What does the future hold for real estate in Toronto?

Edited by Admin
What does the future hold for real estate in Toronto?
The team at HST Relief met last week to listen to CIBC's Deputy Chief Economist, Benjamin Tal, speak about the future of Toronto's real estate market with cautious optimisim.
What are the positive signs pointing to a healthy real estate market in Ontario?
For one, prices have increased in a ripple effect across the GTA and beyond, not just in the downtown core of Toronto.  This is the sign of a healthy, self-correcting market. Technology is contributing to this balance with more (and increasingly more) professionals working remotely, decreasing the demand for the downtown core and spreading real estate value outwards. New regulation led by Kathleen Wynne emphasizes high-rise, high density living. It's imperative to understand that our market is not merely a function of low interest rates - a common misconception.  Low interest rates only affect the capacity for prices to rise.  The underlying cause of rising prices in the GTA is lack of supply. The Greenbelt creates a limited supply of land, analogous to an island (like Manhattan). With legislative focus in Ontario on building high-rise, high-density living across the city, we're sure to see prices continue to rise for detached homes. 
Other good news? The American economy is in a relatively stable spot.  Canada is tied to the US economy more than ever and a US recession could certainly de-rail the Canadian market.  However, interest rates are rising slowly in the US, credit is fueling US consumerism, wages are rising and even housing prices are rising in many parts of the country. Indirectly, this is all good news for the stability of Canadian real estate. 
It's no secret that Toronto's housing market continues to grow at a staggering >10% increase per year.  The most central question for economists in Canada is how to slow and to stabilize the market without killing it. What might new regulation look like? A key question for real estate investors is how taxation and mortgage finacing may change over the next few years.
Here are a few examples of the types of changes investors should be prepared for:
  • Rising qualifing rates for mortgage financing
  • Larger minimum down payments
  • Reduced amortization length of mortgages
  • Modifying amortization length based on individual credit scores
  • Implementation of taxes for foregin investors (as recently in British Columbia)
  • Raising CMHC's 1M threshold and changes in mortgage insurance policies
What else may help stabilize the market?
Toronto needs to encourage its rental market to flourish.  Sub-prime mortgages are rising in the GTA, in part because people need homes with multiple bedrooms and there are very few viable rental options for growing families. Torontonians are taking on large, and sometimes risky, mortgages for expensive detached homes.  Expect to see more purpose-built rental buildings with larger units popping up across Toronto in the next decade.  In the meantime, stats show that rent is rising and people are staying longer in their rentals - more signs of a self-correcting market.       
Questions?  Email Brooke at info@hstrelief.ca

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