If I had to sum up the 2013 Toronto real-estate market in as few characters as possible, I’d probably settle on a giant question mark. Even as an agent, I am still mystified by how the heck the market kept booming these past 12 months. So what can we expect going forward?
We’re now in the 17th year of a long-term up-cycle, which some economists would point out is about double the length of an average real-estate cycle. Still, the Toronto market shows no signs of slowing. Oh, we’d like it to; in fact, we’d love it to! All of us would gladly accept more affordable homes, more choice (meaning more inventory), and the freedom to purchase the home of our dreams without having to compete against multiple offers. But unless some unforeseen crash occurs, 2014 will likely hold more of the same.
Despite media reports, “expert predictions,” and economists near and far suggesting that the Toronto buyers and sellers were in for a rude awakening in 2013, the average price of a Hogtown home actually increased by 11.3 per cent between November 2012 and November 2013. It almost feels like the more people want the market to drop off, the more it continues to ramp up.
Even more startling is that the 2013 condo market was not just healthy, but thriving. The average unit price increased by 10.1 per cent from November to November. And though some might surmise that the influx of “luxury” towers like the Trump, Shangri-La, and Ritz Carlton has artificially driven up the prices, the sheer amount of small, one-bedroom condos being developed will offset the impact of those pricey hotel-condo units.
Lastly, for all their talk of “cooling the market,” finance minister Jim Flaherty and the Canadian Mortgage and Housing Corporation haven’t really been able to curb it, either. Two changes that, I believe, could put a stop to our real-estate madness are higher borrowing rates and the potential boost of home down payments from five to 10 per cent. But whether Mr. Flaherty will take such an aggressive stance remains to be seen.
Looking ahead, 2014 might well be dubbed “the year of the condo”—a record 42,959 units are forecasted for completion in Toronto, more than any year in our city’s history, almost double the number completed in 2013, and much more than what is forecasted for 2015. With this many units readying for sale, and with so many of Toronto’s pre-construction condos being purchased by investors, the question becomes whether the market will be able to absorb the inventory.
In fact, the concept of “inventory” is what shaped the market for residential homes in family neighbourhoods—a lack of inventory being responsible for the dramatic increase in prices. Setting aside stats from the Toronto Real Estate Board and Canadian Real Estate Association, I can tell you, from experience, that almost every time a single-family home in B-plus condition in a decent neighbourhood was listed, 40 or 50 buyers would present with genuine interest; it wasn’t unusual to see over a dozen bids on offer night. Unless it’s two or three houses competing for buyers’ bucks each week, prospective homeowners are not going to see a dip in prices in 2014. The supply-and-demand equation is just too far out of favour.
Every December, I’ve written a year-end blog post or article asking, “Is next year the year that prices finally drop?” I ask, of course, because I don’t know—nobody does. Many analysts seem to feel that if they predict a market correction annually, when it finally happens, they’ll be right. Whether the market is up, down, or sideways in 2014, buyers and sellers will still need to be just as savvy, knowledgeable, and informed about what they’re settling for—and settling in. December is never too early to start on those real-estate resolutions.