How The Toronto Real Estate Market Has Evolved In The Past Decade
Values in real estate will either slowly or rapidly trend upwards over time. You can look back anywhere from 5 to 50 years and see a steady rise throughout the decades. Regardless of what transpires nationally or globally, Toronto has and will remain secure. Prices of condominiums, townhouses and detached homes have all increased substantially in the past 10 years. This is due in large part to the ever increasing demand created through significant population growth from immigration and the echo of the baby boomer generation. Our job sector is also what appeals to so many, as we are heavily service based and entertainment industry driven, with corporate offices of the world’s largest brands, including FaceBook and Coca-Cola. Our technology industry continues to boom, rivaling that of Silicon Valley. The fact that we have several of the best schools in the country is also what aids to the ever increasing demand.
The biggest change since 2009 was a vast increase in population, which the market undoubtedly reacted to. We have an average of 150,000 people coming in year over year from outside the country and other provinces. The Greenbelt Legislation maintains that we keep a certain ratio of natural landscape which has hindered are ability to build out. This has resulted in a Manhattanization effect, as we become more dense, we become more similar to New York. High-rise condos are continuously dominating our skyline as we have moved so far away from the principal residences being detached houses.
Property values specific to the GTA market double approximately every 10 years. In the city of Toronto, we have seen a drastic increase in gain on all forms of properties. The average price as of 2019 is $826,034, which is an additional $470,000 from 2009. Even with slight dips in the market, the values have raised. Condominiums, town houses and detached homes are all following this trend as demand each year is surpassing supply.
Buyer attitude has also evolved as the market changed. As population has continued to increase, people became more inclined to live in smaller spaces. There was essentially no choice but to become more comfortable with it. In this more business-focused world there is more emphasis on convenience and proximity to work. There is also an increased desire to experience the community. The biggest trend we saw in accommodations was people purchasing more condos than detached houses than they were in 2009. It all comes down to affordability.
The United States suffered from the Great Recession in 2008 due in large part to the housing crisis, this also impacted us as well due to our deep ties. This created a large dip in values for us the following year, but it became a significantly less issue in 2010. The Canadian economy is secure enough that it will ride back up. In order protect yourself in real estate from significant financial loss, ride out the recession until the market improves if you have the option.
The main thing influencing purchasing other than availability is government policy. The mortgage stress test was introduced in 2017 to protect buyers from mortgages they might not be able to afford by requiring a higher income than necessary to attain it. This diminished housing sales in 2018 as not only did it make it more difficult for people to buy, but many were hesitant as they didn’t know how this policy would affect them. The same year, the Toronto Fair Housing Plan was also implemented to create more affordable housing and to add an additional tax to non-resident purchasers. This resulted in it being more difficult for outside investors, thus creating an additional challenge for developers to create more projects. The process was made all of the more difficult with extended project approvals which were intended to create more affordable residences. The added increase of development charges put more restraint on builders giving them less opportunities to build.
Chris Slightham, President of Royal LePage Signature Realty, with his assembly of 1,100 realtors has a strong pulse on the current and future trends. When asked about what he predicts for the next 10 years in the GTA, he sees the trend of density and population only increasing. “The growth trends that we see happening now will only continue to increase as the data suggests this in the decades to come.” The main struggle that purchasers will have to deal with is more affordable housing. To combat this, we need government policies in place that directly aid home owners and increase the speed of approvals so that we can catch up with demand.
Regardless of a recession and policy intervention, over time housing values will not stop rising in the Greater Toronto Area. There is no indication that our population will stop increasing due to the continuously increasing potential of what Toronto has to offer. In real estate, all the data suggests success comes with patience.