January 3, 2020 | 2020
Predicting real estate is part instinct and part guesswork. It’s better than a shot in the dark, but it’s not exactly done with scientific accuracy. Simply put, there are too many variables to flawlessly nail what will happen in real estate in any given year. That’s why so many people screw it up or fail to see a sudden change. That said, it’s not a bad idea to look at trends and pull out a few insights from working in the trenches of Toronto real estate. Though I cannot always guarantee my predictions, I will say that my estimations are more grounded in trends that are currently well under way.
If I could have one word to describe what will be in 202o Toronto real estate, it would be “rosy”. It’s been quite a few years since most predictors of Toronto real estate could be put forward without a sense of caution. This year, I feel there’s a much clearer path to an optimistic year, if you consider rising prices a good thing. The things that could drag prices down may not have much traction in 2020, in my opinion. We have returned to a familiar state in Toronto where strong demand, tight supply and more appealing lending options are going to move prices up more than in the previous three years.That applies to both prices and rents. More competition. More bully offers. More happy sellers and frustrated buyers/renters.
In terms of trends this year that will influence prices in Toronto real estate, here are there big 5 I think will have the biggest impact:
Last year, the population of the city of Toronto was one of the fastest growing in North America and the second fastest growing region in population growth just behind Dallas. See more details here. Mostly through immigration, we add 77,435 individuals to the city last year and 125,298 to the GTA. Even though we do see a lot of condos under construction in Toronto and the GTA, it is still not enough to keep the new influx of people. There is some talk of fast-tracking our rather slow development process, but for the time being this kind of growth, in addition to Toronto’s low unemployment, will keep demand for housing high.
LOW INTEREST RATES RETURN
They’re back, and they’re low! Low interest rates are going to keep buyers coming in and qualifying for more. At least for the first half of 2020, I don’t see interest rates going anywhere but down. On the cautious side of this equation, we need to remember that low interest rates are here because the government is trying to spur on spending to avoid a possible recession. Though there is not great fear of a recession, it is possible. Along with the high debt load that the average Torontonian carries, a possible recession does have some downside potential for Toronto 2020 real estate. Still, estimations of the average increase in Toronto real estate value in 2020 runs 5-6% year over year, which is much healthier than previous years. I suspect it will even be higher.
TRANSIT A TOP PRIORITY
For many decades, transit has not only been ignored, but blatantly neglected. That’s been changing in the past 10 years, and that change is only going to become more important in the years that come. 2019 showed us that even a Conservative government will recognize that Toronto requires a Relief Line, even if you call it the Ontario Line. There was a time when conservative governments would do very little, if any thing, to support public transit in this city. Times have changed. Even a conservative government can get behind Toronto transit. Unfortunately, they did pull the plug on Hamilton’s transit plans, which seems unfair to me.
So, where there is new transit in the works, expect to see prices go up more than the average Toronto neighbourhood. And where there is better connection to the city, expect better prices in communities outside the city, like Kitchener.
RAPID GENTRIFICATION IN NEW AREAS
For better or for worst, gentrification has been happening in Toronto since Yorkville in the 60s and 70s. Then we moved through Cabbagetown, Riverdale, and Roncey and Trinity Bellwoods in the 80s and 90s. And since 2000, we’ve seen the rise of Leslieville, the Junction, The Junction Triangle, The Distillery District, and Mimico. So what’s next? Well, if it’s usually a neighbourhood that has been previously underserved where houses are still well below the Toronto average, and condo development is just moving in.
Mount Dennis, Caledonia, Silverthorne, and Weston are all going to be emerging very quickly in 2020. They will be connected to the rest of the city like never before this decade when the Eglinton Crosstown is complete. I have seen a number of young buyers purchasing properties in these Western neighbourhoods like never before. And the cool coffeeshops are not far behind. Even dreary neglected intersections like Old Weston Road and St Clair are about the change dramatically where reasonably price condos like Scout and Reunion. Two condos priced quite a bit lower than the usual condo prices.
UNDER A MILLION WILL BE COMPETITIVE
Though there are many, many properties in Toronto, the most competitive will be those priced under a million. Why? Because that is where you will find the price point that most Toronto professionals can afford. And as prices go up, there will be fewer condos and houses under a million, and the prices will be pushed up even more.
If these price points feel far out of range for you, there are options! We will also see more creative ways of getting a foothold in Toronto real estate for those looking to get in, whether it’s co-ownership or through new options like Key Living where investors buy a property with those who cannot afford to buy on their own. More info at www.keyliving.com
All in all, 2020 will be a year in Toronto real estate that will be less cautious than previous years. Though anything can happen to make the market pivot in a different direction, this year looks particularly stable and strong. In fact, prices may rise faster than some people would like.