2014 Market Forecast
Houses and Condos
Earlier in 2013 there was a Maclean's article entitled "Inside the great real estate crash of 2013." There were other similar publications that came out as well, but here we are firmly standing inside of 2014 and there is no crash in site. Why?
There are a number of reasons. The main reason that people forget about is immigration and population growth. Beyond that, we haven't seen any major changes to the Toronto economy that would cause people to sell at a loss or postpone a move. Keep in mind that 80% of people that make a move do so because they have to. Couples get pregnant and seniors pass. Investor sellers that find they can't achieve the prices they've been conditioned to expect from recent years simply rent out their properties and do this with ease due to the demand driven by a population that is moving back in to the city. The vacancy rate for rentals is still at around 1%.
I almost don't need to talk about what was happening in 2013 with detached, semi-detached and row houses. People universally understand that the market is starved for inventory downtown and in particular for GOOD houses! Everyone expects bidding wars. From a listing perspective, the trick is to maximize the exposure to buyers manage everything carefully and maximize the benefit to a seller. One can leave money on the table if the property is marketed haphazardly and carelessly especially when taking a strong seller's market for granted! From a buying perspective, clients need to understand bidding wars and how to win an asset that's appreciating a year over year double digit pace.
2014! What's in store? The hottest and fiercest competition will be for freehold properties under one million dollars. Why? The banks require 20% deposit on properties over a million. Not a lot of people have $200,000 + sitting around in cash. Properties under a million can get away with 5% down and a CMHC insured mortgage. Both properties with income potential and regular single family homes in this range will be bonkers and it's completely justified. Also, I get the feeling there's a baby boom happening and people still want to remain in the city to raise a family if at all possible.
The condo market will warm up a bit. Why? My feeling is that there's been a lot of people listening to the major publications and purported experts saying that there is a condo market bubble and there's an impending crash. It's easy believe when you can literally see the city skyline changing before your very eyes. However, I think that buyers are wising up that this hasn't been the case. People with down payments that are sick of waiting will get in to the market. Flushing rent money down the toilet gets harder and harder.
In the meantime, condo developers continue to line their pockets with foreign investment money and sell new constructions at albeit a slower pace. Because of this slower pace, there's better opportunity for negotiating with developers but only after it gets to the public offering. If you're interested in getting the best price and suite selection, you need to get VIP or Platinum access through a Realtor long before they open the doors to the public.