Toronto real estate prices up 290%
Excerpt from an article by Tony Wong – Toronto Star
When Kaija Ryynanen moved into her home in the upscale Yorkville neighbourhood of Toronto in 1981, she was taking a risk.
For one thing, she had purchased one of the first condominiums to be built in the area, for the not insubstantial price of $110,000.
“Back then, condos weren’t considered a real home, so it wasn’t easy to get a mortgage,” she said yesterday.
But the 1,400 square foot condo – the smallest available in the building at the time – turned out to be the best investment she has made, appreciating by more than 400% since the day she purchased it.
A report by ReMax Ontario Atlantic Canada confirmed something Ryynanen has known all along: If you bought a Toronto home 25 years ago, you’ve done well. Not spectacularly well, mind you, but good enough for an investment that also serves as shelter.
The average price of an existing home rose by a compounded annual rate of return of 5.6% a year over that time frame, or 290%. The upside, however, is more dramatic in sought-after areas such as Ryynanen’s Yorkville location.
“I’ll never sell it, it’s such a great area,” said Ryynanen. “People thought condos were a passing trend, but look at the neighbourhood now.”
According to ReMax, the average price of a Toronto home in 1981 was $90,203, rising to $351,941 at the end of 2006.
In the top seven markets, real estate values increased by a minimum of 5%.But the key is long term, since timing can be everything. While the average price of a home tripled between 1985 and 1989 from $109,000 to $273,000, those who bought at the top of the market in 1989 saw an unprecedented meltdown in the market for six years straight when the market bottomed in 1996 at $198,000, or 27% less than what they paid.
Toronto has been in a strong bull market for homes over the past 10 years, with sales hitting 83,000 units last year, just 1% shy of 2005′s record-breaking number.
The Toronto market is expected to have another 5% increase in housing values by the end of 2007, according to ReMax. But that’s the most optimistic forecast of any real estate company so far. Other estimates range from a low of 1.8% by housing analyst Will Dunning to 3.5% by Royal Lepage.
“Pretty much consistently across the country, the last half decade has been stronger than in the 90s,” which has caused much of the run-up in recent real estate values, said Dunning, who sees price growth slowing more significantly this year than in previous years.
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