Still crazy after all these years. The Toronto real estate market has risen steadily since the mid 1990’s – except for a brief decline in late 2008/early 2009 that was followed by a rapid rebound – and continues to be a bright spot in the world economy. Despite all the bad news and market uncertainty through the summer months, the Toronto market has continued to be very active and prices have continued to track about 7-9% ahead of last year (see chart below). Bidding wars are not quite as common as they were in the spring, but still common enough.
Toronto Area Prices Mid October 2011
While the market is very strong, Finance Minister Jim Flaherty has said that there is no indication of a price bubble that will lead to a market correction. Going forward, economists are expecting that Canada’s economy will grow a bit more slowly than was projected last spring, but that it will still continue to grow. Canadians’ paychecks are also expected to grow, despite all the economic uncertainty in the world, though of course at a much lower rate than before the recession. Investors are recognizing that Canadian real estate in general, and Toronto/Vancouver real estate in particular, are among the few places to invest with a good prospects for a positive return, and international money is accordingly flowing in the Canadian market. This positive situation can only get better once the uncertainty around the European debt crisis gets resolved over the next few months. Overall, there is every reason to expect that the Toronto real estate market will continue to be very strong over at least the next 6-12 months. With slowly rising incomes, low and stable interest rates, and a growing (albeit slowly) economy, the conditions are “just right” to sustain our amazing market. Goldilocks marches on.
There is only one less-than-bright spot on the horizon: because of the torrid pace of condo construction in central Toronto, there is a risk that condo supply could get ahead of demand over the next year or so and that condo prices might fall. For now, the condo market is still hot, with strong demand for both resale condos and rentals, but the sheer volume of new construction, which will eventually translate to a flood of condo listings as investors (the primary buyers of these new condos) put their units on the market, suggests that supply will ultimately surpass demand. There have been lots of warnings over the past ten years or so that too many condos were being built, and up until now they have all been consistently wrong – but maybe this time they will be right. Perhaps not the ideal time to invest in a downtown condo?