2013 Toronto Housing Market Outlook

February 7, 2013 - Updated: February 9, 2013
   The prevalent question that I am being asked right now is, "What sort of market are you expecting this year?"
I expect two markets this year, a house (some form of freehold) market and a condo market (also commonly distinguished as high-rise and single family homes). Both markets will have a slight influence on each other (the overall statistics gathered and then released to the public will group both sales performances into one figure) but, in certain aspects, they will differ. This blog will deal with the freehold market.
First let's establish, for the sake of this blog, the following parameters:
1- the economy will continue to show a forward momentum
2- the interests rates will not change significantly
3- there will be no momentous crisis on the world map that affects each and every
one of us

    A substantial change in any of these will send the market veering off it's expected course and make my prediction a moot exercise. Please keep in mind the fact that I am establishing these as relative constants as you continue down the page.
   There are numerous factors that play on our market, but I want to discuss what I believe to be the greatest of all of these influencers: I want to focus on supply and demand. The city of Toronto is growing faster than the national average. When comparing the 2011 census to the 2006 census, Statistics Canada showed that Toronto grew at a rate of 9.2 per cent. The national growth rate is 5.9 per cent. Toronto itself has crossed the 2,700,000 population mark and the Greater Toronto Area is presently crossing the 6,000,000 mark. Most 2036 projections have Toronto crossing the 3.2 million mark and the GTA crossing the 9 million mark. We are the largest city in Canada and the fifth most populous municipality in North America. In 2012 alone we had to accommodate a need for 38,000 new households.
   With respect to Toronto itself, land is finite. It seems that we can grow condo buildings faster than mushrooms, but when looking for land on which to build more houses, Toronto's prospects are limited. So, we have a growing population and a limited supply of houses. Where is this leading? It leads to a continued market growth in 2013.
   Let me shine the light on this from a slightly different angle: a large portion of buyers want a house. A freehold ownership is the only form of ownership they will consider. This portion of buyers keeps increasing and the number of new homes in Toronto (comparatively) is not. The forecast for this year (and any future years) is a scenario in which the ratio of buyers to available homes will always be higher. Therefore, on the principle of supply and demand I conclude that the market will continue to fuel an increase in the average price of a home in Toronto.
   Now, let's go a bit further and break down the activity to the components of spring, summer and fall markets. I am writing this blog on the 12th of January, 2013 and I have already personally witnessed (in the start of this year) four multiple offers from the $399,000 (selling for $430,000) price range to the $3,150,000 (selling for $3,300,000) price range. Activity has started early and the main reason is that we had an overly cautious market with a momentary weakening in confidence in the fall of 2012 and the smart buyers (there seems to be a lot of them right now) know that by the time March rolls around the market will swell with the number of buyers actively submitting offers. These smart buyers are focused on completing their purchase before the stress levels multiply.
   The spring market always has the greatest activity (one reason being that families need to relocate in their desired school's catchment area to secure enrolment for the following school year) and by the time fall rolls around the amount of energy left for the fall market is usually an inverse proportion to the activity that the spring market received. 2012 saw a very intense spring market and the malaise of burnout was rampant not only in buyers but also in a great many Realtors. Oftentimes, a Realtor will find that an important part of their professional accomplishment is the ability to help a buyer maintain their positive belief that they will find and successfully purchase the right home despite the stiff competition.
   Supply is a trickle compared to the ever growing demand and the number of sales in the fall market of 2012 was lacklustre in comparison to the average of previous fall markets (adding to a pent up demand at the beginning of this year). This is why I predict a very active 2013 spring market with at least a 3% increase in the average price of a home in Toronto. This volume of activity will continue through to June 2013.
   Summer will be summer. We will be out in the sun, on boats, at cottages and abroad in locations like the Riviera (if the budget is tight then it may be your uncle's old Riviera that is sitting on blocks in his back yard). So the summer market activity will wane significantly and this waning of activity will give rise to the seasonal crop of doom and gloom articles from the sensationalist, if-it-bleeds-it-leads media. These articles seem to affect a sizeable portion of the buying public and, coupled with potential burnout from an aggressive spring market, I would expect an underwhelming fall market.
   Finally, certain communities within Toronto will experience these effects in greater magnitude when you factor in the desirability of the schools in that community, the walkability to transit and consumer amenities as well as parks and the neighbourhood itself.
   As the saying goes, "They're not making any more land". So, barring a drastic change in the three factors I set as relative constants, we will see the market for freehold ownership continue on its path of activity and increase. Make sure you have a seasoned professional helping you to navigate successfully through these currents.
   I have my captain's hat on and await your call.

Tagged with: toronto toronto real estate toronto housing 2013 toronto real estate luxury real estate homes condos investment
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Peter Powers, Broker.
Royal LePage Real Estate Services Ltd., Johnston & Daniel Division, Brokerage
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