March 29, 2024 5:15 AM

How Toronto real estate dynamics differ from the rest

/ Published 5 years ago

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Canadian real estate figures and calculations do not reflect the market as a whole. The warmer markets of Toronto and Vancouver inflate the numbers a bit. If buying real estate in those two cities, it remains not a problem to determine a good deal. In other areas of Canada, an investor may pay too much if using Canadian real estate figures not adjusted to without those two city markets. The grand city of Toronto has created its own unique global micro-economy which impacts the real estate market and stocks there.

Toronto

Quietly and most humbly till the last two years, Toronto has begun a transformation into a world-class city. A global financial capital ranking within the top 10 makes its markets swing to a different tune than the rest of Canada. Toronto’s gross domestic product (GDP) accounts for 18.5 percent of Canada’s GDP. Toronto has been known to make Canada sing—loudly. When Toronto sings it attracts global corporations who want a piece of its real estate and flavors.

As far as money from 2008 to 2015 Canada’s banking system received notice from the World Economic Forum that it considered it one of the soundest systems. Forbes in 2014 declared Toronto as one of the 10 most influential cities in the world. Fast forward to 2018 Toronto has 38 percent of the nation’s business headquarters. It ranks as the fourth largest city in the North Americas as well as the third largest technology sector in North America. It has trade agreements creating more than one-half of the globe’s exports of goods and services to markets containing at least 1.7 billion consumers. All of which makes it a good investment even in the pricier real estate markets.

Real estate

As the city transforms into a global class in every sector so does the real estate markets. Plenty of new listings exist in Toronto, but over 2,600 homes sold in the past several weeks. Homes have an average of 19 days on the markets before being sold, so it gave a 101 percent selling to listing price ratio. As good as that percent lists remember an investor needs lots of available cash flow to make a proposition or at least good leverage. Toronto markets list as the 10th most expensive while being the first place for fastest growth and fastest selling. Note the city also has the third highest turnover rate. Those stats have a basis in firm contract dates and not a reported transaction or closure of a real estate contract.

The real estate market is changing in Toronto. In the past several weeks, over 2,600 homes have been sold so far. (Source)

Some reports say the market in Toronto has cooled, but others define it more as a shift to midrise development. Fewer tower projects have launched this year, but units created for a family in good neighborhoods just outside the downtown area have inched up. An equilibrium has occurred. The cost to rent a midrise unit in the $500,000 range equals the cost of ownership nearly. People who have rented have spied condos and townhomes of similar pricing of their rent each month and moved to own it. How the trend continues will depend on with happens when several 40 stories high buildings finish if people shift back to high- rise living quarters.

Overall

Canadian Mortgage and Housing Corporation expect the nation as a whole to moderate in the next two years. It predicts a decline in housing starts and sales. Rising mortgage rates have an impact on buying homes. In Toronto, it pondered if a bust would happen but reasoned the market remains too mature for that. Its June 2018 newsletter described several simulations with visual graphs to check if a bust was possible at this time and concluded it was not. If mortgage interest rates rise, it may force budding homeowners back into high-density projects so as to qualify for financing. It feels any government changes in housing policy will cause the markets to shift that includes the Toronto markets.

Back to the Toronto real estate market

Toronto offers a monthly economic bulletin that states as of September 2018, 188 tall buildings in the process of construction. Its office vacancy rate of in Q2 4.7 percent so if more companies move headquarters to Toronto then more office space will become needed. To confirm the stats on the construction end, Toronto in all of North America has the highest crane count. The demand for office space presently has 7 million square feet of it under construction now. No one has been able to predict how much more office space the will need to accommodate companies moving headquarters there. Over 30 entities outside of Toronto have commented on the city and have been listed in the economic bulletin.

Conclusion

Toronto in its real estate markets gives a vast information overload. The city has begun specialization real estate for the firms coming or expanding. From that Toronto native to those moving there from other regions, it creates even more opportunity in the real estate markets. Far from a saturation point, the market may normalize, but many projects have not finished from the prior burst of activity so it will impact upon completion. What future action occurs depends on who else or what companies choose to come there.

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