Photo by Canadian Pacific
The following article is a guest post by Aleksandra Oleksak, a native Toronto real estate agent.
Since we’re still just getting out feet wet (or frozen in the snow) with the new year, I thought it would be a good time to look back at Toronto’s real estate market in 2012 and look forward into what 2013 may hold for us. First, the world didn’t end! And the real estate market didn’t crash either. While there were a number of headlines and speculations, especially concerning the Toronto market, the new mortgage rules and a strong demand for housing kept the market afloat. Let’s see what else happened in 2012…
Looking Back at 2012
Condo market didn’t crash
While Toronto had the highest number of condo starts over anywhere else in the world, the condo market still pulled through. Although there were an abundance of units for sale in 2012, and prices did soften, there was no major crash. Instead, we saw a very strong rental market emerge with 1.7% vacancy rates and tenants dueling it out for the same units, while landlords counted their money all the way to the bank. So, if you couldn’t sell a condo you owned, then you most likely rented out your unit to cater to a low supplied rental market.
Housing prices remained stable
Housing prices grew rapidly in the first half of 2012 and steadied during the second half. Yes, the number of sales were down by the end of the year, but that was due to there not being enough desirable inventory on the market. As condos got smaller, families continued to favour homes for their growing family needs. And as builders built more condos and fewer homes, the uneven supply fueled the continued bidding wars – buying into neighbourhood lifestyles was another factor for bidding wars in 2012.
Two very different markets emerged
While we all know that condos and houses are different, last year more then ever, we started to look at the numbers separately. The two markets behaved very differently last year, because of unique factors happening in each, namely the large number of condo starts. The Toronto Real Estate Board (TREB) even introduced the MLS Home Price Index in 2012, so that we could analyze the numbers for housing and condos distinctively to have a more apples-to-apples comparison.
Looking Forward to 2013
Interest rates will not rise
Although the Canadian economy is showing modest growth, other parts of the world are not, especially our neighbours to the south. Canada not only makes decisions that are good for us, they are based on what is happening in the world. And with the U.S. Federal Reserve announcing that it won’t raise rates until 2015, I doubt Canada will before then. Fixed rates are at an all-time low, making buying more affordable. And with monthly rental fees as high as they are, especially in the downtown condo sector, the price of owning on a monthly basis may be the same, if not less.
Demand for housing to stay strong
As families continue to grow, they will need more living space and will want to upsize from condos to homes (or from homes to even bigger homes). With Toronto’s municipal land transfer tax still in play, owners are less likely to list, due to the upfront cost of purchasing; that, on top of the fact that there are more condo starts than housing starts, will result in demand continuing to outweigh supply. As for condos, first-time homebuyers will continue to share the market with investors, as well as baby boomers who are looking to downsize.
Condos are A-Okay
As mentioned above, first-time buyers, empty nesters, and investors will all be trying to buy a piece of the condo pie in 2013. While first-time buyers are looking for a new place to settle into, and empty nesters are downsizing, investors are seeing the longevity in holding onto units and renting out in our heated rental market, which will also continue on this year. So, although it may seem like there will be a large number of new units hitting the market in 2013, the demand will catch up at a more steady pace this year, as people become less afraid of condos.
These are just my thoughts based on the numbers and what I’m seeing in the front lines of the Toronto real estate market. For now, we have to sit back and see what 2013 has in store for us.
The following article was written, Aleksandra Oleksak, a Toronto realtor from Sage Real Estate. You can find more of Aleksandra’s blogging material at www.realtyqueento.com