No Bubble Trouble
The latest (and heartening) analyses of Toronto’s housing market
Sometimes it feels like real estate watchers aren’t even talking about the same city when they’re discussing Toronto’s market. Mere weeks ago, columnists and analysts predicted government regulation and oversupply could sap some of the energy from Toronto’s condo boom and hot home sales. Now, the latest flurry of opinions on the market are optimistic.
The latest yay-sayers:
• A report by Central 1 Credit Union posits that Toronto home values will keep climbing for the next three years and could hit an average of $523,000 by the beginning of 2014 (the current average home price in Toronto is about $500,000). The report also suggests the hysteria over an oversupply of condos is unwarranted. Thanks to the city’s burgeoning population and low-ish interest rates, Helmut Pastrick, Central 1′s chief economist, believes the market will hold steady for a really, really long time: “My 25-year projection for prices would be upward.”
• The Globe and Mail took a look at demographics (with charts!) and concluded that a steady increase in young folks will keep things afloat. Unlike in many developed nations, the number of 20-to-44-year-olds in Canada has been growing steadily since 2007. And since that’s the main home-buying demographic, the logic goes, property values won’t tank.
• In a breathless article, the New York Times focuses on the demand for downtown condos, making the condo boom sound not only sensible but pretty too. The story contains nary a peep about a possible bubble burst or even a market cool-down, but it describes Toronto’s gleaming towers and a “skyline shimmering like a diamond necklace.”
That’s all very reassuring, but would-be buyers would be wrong to think Toronto real estate is a risk-free investment.
Comment: Prices were $21,360 in 1966 and $500,000 today – 25X more – which sounds like a good investment to me. But for a few years in the early 1990s, price have risen year-over-year for 46 years now. But truth be told, people need to go back to looking at houses as places to live, NOT as investments.
Over the weekend, Bank of Canada Governor Mark Carney warned buyers to be careful. Though he didn’t say Toronto might be heading toward a bubble, Carney did offer a few sober words: “In some of our major cities, without question, valuations are extremely firm…and so some caution is warranted in that environment.” Maybe one of those new condos right off the Gardiner isn’t such a great idea after all?
Comment: A bubble is rapid inflation followed by rapid decline. We have increases averaging around 6% for the past 15 years, hardly that rapid. And there has been no decrease. So, by definition, no bubble. Some caution is warranted, sure, that makes perfect sense. But please, let’s not blow things out of proportion here.
Contact the Jeffrey Team for more information – 416-388-1960
Laurin & Natalie Jeffrey are Toronto Realtors with Century 21 Regal Realty.
They did not write these articles, they just reproduce them here for people
who are interested in Toronto real estate. They do not work for any builders.