Overview
As a new Torontonian, I have quickly learned two things:
- Torontonians are obsessed with real estate.
- The condo revolution in Toronto is no trend.
It is nearly impossible in Toronto to avoid headlines and unsolicited advice warning us that Toronto is in the throes of a housing bubble, and (lookout friends!) this cannot last.
As we continue in what seems to be year 12-14 of the housing upcycle, does this notion of a housing bubble make sense? Aren't bubbles supposed to burst?
On October 30th, the University of Toronto's Rotman School of Management hosted a packed house of industry leaders for the Toronto Life In Conversation series event– The Future of Toronto Real Estate, which focused on exactly this.
The question posed to the panel which included industry experts, Craig Alexander, of TD Bank; Paul Bedford, former chief planner for the City of Toronto; Paul Golini Jr., of Empire Communities ; Eve Lewis, of Woodcliffe Landmark Properties; and Mazyar Mortazavi, of TAS., was simply:
"What is the single most driving factor of housing prices in Toronto?"
Overall, the panelists agreed, the Toronto economy is strong, affordability is good and specifically, the relative affordability of condominiums makes for a realistic entry point to the market for first time buyers and immigrants. Overall, buyers are confident in the stability of our market (what bubble?), and a lot of that confidence stems from low interest rates, which makes for cheap debt.
Counting the number of cranes in the sky may lead you to believe that Toronto will soon have a surplus of condominium units. However, construction of new units, of which there are 100,000 currently in development, is directly in line with the city's growth. Experts estimate that the Toronto population will hit 3-3.5 million people by 2031 and 13.5 million by 2041 in the G.T.A., so don't expect a surplus of vacant units – and subsequent drop in condo prices - any time soon.
Interestingly, there was some debate amongst panelists as to the lack of off-shore investors in the Toronto condominium market (contrary to Vancouver) and that international investors not, in fact buying up condos by the bucketful. Instead, local buyers make up the majority of purchasers who are purchasing units as investments to rent and hold on to for either themselves or their children.
Much conversation focused on the definition of 'home' and that the white picket fence just doesn’t cut it anymore. Lifestyles are changing and people want to live, work and play in the downtown core, which has become much more liveable and vibrant than say, 15 years ago. As we are already experience, the trend of raising families in condos will continue, and developers and the City will have to work together to create urban spaces, infrastructure and schools that accommodate this.
But what about the "Bubble?"
Craig Alexander predicts that although there may be slight increases over the next few years the Bank of Canada "must wean people off of cheap debt, but it can't go cold turkey". He points at the Millennial Generation as one to watch, and predicts that a slight increase in interest rates will affect the confidence of those who did not live through the dark days of interest rates at 18% and who believe that rates hovering around 2.5% are normal. This, Alexander predicts, may contribute to a cycle where buyers pull back. A little.
Luckily for all of us in the industry, long term support for the condominium market in an increasingly cool and globally coveted city is looking great. The takeaway message: Don't expect this bubble to burst any time soon.