Everyone is always asking us what we think we’ll happen to Toronto’s real estate market. So without further ado, our predictions:
- Based on the June statistics, and our unscientific feelings in May, the market was already slowing down before the government changed the mortgage rules.
- The new 25-year amortization cap will disproportionately affect first-time buyers, who often rely on a longer amortization to get into Toronto’s housing market. Buyers who were already on the edge of affordability before the changes may well be forced to rent for a longer period of time. First time buyers are believed to make up half of the market – and they’re the ones who got us through the market decline in 2008.
- If more first-time buyers do in fact turn to the rental market, we’ll see even more pressure on rentals, and we’re already at an all-time vacancy rate low of around 1%. With few new rental buildings to choose from, there’ll be an even higher demand to rent investor-owned condos, driving rents up (and thus investor profits).
- We are seeing 2 distinct markets taking shape in Toronto: the market for single family houses and the market for condos. There is certainly more condo product on the market, which means condo buyers have more options and sellers aren’t in the same driver’s seat they’ve been in for the last few years. Since June 1, 64% of downtown houses sold at 100% or more of asking; in that same time period, 24% of condos sold at 100% or more of the asking price.
- Certain segments of the condo market may take a short-term hit. For example: there are at least 5 new condo hotels with $1,000/sqft+ prices all coming to market at the same time: Trump Towers + Ritz Carlton + Shangri-La + Four Seasons + Bisha. That’s a lot of million dollar condo-hotels for our city to absorb all at once.
- New condo developments (and yes, there are many) are looking at their options – 3 projects that launched earlier this year have already been cancelled. I expect we’ll see a few more projects in the pre-sales cycle not reach their sales goals and be postponed, thus easing some of the supply of new condos.
- September will be the true test of the market – the answer to the question: are we just experiencing the usual summer slow down or will we see a period where the market becomes more balanced (ie more sellers to meet the buyer’s demands). September is historically the second busiest time for Toronto real estate.
- Toronto home Buyers and Sellers have proven before that they are a resilient bunch and not prone to knee-jerk panic reactions. They weathered a crazy spring market that saw new sale and price records AND unprecedented negative media coverage.
A more balanced market is good for everyone-it protects our long-term investments as home owners. What do you think?