It seems that the residential real estate market in Toronto is overheated. Two major Canadian cities with higher than average housing costs are Vancouver and Toronto. Out of these two though, Toronto real estate prices are cheaper compared to Vancouver.
But how does Toronto’s housing market compares with the rest of the world?
CBRE, the largest commercial real estate services company in the world, released its 2019 report on housing prices in 35 major cities in the world. In that report, Toronto ranked 12th most expensive with an average of $575, 557 (USD), a 1.4% increase from last year. Hong Kong and Singapore are the top 2 most expensive, respectively.
Also, Toronto was ranked 2nd most overvalued real estate market in UBS AG’s annual global real estate bubble index. What keeps the Toronto house market up? Here are possible factors why Toronto home prices continue to increase.
Job Opportunities, Immigration and Foreign Investors
Toronto earned the nickname Silicon Valley of the North, thanks to its fast-growing tech industry. And this is just one of the many industries in this city. The good economic growth in Toronto attracts big businesses from all over the world. Because of this, there are many opportunities for job and it can be expected that more people will move in to the city to be closer to their job.
Resonance Consultancy Ltd, a Vancouver-based firm, also recently named Toronto as the best city to live in Canada, 17th in the world. This is a factor why many immigrants choose to live in this city than any other place out there. Tons of foreign investors are also pouring in, despite the government placing a foreign buyer’s tax of 15% on real estate. All these affect the supply and demand in the housing market, hence the high prices in homes.
Low Interest Rates and High Costs in Construction
Banks offer low interest rates for mortgages. This is a good thing for buyers as it makes homes more affordable. In the long run, however, home sales rise as more consumers are able to take low interest loan. This will cause a rise in demand and will result to an increase in house prices. Also, building a house is expensive in Toronto. According to Rider Levett Bucknail (RLB), an international property and consultancy firm, there is a 10.17% increase of construction costs in Toronto last year.
What can you do?
After knowing the factors that affect the house prices in Toronto, what are some things you can do if you find Toronto house market not affordable?
With the recent pandemic, there is a significant drop in rental rates because more rental units are available in downtown area with decreasing demand as tourism froze and students going home to provinces as learning shifted to online classes. This might be a good time for you to consider renting.
When you rent, you can set aside the rest of your money and make profit so in time you can buy your own house. You can also continue on saving money so when a good deal comes, you can buy a home. Also, it is always a wise course not to live beyond your means. Make sure you buy a house that is not too big but just enough for you. This will help you not to spend too much of your money on housing.
Another option you can take a look at is condo market. Many first time buyers now buy condo units because there is not much supply for single family houses and detached homes can also be too expensive. As things slowly return to normal from the pandemic and sales are once again starting to bounce back, now is the time for you to buy a condo home.
Toronto condo market is still strong despite a short downturn in prices. According to TRREB, the average price of Toronto condos is $672,000. This is still the most affordable option compared to the detached home average price at $1.52 million. Number of condo units sold in June 2020 is at 1, 287, it is less compared to last year but certainly improved from the past 3 months of this year. Condo units sold in May 2020 was just 727.
Pre-construction condo market has picked up after a quiet spring season. There are many pre-construction projects on sale with higher prices compared to pre-pandemic and certainly to summer 2019. If anyone is wishing to buy his/her condo unit, this is a good time to do that. I am observing that with each new release the prices are going up as is always the case.
I hope this article answered your question regarding Toronto real estate. If you have any questions or need help in buying a new home, contact me at 647-834-9928 or send an email to email@example.com.