May 3, 2018 | Toronto Real Estate Bubble
In the past few years, a Swiss bank called UBS has been publishing a list of the cities most at risk of a real estate bubble. In their latest publication, guess who ended up at the top of that list? Uh huh…Toronto. If you own property in Toronto, this may prompt you to panic now, but don’t do that just yet. You may want to consider that this study was published in September 2017, and likely used data from Toronto’s very frothy Spring of 2017.
Toronto may have been on the top of that list, but we were not alone. The UBS Global Real Estate Bubble Index does determine that there are 8 cities in the bubble risk territory including Amsterdam, Hong Kong, London, Sydney, Vancouver, Munich, Stockholm. If you’re curious, this real estate bubble list can be found here.
In a sense, they were right. Toronto did have a run up in prices in 2017, particularly in the early Spring of last year, then they fell like a stone into the summer. So, let’s talk about that. So many real estate salespersons want to discuss the good stuff, but let’s look at the fall in real estate prices now that we have a good year of it behind us.
Since last Spring, there has been a lot of confusion on just what is happening in the Toronto real estate market. Are we correcting? Was it a simply realignment of the Toronto real estate market? Is this just the beginning of a great big real estate bubble that is yet to pop?
For me, if I can take the entire GTA including Mississauga, I would say the summer of last year was a reboot of the Toronto real estate market. Prices were going up very quickly in a way they have not in a very long time. In the early Spring of 2017 the government rushed in with all kinds of legislation to cool the market. After that, everything just effectively stopped for two months. I’m not sure if the legislation itself worked to cool the market or just the efforts of the government scared the buyers to stop and wait.
To be clear, by using the term “reboot” , I don’t wish to diminish anyone who lost out in last year’s real estate market. Whether any loss on a real estate purchase last Spring was brought on by rising interest rates, government intervention or by real estate psychology, there was a change. Some people did lose out.
But who were they? To me, the losing out certainly did not happen to everyone. Some buyers who bought in Toronto at at very height of the Spring market in 2017 have made double digit appreciation on their properties. Others have gone in the other direction.
To date, I would generally say those who purchased at the higher price points over $2,000,000 on detached houses outside of the old city Toronto seemed to have lost out the most. Two things are clear to me. A detached house in the Spring of last year sold for less in the Spring of this year. The suburbs didn’t seem to have recovered as much as many parts of Toronto.
For those who experienced loss last year, it would still not be the same across all GTA locations.TREB stats reveal that North York certainly fell more in value than Mississuaga. I would say a detached house in North York would still sell less than last year, but a condo would not have the same kind of loss year over year.
Downtown, neighbourhoods like Riverdale are doing quite well this year in the detached house category. Same goes for much of Leslieville, Trinity Bellwoods, and High Park.
Also on this year’s winning side of things, one bedroom and studio condo apartments downtown have sold for much more than last year. Condo sales have reported gains in many Toronto neighbourhoods. Outside of Toronto, the condo sales vary. Some regions have small increases. Some are still a little lower than last year. But overall, condos have not suffered nearly as much as detached houses. Even semis and row houses have not suffered as much as detached houses.
So, this downturn, or reboot, or bubble burst, or whatever you want to call it, really isn’t very consistent throughout the city. Downtown has been quite competitive this year, but I don’t see that it has spread to the suburbs or even some outer regions of Toronto.
I will be very curious to see where UBS has to say about Toronto in their next report. There are parts of our city that are taking two very different directions when it comes to the real estate market. Some property types like condos are going up, while detached houses in North York and stagnating and still down from their 2017 heights. Of course, this next study will take the city as a whole. Will they still consider us a bubble risk now? Has there been a mini-correction? Regardless, in Spring of 2018, I am seeing a much more healthy market than last year. At this point last year, things had started to slip. The stand-off between buyers and sellers had begun. This May seems less strained and very different throughout the city. There are very competitive bidding wars in some neighbourhood with ten or more offers on offer night. Some houses, on the other hand, are on the market for months.