This time of the year is usually a pretty good time to do a litmus test for the Toronto real estate market in 2016. Like Goldy Locks choosing her porridge between the too hot and too cold option, this is the time of year for Toronto real estate that’s not too early or too late to get a sense of how the Spring market will likely play out. The data from the first busy real estate month of March has rolled in, and we can get a good sense of what the rest of the Spring market may look like.
Those many reports and blogs and article on the Spring market findings for Toronto will often throw around the term “growing concern” when discussing Toronto and Vancouver. It’s a term that has been linked to these two cities for several years now. These are the two Canadian cities that just can’t seem to keep prices from levelling off or cooling down. Here are some of the stats you may have seen from the Toronto Real Estate Board:
- Prices Up A Lot. The average price for all types of homes are up 12.1% from March of last year.
- It’s a Seller’s Market. A low inventory of houses and low rise residential homes have led to bidding wars where buyers outnumber sellers.
- Detached + 416 area code = Amazing Prices. The average detached house is $1.17 million and heading to $1.2 million in the 416 area code in Toronto as compared to $836,217 in the 905.
If you follow real estate news, you may have seen this elsewhere in the last few days. So, let me try to give you some perspective on how this info is being received. You hear that? That is the sound of crickets… You would think this info should be met with strong emotion. These are impressive stats or horrifying, depending on how you see things and if you own real estate. Still, the response is a bit lacklustre. We have, in a sense, become numb to impressive numbers. So, it feels a bit like business as usual. Prices are higher, It’s tough to buy. Yada, yada, yada… Then everyone says this is the last year this will happen and discussions about affordability follow, and then prices don’t level off or come down as predicted.
So, instead of bringing up these points, let me bring up a few things that are not being discussed enough, but I think are relevant to the real estate obsessed in Toronto. These are the things that are not grabbing headlines when the stats come out, but are important in gauging where Toronto’s market may be heading and where to buy. Here are some important points I would like to make based on my experience in 2016 so far:
- Condos are Doing Well. So much discussion goes toward houses because of their steep appreciation, but condos are also appreciating in value but not such a stark way that makes people concerned. Condo concerns are usually focused on oversupply, but supply may be slowing down some, especially now that so many developers are switching to building rental properties. Now, this is not to say that all condos are created equal. They are not! Choose wisely. If, for example, you are considering Urbancorp condo these days, you may want to do a little research before you purchase…
- Rental Markets are Important Indicators. Why?You ask… What does renting have to do with buying and selling property? Well, rentals show us something. We all know that a lot of purchased condos are from investors who, in turn, often rent out their condo. We also know that developers are building more rental properties. You would think that this would lead to a oversupply of rental options, but it hasn’t. Why not? Because there are a lot of folks who are priced out of buying or are taking longer to save up a down payment. So, there’s more demand on the rental market. I think it’s part of a paradigm shift for Toronto where we will have more people renting in the future like other bigger cities such as London, Berlin and New York. We may even have middle class Torontonians remaining as renters more and more.
- Two Bedroom Condos are the New Starter Home. The price of buying a starter home can start around $650K in the newest of emerging neighbourhoods. For those who cannot afford that or would prefer to stay closer to downtown, then the two bedroom to three bedroom condo is not a bad idea. Thing is, Toronto has not built enough of them. So, they have become competitive.
Yes, as TREB data indicates, 2016 is off to the same strong start as 2015 and 2014 and 2013 (well, you get the idea), but strategy has never been more important right now. Sellers, just becasue prices are high does not mean it is easy to sell your home. It’s easy to sell it for a decent price, but for top dollar you want a rock solid strategy. Buyers, same for you. Competition is tough. But there is hope! With the right strategy, I was recently able to help two clients purchase a detached three bedroom house with parking in an established neighbourhood with a decent home inspection and great schools for under $900K. Buyers, don’t fear the stats. Strategy is every thing.