one million immigrants to Canada over the next four years to create a stronger tax base. We’re also seeing an increase in interprovincial migration, with a great deal of movement from British Columbia to Ontario within the last few years, up 38%. For the most part, Millenials have been living at home longer; many not moving out until their early to mid-thirties in some instances. The time spent at home means they’re saving up money while working in order to afford a downpayment on a condo in the city. It’s estimated that, within the next decade, approximately 700,000 Millenials will be entering the real estate market in Toronto and the GTA.
Beyond this additional demand are international students. Since 2015 there has been a steady increase in study permits that have been issued. In 2017, Canada issued over 317,000 permits. Many of these are for students studying in and around Toronto and the GTA. These students often stay a minimum of three to four years for their education, potentially staying on for work and, eventually, permanent residency.
All of this points to a supply and demand issue that won’t be going away any time soon. As Toronto grows, the prices you pay now for a property will eventually be met once newer buildings are completed.
It is a challenge to simply increase the currently low supply due to available resources, services, and the sheer time it takes to construct condominiums. Demand, which is already high, will only continue to climb, and property prices will continue to rise throughout 2019.
Be wary of news articles and opinions that suggest Toronto’s real estate market is in a “bubble” or going to crash because it looks like this is a great year to invest in a condo!
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