GTA Real Estate Swimming Upstream?

Media speculations in late 2012 expressed concerns that the Canadian and Toronto real estate markets are likley to experience some price softening. It is possible that mortgage lenders (BANKS) may bring some of this about by reducing their lending ratios, and a new central bank governor may test higher interest rates, but market demand factors will inevitably counteract any real estate market manipulations.

Toronto and the surrounding communities are expected to contain over 6 million people within a few years. This means there is not only a critical mass of people looking to improve their housing every year, but there is also a growing need for additional housing. This also means that demand for housing is unlikley to diminish.

Consequently, property prices have little downside. Of course, as some areas age worse than others, there will be some pricing weaknesses, but we are seeing lots of older and smaller homes being "gentrified", especially within the old city boundaries.

There is also a mini baby boom going on within the immigrant communities that will sustain demand for family sized housing. This will offset the downsizing by ageing boomers. 

Baby boomers choosing to downsize as they experience empty nests are looking for smaller homes but high quality housing is very important to them. Luxury townhouses or condos over 1200 sq. ft. will hold their values.

In the near term the boom in GTA condos with upwards of 150 buildings under construction will no doubt weaken this market for small boxes in the sky. But this is mainly a speculative investors' market in future rental units to replace the shortage of decent rental buildings in the GTA. These are mostly rented by the younger demographics, but some seniors begrudgingly will live in them as their incomes are diminished.

As Toronto's population exceeds 50% of parents born outside the country, we will see the continuation of growth in mono-cultural dominated communities. The majority of older citizens are from the traditionally dominant Toronto cultures. As these people downsize, a significant portion of them will likley move away from the core and into other Ontario communities for retirement.  Many will just relocate in warmer climates, whilst those than can afford it will retain a GTA fair-weather accomodation (either owned or rented) to maintain contact with family and old friends.

The bottom line is that the GTA will represent a very vibrant real estate market for the foreseable future. Anyone who has experience travelling to other major cities will appreciate that Toronto is still a very affordable place to live and buy real estate. The GTA is so diversified that it has become similar to a city-state of its own. Consequently, it is well equipped to swim upstream against the predictions of the price-drop pundits.

Jim Reid BA, MBA, ABR, Broker