August 18, 2016 | Toronto Housing Market
When it comes to population growth and its relationship with real estate, most would assume that a growing city would have bigger and healthier property sales prices. And for the most part, this would be true. Shrinking cities with a declining population, like Detroit, often have their real estate wealth decline with their size. With dwindling prospects for jobs, bulldozer operator may be one of the busiest jobs in Detroit because many houses on a given street are torn down when they become derelict or abandoned. For growing big cities like Toronto, Vancouver, San Francisco, New York or even Houston or Dallas, real estate prices generally grow along with the population over the long term. It seems simple. Growing cities have growing real estate wealth, and declining cities have declining real estate wealth. But it’s not that simple. When looking at growing cities, it is very important to remember that not all cities grow the same. Population growth and real estate prices may have a direct relationship, but there are other important things to keep in mind that effect real estate prices in growing cities.
For Toronto, our growth has been pretty impressive from a North American perspective.
In the GTA, Toronto has grown from 3.7 million people in 1986 to 5.5 million in 2005 to 6.3 million now. It is estimated to be closer to 7.3 million people in 2021 and 9.1 million people in 2036.
Many cities may be growing in North America, but Toronto’s numbers are impressive. It will put a lot of demand on the housing market and the city’s infrastructure.
There are American cities that are of a similar size to Toronto with the same projected population growth. Our Texan cousin cities of Houston and Dallas are good examples. If you look at the real estate prices in these American cities, you will see that prices are not as high as in Toronto.
If they are growing at a similar rate and are a similar size, why is real estate more expensive in Toronto now and very likely in the future?
For one very big reason, Dallas and Houston have more room to grow. They can easily build more housing as they expand outward because they have the room to expand.
Cities that do not have room to grow become much more expensive. Take Vancouver. Yes, there is plenty of talk how foreign investment has ramped up the prices here, but they also have another thing pushing prices up: Mountains. Vancouver has grown to the side of the mountain. Now it is going to have a hard time expanding beyond these boundaries without reaching out far to expand beyond the mountains. More expensive cities like San Francisco also have no room to expand out.
Toronto is in an interesting situation because it has the Green Belt policy that restricts development within an area around the GTA. The point of this policy is to protect farm land in case of a food crisis, to protect the environment and to discourage urban sprawl. I really do believe in the ideas behind the Green Belt policy.
Unlike Vancouver, however, the thing that is preventing our city from physically growing out is self-imposed, and I suppose it could be un-imposed.
Another important factor to consider with population growth is the why. Why is this city of Toronto growing? If we look at Calgary and Edmonton, we can see cities that were expanding quickly during the oil boom, but because they are reliant on oil, their growth will be tied to the boom/bust cycle of a resource economy. Toronto is more diversified which protects it from boom/bust cycles. There are a lot more industries at play here, from finance to manufacturing to start ups.
Now I don’t want to be a cheerleader for why Toronto is better than other cities. This is not a blog on how great Toronto is compared to other cities. Toronto’s growing population could pose some problems.
First in my mind, Toronto’s transit system does not have enough vision. I will give our various levels of government some credit for pushing through bigger projects like the Eglinton Crossway and the UP Express (which I have grown to love), but wow, we need a lot more vision here and a lot more big planning. We need a Relief Subway Line in the city and we need an integrated transit system throughout the GTA to move people quickly in and out of the city because real estate prices in the city will be too expensive for many in the future. We need quick transportation past the Green Belt so we don’t have as much pressure in the Green Belt to build housing for a growing population. This may also relieve the pressure on prices. Like all cities, we need to grow in the right way. If there’s too much traffic, lousy urban planning and poor transit, Toronto will lose out to other Global cities. I think we have a pretty amazing place here, but we need to think bigger. We need to come up with solutions for our growing city that makes it better. We have to stop playing catch-up for the population growth that has happened and start planning for the population grown that is very likely heading our way.