Real estate prices in Toronto the past few years have gotten insane. Each month, it seems that prices for detached homes and condo’s have jumped by 15-20% compared to the year prior. The same was happening in the Vancouver market as well, but apparently the government’s ‘foreign buyer tax’ helped to cool things off a little. There are rumblings of a similar tax imposition here in Toronto, but I personally doubt we’ll see it happen.
The word ‘bubble’ is getting used a little more often now as well, and its understandable given that real estate is going for hundreds of thousands of dollars over asking price sometimes within a day. However I also read recently that an estimated 100,000 additional people are expected to move to the city each year, for the foreseeable future. All those people need somewhere to live, which will continue to drive demand while supply struggles to catch up.
Condos are a means to help alleviate the pressure being build up by the increased demand. Intensification of development is inevitable – squeezing more people onto a smaller footprint of land. Think of any large, global city… they’ve had to build up.
The boom in condo’s is helping give people a place to live, however the speed of their construction is still being outpaced by the number of folks moving here. The square foot price of condos is still going up (stats from metronews – Jan 17):
2011 – $2.21 / square foot
2015 – $2.48 / square foot
2016 – $2.77 / square foot
That’s over a 25% increase in condo prices in just 5 years… and that increase is well below the increases seen in detached homes.
Where this becomes really interesting is when our domestic prices are compared among some other world class urban centers; see the graph below (2016 prices):
When you examine the condo price of a unit here in Toronto to comparable cities in Europe, Asia or New York, ours actually look like a bargain. If the so-called ‘bubble’ were to bust anytime soon, Toronto could be a great place to purchase some investment condos, assuming our prices will trend upwards like our global counterparts. Given our current local market circumstances however, I’d be a seller and not a buyer.