It pays to be diligent when trying to understand where the real estate market in Toronto is headed. Sally had two buyers recently say that they felt the Toronto market was headed for a crash and they were basing this assumption somewhat on some United States new construction sales numbers that they had read.
First, and most importantly, we are not the United States and there are some very dramatic differences between our markets. In several US states, they have had double-digit annual appreciation in the last couple of years... in some cases into the low- to mid-twenties. This is pretty extreme and logic would say that this is not sustainable and some sort of a shift is bound to occur.
The Toronto Real Estate Board however had an average appreciation level of 6.6% between 2005 and 2005... much more modest. In addition, 2005 was a record year for Toronto real estate sales so, if as CMHC predicts, sales will drop this year by a few thousand units, it will only bring us back to 2003-2004 levels, which were record years at the time!
Don't forget... a drop in sales numbers does NOT indicate that prices are falling. Au contraire, CMHC is predicting that our appreciation level in 2006 will indeed decline from 6.6%... but only down to 3-4% annually. Don't forget, this is still UP from current prices in a very modest, understated way (similar to Canadians in general :) right?).
The Post carried an article March 22nd with a headline "Condo sales down 12% from last year". You had to read the entire article before realizing that first, in 2005 we had record condo construction sales which were up 31% over 2004. It would be reasonable to believe a slowdown would be almost normal!
Now remember, that was brand new construction. Lest the resale condo market be painted with the same brush, by the end of February, resale condo sales were up 16.2% by the end of February over 2005... totally in the opposite direction.
A Globe And Mail article from March 6th indicated that "At an average of $327 a square foot, city suites cost half of what they would on the West Coast". This price has only risen 8.6% from January 2005 and, compared to Vancouver prices at $651/sf, we have a bargain.
We're seeing a continuing widening of choices in terms of size, layout and style here in Toronto which is increasing the number of existing condo owners who 'move up' to another condo (unheard of 2-3 years ago). We're even seeing house owners in the 40's making the move to snazzy units along the waterfront with expansive views and spacious balconies.
So what are the positives? Continued low interest rates (currently 5.1% for a 5-year term and only 5.5% for a 10-year term), continued strong regional economy prospertiy in Southern Ontario and continued immigration to the GTA will allow our marketplace to continue to appreciate in the years ahead.
Remember, even if appreciation slows to 3-4%, it is STILL UP and waiting does NOT work to a buyer's best interest!
