According to the latest stats from the Toronto Real Estate Board (TREB), 2013 was another banner year for the Toronto real estate market, characterized by robust sales activity and a continued gap between demand and available stock, which put upward pressure on prices. Total sales inched up and prices swelled. In the City of Toronto proper, the average home price climbed well upwards of $500,000- almost $50k beyond where prices closed out at the end of last year (click here for the full December 2013 stats, as well as a glimpse of year-over-year activity).

Mid-month stats for January (click here for the press release), show a slight dip in activity, characterized in particular in a major retreat of 20 percent in new listings, year-over-year.

“Aside from the fact that January sales from year-to-year tend to be volatile, the dip in sales during the first two weeks in January was likely due in large part to a lack of new listings.  Quite simply, some would-be home buyers could not find a home that met their needs,” said Toronto Real Estate Board President Dianne Usher.

“The average selling price in the GTA will continue to trend upward in 2014.  Listings will remain below the pre-recession peak and sales are expected to increase over 2013.  This means that we will continue to see substantial competition between buyers for some home types and in some areas of the GTA,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.

This is certainly holding true in specific segments- namely in the City of Toronto and in the freehold housing market.

While this upward trend will continue, and while this continues to be a commentary on the health of the market, Urbaneer embraces 2014 with pensive optimism. After all, with several fruitful years recently of price increases, there is valid concern our boom market could potentially face some price adjustments should demand dwindle.

In 2013, demand for housing remained brisk as interest rates remained low, granting more purchasers passage to first time home ownership, albeit often at precedent setting prices. However, by the end of the year we started to see prices stabilize for condominium housing, though the crazy bidding wars for freehold houses in demand locations continued. This split in the market is creating havoc and confusion to both real estate professionals and the general public at large. Realtors are wrestling with the dichotomy of two markets. In the condominium market, we are urging sellers to exercise caution in establishing their list price and be prepared to negotiate, which is in contrast with the freehold housing market. There, buyers are bidding substantially more than the list prices and are finding themselves falling behind more aggressive buyers (sometimes significantly). It's becoming increasingly evident that if your budget for a property located in the downtown core is under $500,000, you are limited to either a fixer-upper house (which requires substantial renovations) or to the condominium marketplace.

With interest rates remaining at a four decade low and the stock market continuing its somewhat erratic behavior, investors are turning attention towards building up a real estate component of their overall investment portfolio, increasing the flow of capital into the property market. Last year, it was increasingly popular for people with any sort of surplus capital to seek and secure income properties as a long term, buy-and-hold investment strategy. While revenue property is an excellent part of any investment portfolio, the competing price wars have shrunk the return on investment from once standard returns of 8 to 10 percent, down to returns as low as 4 percent. While these returns are often still attractive, without much of the major ups and downs that characterize the stock market, they are vulnerable. Investors are hedging their investment against an on-going demand for property to continue to push property values up, eyeing larger returns on future resale value.

With indications from the Bank of Canada that interest rates will show only minor movement in the short term, we do expect minor increases in interest rates to be implemented through the year. And while interest rates may continue to hover around 4 percent – which is still an excellent interest rate for those of us who recall the days of 12 percent first mortgages (and the horror of 18 percent + in the early 1980s) – many experts are recommending buyers lock into five, seven or ten year terms. Where interest rates go is in part dependent on the value of the Canadian dollar on world currency markets, our national economy and a stable global political economy. If they do escalate, it means that buyer financing – while still attractive – will begin to slow down and the seller's market which has dominated our real estate climate this past decade could – for all practical purposes – be over. While we do not think that a buyer's market for freehold houses is looming, we do believe that the market is transitioning towards balance in the coming year.

The demand for condominiums and rental apartments has been very strong these past few years. However, with so many new condominium buildings recently completed – or near completion – there will be an abundance of 400 to 900 square foot studio to two bedroom units available for sale and rent in 2014 – which could give greater negotiating power to both buyers and tenants alike. Developers are exercising caution now, as the central part of the city is considered saturated. Part of the issue is that developers haven't kept abreast of the changing demands of condominium buyers who, once dominated by first time buyers limited by affordability and investors seeking smaller rental units, are being increasingly replaced by affluent move-up buyers needing more space and down-scaling Boomers who can't find suites spacious enough to accommodate their house-sized furniture. Today it's almost impossible to find a new condominium in the downtown core that can hold a king sized bed, let alone a queen sized bed and a chest of drawers.

For all the nuances of the real estate market, the positive overall trend is that people are extremely keen to live in the City. Now, more than ever, all types of people are seeking to live amidst the cultural amenities that are ensuring downtown vitality. It bodes well for the future values of the urban core, especially if the area is within walking distance to vibrant shopping, café amenities and reputable schools. Whatever fluctuations property prices may see in the coming years, owning downtown is an excellent long term investment.

As pro-urban housing specialists in the City of Toronto, we pride ourselves on our commitment to guide buyers and sellers successfully through their personal real estate needs. Working from the Beach, west to the Kingsway and from Harbourfront north to Hogg's Hollow, we offer a comprehensive understanding of the dynamics of Toronto's real estate market. To learn more about our services, including our custom housing profile which helps clarify your next move needs and profiles our current listings, just check out our website at urbaneer.com, or pick up the phone and call us at 416-322-8000 to receive a personal no-pressure consultation. Or consider signing up below for our FREE monthly e-newsletter!

Want to read more? How about our Dear Urbaneer post on How To Choose A Winning Location?

~ Steven and the urbaneer team

We're here to earn your trust, then your business.

Real Estate
Urbaneer’s Real Estate Forecasts