Twenty-fourteen is shaping up to be another great year for the Toronto real estate market. As I have said many times before, Toronto is unlike other markets. It drives me nuts when people talk about the ‘Canadian real estate market’, as if trends in smaller cities and towns have anything to do with Toronto. Our economy is diverse and our population continues to grow, so there’s no mystery as to why residential real estate prices also keep growing. Of course it makes sense that the real estate market here is out-pacing many markets elsewhere in the country. How could it not?
Add to the picture this year the improving US and global economies. The jobs numbers that came out last week in Canada (net losses) and the US (weaker than expected growth) show that the ‘recovery’ is still, well, in recovery. However, there is a growing sense of inevitability that the US will finally show some upward momentum this year. Even Europe seems to have stumbled towards stability. As the American economy grows, so do Canadian exports, which will give a boost to our own mostly-stable, but slow-growing, economy. Once real growth kicks in we’ll be in for a few good years. (How many is anybody’s guess. This C.D. Howe report indicates that the pre-recession growth cycle was 16 years. We should be so lucky this time around!)
Another major factor this year is interest rates. I think that we are probably still on course for flat rates this year and into next. Even when rates do start to rise, they’ll most likely rise slowly, so as not to jolt the economy. We’ve got another few years of near-record low rates ahead of us. (My first mortgage, in 2001, was for 8.9% – more than double current rates – which was considered a great deal in those days. Perspective is important!)
The supply shortage that has been a feature of the Toronto market since late 2008/early 2009 has yet to ease. As a full-time, professional Realtor I spend a lot of time talking to other agents. As we start 2014 there is a continuing urgency among my colleagues to find homes for our buyer clients. The view ‘on the ground’ is that tight supply will continue to drive prices up, particularly for single family homes and small income properties. I believe that it’s safe to expect a 5-7% year-over-year increase in 2014.
On that latter note, specifically, I continue to encourage my clients, especially first-time buyers, to consider an income property. In the short term, the income will help you afford not only the purchase (assuming you live there, which is an important factor), but a decent lifestyle. If kids are in the plan, or even if you just want more privacy down the road, you can keep the income property and use the equity to move on at some point. Not surprisingly, though, duplexes and triplexes are in high demand/low supply. It’s not a slam dunk, but it’s definitely worth thinking about.
Mortgage rate tip: one of the big bank mortgage pros that we work with told a group of Realtors last week that he expects a mortgage rate ‘sale’ some time in February or March. It has happened in each of the last few years, so he thinks it will happen again. Watch for it, and if you are in the market, try to nail down an interest rate deal before the busy spring market.