This is one question that we as REALTORS® get asked the most. Although just like the question, the answer has different implications for different people. My advice to both the person asking the question and the person answering the question is to try and understand the answer in relevance your personal situation and goals. Are you selling, buying or just planning on leasing? The answer has to be specific to your particular objective.
Toronto has gradually slipped into a land supply issue. It is not as abundant as it used to be, especially after the inception of Green Belt. As such, the logical solution is to increase density. This is being achieved by reducing the dwelling sizes and expanding vertically. With the development charges at an all the time high and expensive initiatives to build green, builders are pushing the pricing envelope.
Last year, we saw projects like Fly Condos in downtown Toronto being sold at approximately $500 per sq.ft. Although a different type of a project www.thebishacondos.com is hovering around $700 per sq.ft. price point. Then there are projects comparable to Bisha hotel and condominiums going at close to $1,200 per sq.ft. But take heart, there are still amazing values (www.2brcondo.com) out there at $500 per sq.ft. What does all this tell you? Well, all the factors mentioned above combined with the influx of new migrants settling into GTA, are contributing to higher prices. 44% of the GTA’s new housing market and 78% of high rise condo market is in the City of Toronto.
A quick poll done earlier this month involving a small group of REALTORS®, builders and others associated with the real estate industry had mixed feelings about the market. 45% believed that fear prevails in the market while another 46% were of the opinion that there is optimism. 56% thought that economic conditions, including interest rates and employment, were important when buying and only 16% thought that price was a criterion. The perception is that more than half of the purchasers are investors and even then 67% of the industry experts thought that the price will go up in the next six months. This is comforting for the condo market since 52% felt that condominiums will be highest in demand in the years to come.
As per the statistics published by the Toronto Real Estate Board, we are roughly at the same price point as we were 20 years ago. This has to be viewed in conjunction with the mortgage rates because that is a key component to affordability.
Hovering around 20% two decades ago, mortgage rates today are still at an all time low. To ensure that Canadian real estate market doesn’t go belly up like in the US, most lending institutions are qualifying buyers at fixed rates even if they are getting mortgages at variable rates. That’s approximately a 3% rate buffer in terms of affordability. Furthermore, the new condo real estate deposit structure has been pushed by most developers to 25% down payment, 5% of which is payable at the time of interim occupancy. This is a shift away from 15 + 5% model and quite a departure from 5% down payment sales. The new home market also remains affordable. All this foresight has lead to robust market conditions where prices are gradually trending up and not exploding.
Hence folks, it is a healthy market. So get out there and do what you need to do. Wish you a very happy real estate.