2019 Real Estate Predictions

 
 

As 2018 comes to a close, it seems like a fitting time to reflect on what happened in 2018 and settle on what I think is going to happen in 2019, as I prepare my clients for the next Spring Market.

There’s no hiding that there are some economic headwinds on the market. Donald Trump’s policies haven’t been good for the Canadian Economy, Canadian Oil Companies struggle to compete globally, interest rates have been rising and GM just closed their plant in Oshawa. Things aren’t great when looking at the whole of Canada, or Ontario on a wide scale, but things in Toronto seem to be going quite well. Toronto is arguably the lone bright spot in the Canadian Economy right now.

Considering what happened in 2017 and the fact that interest rates have been on the rise in Canada, the Toronto market feels like it did pretty well all things considered in 2018. Overall stats for the entire city haven’t been impressive with total sales down sharply and prices relatively flat, but in particular neighbourhoods in the Central Core the market have actually performed quite well.

When looking at the City of Toronto, what’s going on in Leslieville or Trinity Bellwoods doesn’t have a lot in common with what’s happening at Yonge and Finch. These are different markets with different fundamentals. My business is mostly focused on the Central Core, so in addition to making overall predictions for the Toronto Market in 2019, I’ll also dive a little deeper into some neighbourhoods that are more of a focus with my business.

 
 

For the entire City of Toronto, I expect the average price of a property to increase by 3% in 2019. In 2018, the average sale price of a property in Toronto was $835,422, and if prices go up 3%, that should give us an average price of roughly $860,00. Prices have steadily been climbing throughout 2018. A couple months ago there was talk of 2 or 3 interest rake hikes by the Bank of Canada, however since the price of oil has plummeted there are increasing headwinds to the overall Canadian Economy, and we may actually see a rate cut instead. I don’t have a crystal ball, but I expect condo price growth to remain quite strong and for it to continue being extremely competitive for first time house buyers.

Millennials will continue to drive the market as they continue settling down and starting families. They’ll continue competing to buy their first condo, and older Millennials who are 30+ will continue battling to up size from their condos into properties where they can start a family. Overall it will become increasingly difficult to find the basic entry level 3 bed, 2 bath semi detached house, and I suspect the entry level rate for this type of property anywhere within a 45 minute commute of Union Station will clearly surpass $1 million.

The condo market will maintain its strength. With downtown Toronto essentially experiencing “no vacancy” and rents consistently on the rise, the price to live in downtown Toronto where you can ditch the car and rely on the ability to walk or bike to work, rock bottom supply will lead to an increase in prices. As new developments finish and those pre-construction buyers look to sell their investments, prices could move 10% higher from the $1000 per square foot mark they’re at now as more expensive brand new buildings begin to trade in the secondary market at $1200+ per square foot.

 
 

The freehold market in the downtown core should perform very well. As I mentioned before, an increasing number of Millennials who own condos have seen their properties increase dramatically in value over the past 3 years, narrowing the old spread between condos and freehold properties. Looking at C01 Downtown, the average price of a condo in November 2016 was $536,749 vs $1,192,300 for a semi detached home in that area, or a factor of 2.22. In November 2018 the price of a condo apartment in C01 was $695,814 and the average semi detached home in the same area was $1,420,862, or a factor of 2.04. In that time frame, the average condo has gone up 29.6% in C01 from 2016 to 2018, while the average semi detached has gone up 19%.

Those condo owners have seem their properties increase in value by about 30% in over the past 2 years, those owners now have significant equity they can use for down payments, allowing them to pursue properties over the $1 million mark that require 20% to be put down as they climb the property ladder.

Overall, the market should remain strong in 2018 barring some severe economic turbulence that could spark a recession. With a rising population, solid economic growth and fewer listings than we saw from 2012 to 2017, demand should outstrip supply in the Core of Toronto and prices will continue to rise. Disagree? Comment below!

Jim RobertsComment