From Boom to Balance in the City of Toronto

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After an unrivaled housing boom that has cycled substantially longer than those previous, recent Toronto real estate statistics are reporting a reduction in volume traded and a minor increase in home prices. This signals a shift in the market, with the pendulum swinging from a Seller’s market to one that is more balanced. As bidding wars diminish a balanced market provides, for both Buyers and Sellers, less opportunity for making mistakes and more time for due diligence. And thank goodness, for there really shouldn’t be any overwhelming pressures when it involves your purchase and sale, especially when it is one of the largest investment decisions you’ll ever make.

So why is the real estate market dynamic changing?

There are a number of factors that are influencing change. The most notorious and significant is the fallout of the U.S. Sub-Prime Mortgage Crisis. The introduction and practice of approving higher-risk property loans to marginally-qualified buyers not only fueled the U.S. housing boom by making home ownership falsely affordable, but it became inextricably linked to global financial markets. These mortgage debts, which were packaged as mortgage-backed securities and collateralized debt obligations to third-party investors across the Globe, became the catalyst for the current financial market correction. Since the U.S. housing bubble burst in 2006 and prices started to drop, the escalating defaults and foreclosures by homeowners and the ensuing tightening of available capital has caused a ripple effect in the global credit markets and banking systems. The flood of foreclosures onto the U.S. market, combined with an already high percentage of vacant property purchased solely for speculation, resulted in a substantial over-supply that has walloped the values of the American real estate market, and spurned further losses in the global financial markets now being stabilized through government intervention.

While Canadian financial institutions did not follow the American Sub-Prime lending model, in 2006 the introduction of the ‘no money down’ and the 40 year amortization as mortgage financing options did contribute to this Boom cycle, with an increased number of buyers entering home ownership who previously did not qualify. This latitude in insurable lending standards was subsequently revised in July 2008 by CMHC (Canada Mortgage and Housing Corporation) to a minimum requirement of 5% down and a revised maximum 35 year amortization, as a means to temper the overheated housing market.

As the Spring real estate market transitioned into a seasonally slower Summer, headlines touted financial mayhem south of the border and the correction of global stock markets. In Toronto, prospective buyers who were not highly motivated to purchase responded with a wait-and-see pause. As the intensity of the hot market cooled and properties began sitting on the market longer, the transition from Boom to Balance began taking place. Today, caution, diligence, and prudence serve as the foundation for a Buyer’s purchasing decision, while Sellers are having to be realistic in their expectations and prepared to negotiate.

Will the Toronto housing market adjust significantly?

If corrections in the global financial markets are going to adversely affect housing markets in Canada, we believe the Toronto market has mitigating factors which may counter-act any significant adjustments in property values. Specifically, our city didn’t experience the dramatic spike in prices like the western part of Canada that saw a substantial gap between market values and property rental earnings.

And along with being one of the more economically diverse Canadian city centres that attracts the largest share of immigration, we also have favourable social and demographic factors that may ease a Boom to Balance transition.

Over the past decade three generations have been collectively moving residences, in an era with the greatest transference of wealth between generations. The baby-boom cohort and their parents have been transitioning out of their long time domiciles at the same time their children (or grandchildren) are entering the market, often with tax-free ‘gift’ capital provided by parents or grandparents. The size and affluence of this still active local market will contribute to stabilizing the Toronto housing market in all but the highest price points.

There has been a significant shift in the demand for, and supply of, housing for singles. Instead of renting, the availability of centrally-located affordable condominiums has provided ownership opportunities geared to the single income. With younger buyers entering the market sooner, more men and women purchasing before marriage and unfortunately, a by-product of divorce is the need for two residences this trend is now firmly established. Discernment is critical though, for small condominium units are popular with investors for rental and speculation. And given the number of condominiums still under construction or to be built, this segment of the market is at risk of a potential over-supply. An intelligent purchase is critical.

In the old City of Toronto, the demand for central freehold housing will continue to outstrip the supply, for there aren’t very many new freehold properties being built. Our very livable city of neighbourhoods with its efficient transportation system is popular with urban professionals, setting the tone for the continuing gentrification of former working class neighbourhoods. In a city that is destined to keep growing, a freehold property in a demand location will remain a solid long term investment.

So what does this mean for the City of Toronto?

Although statistics are beginning to show the end of a boom cycle, where records were set both for the volume of real estate traded and the price point attained, it does not signal a significant decline in real estate values. The ongoing relocation of multiple generations will continue to occur, immigration will keep the city growing, singles will buy affordable condos, and professionals will demand quality urban housing. What is shifting is the dynamics of the housing market, where buyers will be more conservative in their negotiation, more prudent in their due diligence, and less willing to plunge into a market that no longer guarantees a quick flip and guaranteed return should life circumstances change. And for Sellers, it’s important to be realistic in your expectations, acknowledge it may take longer to find that ‘right’ Buyer, and choose a seasoned realtor who have experience operating in changing market conditions.

As realtors who monitor trends and markets in housing, we offer consumers insight and assistance in making rational and educated decisions about real estate. If you are thinking about buying or selling, call us for a pressure-free consultation that will quickly put the realities of today’s housing market in perspective. Offering savvy insight and expertise for 19 years in Toronto, we are your pro-urban housing specialists. Specializing in renovated and restored character dwellings, low-maintenance living, revenue-producing income properties, and loft conversions, call us now at 416-322-8000! Or check out our website at for our current promotions, past newsletters and our Custom Housing Profile that helps you identify your next move!


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