Last week, the Toronto Star hosted a virtual panel discussion on a topic that's on everyone's minds: the Toronto and GTA real estate market. They invited subscribers to submit their questions, and brought in six experts to provide insights on what's happening right now – and what things could look like in the coming months and years.
For those of you who are Toronto Star subscribers, you can watch the discussion here. But if you're not (or you don't have an hour to sit through it), that's OK. We watched it for you and took lots of notes. Here are the top takeaways:
It's not much cheaper to buy outside the city anymore.
There was a time when you could sell your place in the 416 and buy in the 905 or beyond with a good chunk of money left over. But that pandemic has changed that. The skyrocketing demand for bigger properties in traditionally more affordable areas has pushed prices through the roof. In Durham region, for example, the average price has shot up from $650K to $930K. Compare that to Toronto's $1M average price, and there isn’t much of a difference anymore.
Moving out of the city isn't a new trend, however. Over the last five years, baby boomers have been moving to “ex-urban” areas like Kitchener-Waterloo, Kingston and Muskoka as they retire, and millennials have been heading out to the suburbs and beyond for affordable, family-friendly homes. The pandemic has accelerated that trend, and one factor that's swaying younger buyers is the advancement in technology and connectivity in smaller towns. The experts expect this “evening out” of urban and ex-urban population to continue.
There is concern about the impact this trend is having on smaller communities. As urban buyers (with urban incomes and budgets) move further and further out, affordability is becoming a factor: locals are getting priced out of their own communities.
The downtown condo market is alive and well.
Despite the exodus to the burbs, the condo market is headed back to where it was before COVID – if it's not there already. The panel members are projecting strong, continued growth for a few reasons:
Shifting demographics. According to Dana Senegama, Principal Market Analyst for the CMHC, households are getting smaller, so the demand for compact living will always be there. Many people don't want to care for big homes, and they want to live near work and close to hospitals. And while people are certainly looking for larger spaces due to the pandemic, that doesn't necessarily mean they want detached houses – just look at the current demand for bigger condos and townhomes.
Downtown is awesome. No matter how many square feet you have in Cambridge or Kingston, nothing compares to what Toronto has to offer – especially in the downtown core. “With the inherent vibrancy of our downtown, people are looking to come back,” says Dave Wilkes, Star columnist and President and CEO, BILD. “I think we will see a return to a strong market very shortly.”
Prices have stabilized. There hasn’t been a big increase in prices, but the demand for condos downtown is there, especially in newer buildings. The experts are predicting about 4% appreciation in the condo market over the next year.
The office isn't dead.
People are done with work from home and doing everything virtually. They want to go back to the office.
“Six months ago, everyone was saying ‘the office is dead,’” says Jennifer Keesmaat, CEO of the Keesmaat Group and former Chief City Planner of the City of Toronto. “Six more months in...all of us are saying ‘Get. Me. Off. Zoom. I want to go to the office. I want to be with people.’ And that is...driving the downtown condo market.”
Think the market is hot now? Just wait till immigration resumes.
Once the borders open again, the demand we’re seeing now will become even more intense. Of the 400K immigrants a year the government has promised to admit, 115K are expected to settle in the GTA. Immigration won't just drive demand from buyers who plan to live in properties, it will spur investors as renters come flooding back into the city.
“We have a shortage of supply,” says Jennifer. “We need to be building significantly more homes than we are building today. And if this can be happening at a moment when immigration is on pause, just imagine when it reboots... things could potentially go crazy.”
Part of the reason for the low supply is that boomers aren’t selling.
As the largest group of homeowners, baby boomers are usually the greatest source of resale supply. But here’s the thing: they aren't downsizing right now. For one, they are the age group that's at the highest risk for COVID, so they’re avoiding risk. And right now, nobody's looking for LESS space, so downsizing is on hold as well.
The homeownership rate has jumped during COVID, and millennials are driving the market.
Over the last year, a huge number of 25- to 35-year-olds became homeowners: their purchases account for 60-65% of all transactions. Homeownership rates for that age range are now 50%, with 25% of those having bought in the last nine months.
Real estate is a long game, and “buy and hold” is the best play.
A big concern for buyers right now is overpaying. The fear is that if prices drop, they’ll lose money when they sell. Here’s something to consider: if you sell within a year or two, losing out is certainly a possibility. The market fluctuates year to year, and as we've seen recently, it can vary wildly month to month as well.
But historical data says this: if you hold onto a property for five or more years, you won’t lose money. The numbers from the last 60 years bear that out, and as Toronto continues to grow, there’s no reason to expect that pattern wouldn’t continue: with a growing population, homes tend to rise in value faster than the rate of inflation. Toronto shows no signs that it will stop growing, and with demand come rising prices.
Looking to get solid insights into when and where to buy and sell in the Toronto and GTA market?
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