Despite More Changes in Store, Toronto Area Real Estate Market Continues to Thrive
The Toronto area real estate market of 2017 was a roller coaster, as various new policies and rules impacted on sales and prices.
While more changes are in store in 2018, Charles Jaque, director of sales and marketing for the Milborne Group, says there’s no reason to be concerned for the health of the market. The GTA condo market will continue to thrive, and there’s good reason to believe the low-rise sector will also be robust.
Last year was a record-breaking one for the GTA condo market, with 36,429 new units sold and prices up a staggering 41 percent in 2017 from 2016, according to an Altus Group report. The low-rise market was more volatile, with sales and prices dropping in many areas and just 7,700 new single family homes sold.
One of the many drivers for the dynamic condo market has been politics, according to Jaque.
“Politics have made Toronto and Canada an amazing place to live. It’s safe, clean, it has good schools. When there is trouble in the world, the Toronto market does well,” says Jaque. “Toronto is the most multi-cultural city in the world and is open to immigrants.”
Government policies governing immigration and banking have helped make Toronto the economic powerhouse it is, he says.
The Fair Housing Plan (that among other things, imposed a 15 percent tax on foreign buyers), caused people to take a step back from the low-rise market in mid-2017 and slowed the pace of sales to 2016 levels, says Jaque. However, due to affordability, condo prices and sales volumes continued to rise in the 416, and in key 905 neighbourhoods such as Vaughan, and beyond.
“We’re expecting to see a tremendous amount of demand on the upcoming DTK Condos by IN8 Developments and Westdale Properties in downtown Kitchener, as real estate investors are looking for more affordable options to Toronto,” says Jaque.
Downtown Kitchener is just an hour away from Toronto and minutes to some of the best post-secondary institutions in the world. The city is growing quickly with new employers and businesses entering the market, and condos there will be less than half the price of Toronto.
There still are those buyers who are determined to buy in downtown Toronto, regardless of price.
“The new norm is that in the downtown core, new condo prices are a minimum of $1,000 a square foot,” says Jaque. But rising prices haven’t dulled buyers’ desire. People from around the world familiar with high density cities see opportunity in that market. Demand is also coming from those who recognize that the downtown has become “a fun place to be” as a centre for socializing, as well as an economic and cultural hub. That’s why projects launched downtown this year will be quickly snapped up, says Jaque.
Another location creating a lot of buzz in 2018 is Downsview Park, which is well served by subway and major highways. One of the interesting new projects coming to that neighbourhood is TAS Design Build’s The Keeley, to include townhouses, condominiums, and its own park.
“People from all over the GTA are interested in this project because of its location and connection to highways,” says Jaque.
Don’t expect a drop in real estate prices, says Jaque—in fact, expect condominium prices to continue to rise. The City of Toronto recently doubled development fees and coupled with increased construction costs, developers have little choice but to increase prices. A lack of supply will also exert upward pressure on prices.
Other factors include changes to the Tarion home warranty program intended to better protect consumers. For example, Tarion will now provide coverage on residential condo conversion projects where existing buildings are turned into condos or new builds incorporate some of an existing building’s features into a design. The enhanced protections for buyers will be good overall for the industry, says Jaque, as well as improvements in design, customer care, and how the Tarion process is carried out.
Changes to the Ontario Municipal Board, which will put more decision-making power in the hands of local governments and politicians, will also impact the market.
“It’s going to be important for constituents to have an understanding of local projects and if they support affordability, they should support new development,” says Jaque. “They must make themselves heard if they support a project.
“Planning departments are understaffed and we need people at public meetings who support projects to stand up,” he adds. “If the city only hears from people who oppose developments and start disapproving projects, supply will drop and that will drive prices up further.”
Jaque says with affordability continuing to be an issue, there will be a trend to smaller units. But because the Toronto area market is so competitive, he predicts some developers will attempt to set themselves apart with premium developments filling the gap between mid-market and luxury projects. Developers are also filling new niches in the market and this will be one of them, says Jaque. Other projects that focus on end user experiences, and those that include affordable units, will also do well, he predicts.
He also expects the low-rise market to recover in June from the dampening effect created by last year’s Fair Housing Plan.
Chinese buyers will continue to play a significant role in the GTA market, says Jaque. While the majority used to come from Hong Kong, there’s been a shift to buyers from mainland China, who are interested in Toronto real estate, whether it’s to accommodate children they are sending to Toronto for post-secondary education, or to settle here.
“Prices and sales are at an all-time high despite so many changes,” says Jaque.
“It’s a testament to the resilience of the Toronto market.”
Tracy Hanes is a GTA-based writer specializing in real estate.