Real Estate Cheat Sheet: change is coming to the Toronto market, but nobody knows when
A month and a half into 2014, the experts are still expecting this to be a good year for real estate in Toronto—for sellers, that is, who continue to benefit from exceptionally high average sale prices. Looking further ahead, though, the fate of the market is still uncertain. At least one group of analysts thinks 2015 will see home values take a modest dive. Here’s what else is being said about the Toronto’s housing market.
1. Average home prices are still up, year over year
The good news is that most of the gloomier aspects of Toronto’s real estate outlook are still only gloomy in theory. In the here and now, the Toronto Real Estate Board’s numbers from January show that average sale prices for homes in Toronto were up 9.2 per cent, year over year. Looking only at detached family homes, the increase is even more striking: prices in that category were up 14.8 per cent.
2. The outlook for 2015 is uncertain
And yet, the drumbeat of skepticism continues unabated. A report from TD Economics says that Canada’s—and especially Toronto’s—housing market is overvalued, though the precise amount of overvaluation is difficult to measure. A sudden increase in interest rates could cause the “correction” that Toronto investors have been bracing for. TD thinks the change is likely to be gradual. Its analysts foresee slower price growth in 2014, and a possible 1.2 per cent decrease in average home prices in 2015.
3. Retail space will continue to be sought after
The strength of Toronto’s retail scene—at least, at the high end—is obvious. U.S. brands like Saks, Nordstrom and Target are moving in. Developers are proposing ambitious new projects that would bring luxury retail to new parts of downtown. Even Union Station is getting in on the action. And so it’s hardly surprising that commercial brokerage CBRE is predicting that 2014 will continue to be a big year for retail in the city core. In fact, a report by the brokerage says Toronto alone is home to more than half of Canada’s new retail development.
4. The way we buy homes could change
Thanks in part to a recent high-profile sale in Mississauga, interest in real-estate auctions is starting to pick up locally. Kingston realtor Manson Slik tells the Star that he’s pushing auctions as a solution to problems with Toronto’s listing system, which he says encourages sellers to manipulate buyers into participating in frantic bidding wars. Naturally, there’s still plenty of bidding in an auction, but some realtors think the format can take some of the emotional stress out of the process, while still netting a fair—or more than fair—market price for the seller.
5. Rental units are flooding the market, but don’t fret
The demand for rental residences in Toronto peaked in 2012, says a new report from CIBC, and the massive influx of condo units onto the rental market will nudge the vacancy rate up 0.4 per cent. At the end of 2013, this trend had everyone from the everyday income buyer to the Bank of Canada worried—especially since correction in condo market could be felt elsewhere in the economy (like, say, the construction industry). Fear not, says the report’s author Benjamin Tal. The changes mean that rent inflation will ease, but “the magnitude of the projected supply/demand mismatch suggests a much gentler adjustment than feared by many.”