Real Estate Cheat Sheet: will house and condo prices ever fall?
All the laws of Newtonian physics suggest that a thing simply can’t go up and up forever. And yet, Toronto’s real-estate market seems to exist in a universe where “down” isn’t even a concept. Everything goes up—the buildings, the prices, the population—and it can start to seem as though there’s no other way. It can’t always be like this, but, for now, the numbers indicate that things will remain as they are. Here, four reasons Toronto’s real estate is safe—for the moment.
1. Home prices are up, year over year
According to numbers from the Toronto Real Estate Board, there was no point during 2013 when Toronto home prices weren’t higher than they were during the same period in 2012. What’s more, the end of the year was particularly strong. In December, average sale prices were up 8.9 per cent over 2012. TREB expects average prices to continue to rise in 2014, faster than the rate of inflation, in part because city’s inventory of available low-rise housing is still considered low. In other words, supply shows no signs of catching up with demand.
2. First-time buyers will still get a rebate on the Land Transfer Tax
During his mayoral campaign, Rob Ford promised to repeal the Land Transfer Tax (LTT), a municipal levy on a property’s sale price. Ford was eventually forced to abandon his promise, because the LTT is a fantastic moneymaker. It’s a way for the city to capture some of the value of its thriving real-estate market, and its continual surpluses have been instrumental in balancing Ford’s budgets. Real-estate agents hate it, but it’s here to stay.
In 2013, Frank DiGiorgio, Ford’s budget chief, was openly musing about cutting the LTT. The way he proposed to do it was by eliminating a rebate program for first-time home buyers, so that their payments could be used to offset an across-the-board reduction. Fortunately for young couples and families, it’s looking as though the idea doesn’t have the votes it needs to become a reality. And so, if starter homes are still too expensive for some, at least the city won’t be exacerbating the problem.
3. The condo market is still chugging along
Now is an interesting time for Toronto’s condo market. A record number of new units are scheduled for completion this year. It won’t be long before we know whether there are enough buyers to absorb the supply. Even so, Urbanation, a market research firm, thinks demand is likely to remain high throughout 2014, though sale prices are expected to remain stagnant.
4. Rich people are still rich
A report by Sotheby’s International Realty reinforces a somewhat obvious truth: the rich are still rich, and they’re still acting like rich people. About 600 more Toronto homes and condos sold for over $1 million in 2013 than in 2012. It’s still a fairly rarefied market, though. There were just under 5,500 sales in that price range last year, and Sotheby’s says only 270 of them were condos. Maybe people still expect palatial estates in return for their multi-million-dollar investments. For them, there’s always Mississauga.
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All the laws of Newtonian physics suggest that a thing simply can’t go up and up forever. And yet, Toronto’s real-estate market seems to exist in a universe where “down” isn’t even a concept. Everything goes up—the buildings, the prices, the population—and it can start to seem as though there’s no other way. It can’t always be like this, but, for now, the numbers indicate that things will remain as they are. Here, four reasons Toronto’s real estate is safe—for the moment.
1. Home prices are up, year over year
According to numbers from the Toronto Real Estate Board, there was no point during 2013 when Toronto home prices weren’t higher than they were during the same period in 2012. What’s more, the end of the year was particularly strong. In December, average sale prices were up 8.9 per cent over 2012. TREB expects average prices to continue to rise in 2014, faster than the rate of inflation, in part because city’s inventory of available low-rise housing is still considered low. In other words, supply shows no signs of catching up with demand.
2. First-time buyers will still get a rebate on the Land Transfer Tax
During his mayoral campaign, Rob Ford promised to repeal the Land Transfer Tax (LTT), a municipal levy on a property’s sale price. Ford was eventually forced to abandon his promise, because the LTT is a fantastic moneymaker. It’s a way for the city to capture some of the value of its thriving real-estate market, and its continual surpluses have been instrumental in balancing Ford’s budgets. Real-estate agents hate it, but it’s here to stay.
In 2013, Frank DiGiorgio, Ford's budget chief, was openly musing about cutting the LTT. The way he proposed to do it was by eliminating a rebate program for first-time home buyers, so that their payments could be used to offset an across-the-board reduction. Fortunately for young couples and families, it’s looking as though the idea doesn’t have the votes it needs to become a reality. And so, if starter homes are still too expensive for some, at least the city won’t be exacerbating the problem.
3. The condo market is still chugging along
Now is an interesting time for Toronto’s condo market. A record number of new units are scheduled for completion this year. It won’t be long before we know whether there are enough buyers to absorb the supply. Even so, Urbanation, a market research firm, thinks demand is likely to remain high throughout 2014, though sale prices are expected to remain stagnant.
4. Rich people are still rich
A report by Sotheby’s International Realty reinforces a somewhat obvious truth: the rich are still rich, and they’re still acting like rich people. About 600 more Toronto homes and condos sold for over $1 million in 2013 than in 2012. It’s still a fairly rarefied market, though. There were just under 5,500 sales in that price range last year, and Sotheby’s says only 270 of them were condos. Maybe people still expect palatial estates in return for their multi-million-dollar investments. For them, there’s always Mississauga.){kind=link}
Why would you believe anything from the biased Toronto Real Estate Board? They
have a vested interest in keeping real estate overpriced as they
represent real estate brokers and agents. IN fact, condo prices fell about 1.5 per cent in the past year to
around
$433,000, according to the latest RealNet price index. Some economists
say that when you take the incentives into account, prices are down more
significantly. There are estimates that many of the incentives
out there amount to a discount of about 11/2 to 3 per cent of the
purchase price. Canada has the most overvalued housing market among 20
developed countries, says a report from Deutsche Bank.- almost 60%
overvalued.
I totally agree. When the sh!t hits the fan, watch out. I have been thru 3 to 4 real estate crashes in Toronto and it takes a lot longer to recover than USA.
The real estate market in Toronto will crash as sure as the sun rises in the East and sets in the West. It doesn’t even take an increase in interest rates (though rates will rise). Canadians are more indebted than the Americans or even the Irish in 2008.
The realtors sure like to promote the sales of condos. Sure they acknowledge that there is an increase in sales, but they claim prices are rising in the condo market. Lies. I see 30 units for sale in a 1 year old building now, and no one is selling. Prices have been adjusted about 5K and still no one wants to buy. Realtors and builders are the biggest problem contributing to the over-supply problem. With household debt highest in the world here in Canada, Toronto having the highest unemployment rate in Canada (highest in 5 years), incomes stagnant and jobs moving back to the US (Sears, Steel mills, etc.) and commodities dropping like crazy here in Canada the CAD is being brutalized (about time) from its artificial highs. Our politicians are a mess, and Canada is heading in the opposite direction of the US economic rise. As soon as central bank tightening or rate increases come we’ll see an influx of homes for sale and the prices will plummet due to huge supply and no demand. People who put 5% down on their homes will not be able to afford their mortgages with even a 1-2% increase over the next year or two. Keep buying everyone! Debt for all! Our population boom cannot be sustained by the decrease in jobs and the lack of competitive wages. I can’t wait for the crash. Thanks Canada. Where I want my money to be now? US!!! NOT CANADA!
I am not sure which area you all talk about, Markham is a hot condo market, prices stable, offers more than ask and sold within a week… May appear longer because of status certificate condition takes a week to get. Explain to me that the condo market is dying? Slowing down?
I am talking about the GTA, but more specifically Toronto and surrounding areas like Etobicoke. It is on the verge believe me or not. If you just look at the MLS listings there are so many new condo units for sale that have not been selling for months and some for almost half a year. There is a decline in sales no doubt even the realtors agree. The prices cannot be sustained. If anyone thinks otherwise then I want to see facts on just how well the Canadian economy is doing. Why do you think the CAD is falling? It is intended to remain low it is because the only way for our GDP to rise is through exports and manufacturing. There will be a record number of units on the market this year, and vacancies are increasing. The market will not look so great to investors. It is a very fragile state where a sell off could be triggered quite quickly given the deteriorating state of the economy. Check out Canadian household debt, unemployment figures and housing prices.
As long as you can carry your household comfortably without depending on appreciation you should be okay in a downturn, If and when the market drops, it will only be a matter of time before prices begin to increase again. Those sitting on the sidelines “waiting” lose the most
Great news: The sky is NOT falling! :) While it is easy to predict “the end of the world” in the Toronto Condo market, it’s wiser to look at the numbers. Q4 2013 Report shows that condo prices are up compared to 2012 and that the volume of condo sales also increased, especially in the last half of 2013. Report here: http://bit.ly/1jtLax9
Daniel MacQuarrie
http://www.tophousesforsaleintoronto.com
On so many levels, housing in Canada is way overpriced. On a per income basis, the historical norm is around 3 times income, you do that math on that one.
Another statement that is laughable is that the new condo developments are pre-sold, so there must be demand, right?
Not necessary.
New rules force builders to sell a certain amount before they can begin building. I know from a friend who works in the industry that builders are actually buying units themselves (backdoor) to be able to break ground and start building, hoping they can sell these units later on.
Look, real estate is like any other asset, booms and busts will always be part of the world.
Is Toronto real estate really worth $530 per square foot when Chicago is now $175 and the median wage is the same?
Of course not, but suckers keep buying because “real estate always goes up”…. sure
Daniel, if that’s your view, leverage up and jump in. Hundreds of units are available in CityPlace right now (among others). If you’re okay with frat boys partying all night, shoddy constructions, vomit in lobby etc, then you may just become a millionaire “investing” in our great condo market!
Victoria, I am sorry to hear you are having such a poor experience with CityPlace. However, my blog/report is about the Health of the Condo market in general for the year of 2013. One individual, anecdote about one Toronto condo is not enough information for investors, or condo owners to make valid, informed decisions. I hope your Condo improves, and you enjoy your purchase more fully in the future! :)
Prices of condos will not end up in the hole. Before everyone gets upset and blames another REALTOR up-talking the market, consider this that someone like me also invests so we watch the market too. For our own sake and for the sake of our clients, we have to keep it realistic. No fear mongering and no exaggeration either.
Here’s why the condo market is the way it is: Still the most affordable way of living (especially in the downtown core), population growth, immigration demographic, mortgage rates, job market trends and the fact that no rental buildings have been built in so many years now. So as for newly built rentals, condos are the only option available. You can read more at:
http://www.century21.ca/jagdeep.singh/Blog/No_Bubble_Trouble_for_Toronto_Condos
http://www.century21.ca/jagdeep.singh/Blog/It_Is_Not_All_Doom_and_Gloom_Real_Estate_Market_Remains_Robust
I choose to sit on the sidelines by renting in a fantastic area in Davisville for only $1300/month, and stashing loads of cash in my RRSP and TFSA (that made 10%+ returns in 2013). I travel to Europe every year, and eat at restaurants whenever i please.
I would confidently say that not many homeowners have the same freedoms as i do because their up to their eyeballs in debt. But thats fine, to each their own.
The real estate market is stable because there is demand for homes in Toronto and an ever decreasing supply of available homes. Basic economics, high demand and low supply equals higher prices.
FACT: The Toronto Real Estate Board reports the sales of homes and the prices they sold for without any bias or prejudice.
For All The Things That Move You: http://www.ChooseRemax.ca