January 8, 2015
Hey folks! Cheers to a new year and another chance for us to get it right.
We are already one week and a day into the New Year, and despite the cold, there is a warm patch lurking in the words to follow.
Last year, we went out on a limb and took a bold stance on a few real estate forecasts.
Our predictions for 2014 were premised on that year being a record year for sales on the Toronto Real Estate Board. We were just about the only ones to make that call.
Most financial institutions were calling for lower sales and of course a price correction that never happened.
Fast-forward today and those same institutions (along with CMHC) are now calling for a strong real estate market in 2015. Alas. We can only agree.
We also reported that the biggest challenge in the condo market wasn’t merely the number of units being built but rather an imbalance of the mix of units under construction.
It’s no secret that going forward bigger will be better. Simply put, we need larger units to accommodate changing buyer demographics and developers are already committing to more two bedroom suites in 2015.
The year also saw many ‘bears’ that were (and still are) negative on the Toronto real estate market.
These so called experts told you that younger homeowners will move to the ‘burbs in mass to start families; that mortgage rates will be 7-10% in the near future, and that real estate prices are overvalued.
Interestingly, I’ve observed that the ‘bears’ behind such comments do not usually reside in Toronto and have little or no clue about the vibe of the city & its varied social dynamics.
Yes, there is no doubt that a segment of younger homeowners will move to the suburbs seeking larger nests.
However, a far larger segment will likely choose to remain downtown where overall, convenience still reigns supreme.
Mortgage rates are not likely going anywhere significant for the next five years, and might I add – overvalued is an opinion not a fact.
The market will always determine price.
“Watch for these 4 Key Trends Impacting the Market”
1. To sustain current immigration flows to Toronto (both foreign and local), 35,000+ new dwellings are required annually.
- Low rise construction (i.e. houses) is falling and currently produces only 11,000 units per year.
- The balance has to come from the high rise or condo sector.
- The math speaks loud and clear: current condo completions of 20,000 units annually will still lead to a supply shortage, plain and simple.
2. Most of us disdain commute-times. Despite government commitment to improve public transit, nothing major will occur for at least another seven years.
3. An increasing majority of people living downtown are choosing to go ‘carless.’ Weather permitting, they prefer to walk or bike to work.
- Thus the savings offset here can be directed to more expensive housing options.
4. Millennials value ‘free time’ above all else. Such translates into Starbucks as opposed to grass cutting or snow shovelling, a different lifestyle entirely from baby boomers, who have traditionally shaped the housing demand dynamic.