Chronic undersupply to blame for Toronto’s real estate crisis
I have been involved in real estate in one form or another since 1998. That was the year I made my first property purchase. It was 4 years later in 2002 when I decided to get my real estate licence and worked up to achieving my broker’s licence. I’ve been analyzing Toronto and the GTA’s real estate markets since then and in these past 17 years I’ve never seen a thirst for property as I’m seeing today.
Toronto and the rest of the GTA are chronically undersupplied with homes. The surge in foreign investment in our country and Toronto and Vancouver in particular plays a considerable role, but more importantly, low interest rates and a chronic lack of inventory are primarily to blame.
With a significantly greater number of buyers than sellers, we are seeing multiple offers on virtually anything that hits the market this spring. When it comes to emotional buying, forget all logical reasoning and “market values”. Prices are dictated by how much one is willing to sell a home for and what a buyer is willing to pay for it.
THIS IS WHAT I EXPECT IN 2016
Home values will continue to rise and demand will sustain itself at the levels we’re seeing today. Our money is cheap and interest rates are low which is attracting both domestic and foreign buyers alike.
Domestic buyers waiting for prices to fall will be priced out completely by 2017. I have already seen this with many who had sold their homes a year or two ago expecting home values to fall and are now finding themselves priced out of a market they had hedged their bets against.
Foreigners see Canada as a safe place to park their money, especially the Chinese who in recent months have seen turmoil in their economy and stock markets. Although they have a $50,000 restriction on how much money they could move out of China, they are finding ways to export that money into the Canadian real estate market.
THINGS HAVE BEEN BAD FOR SOME TIME
When markets are balanced, we’d see roughly a 50% ratio of sales to new listings. Over the past 17 years that I’ve invested and worked in real estate, markets have favoured sellers. It has gotten so bad that we are now seeing a ratio of 71% in favour of sellers, as of February 2016.
Toronto, Vaughan and the entire GTA is still very much in growth mode. Production, especially of low-rise homes (detached, semis and town homes), lags far behind demand. According to some estimates, low-rise supply has seen a deficiency of 10,000 homes per year over the past decade. That’s a shortage of 100,000 low-rise homes throughout the GTA.
Without intervention from both the Provincial and Federal Governments, this problem will continue to cause serious consequences throughout Toronto and the GTA for the unforeseeable future.
BNN reports on Chinese investors buying up Canadian real estate
Ilan Joseph is a Real Estate Broker with Sutton Group and is co-founder of a 10-person award-winning Toronto, Thornhill and Vaughan real estate team.
Since 2002, Ilan has provided more than 1650 buyers and sellers valued advice and service, enabling them to reach their real estate goals.
He’s kind of like the Bruce Willis of real estate.