Whether you're waiting in line at the supermarket, sitting around the festive turkey or after enough New Years' drinks where you feel you have the right to be heard yourself, predictions in real estate for Toronto in 2012 will be heard. This year, there is a sense out there in the public that the Toronto real estate market may be cooling off or correcting. Many have told me that Canada is overvalued by 10 to 25% . Others say Canada is at the very end of one of the longest housing booms in the Western world. And the real naysayers say the market will crash in a spectacular, disastrous U.S. nosedive or even worst. What still shocks me: Most real estate commentary seems to be overwhelmingly apocalyptic. This happens every year, but particularly this year.
Canada is overvalued by 10 -25% comes from an article in The Economist back in the Fall. I think Canadians were so flattered to be mentioned in such an international magazine, that many media outlet circulated this info so that this opinion really permeated the Toronto public in a substantial way. My response has been that it's easy for Canada to look so expensive (along with France and Australia) when many homes around the world have seen so much price depreciation. But the biggest problem I see: If Canada's real estate market dipped, it would not happen the same all over the country. In fact, it wouldn't happen the same over the city. The market in Vancouver is not the same as the market in Toronto or Saskatoon or Calgary or St. John's. And the market is High Park is not the same as Riverdale or Scarborough or Milton. So, to say home prices in Canada are overvalued by whatever amount really doesn't seem very helpful to any one.
If you are one of those who simply are convinced that the market is heading south, but you would like to buy some thing nonetheless, I suggest a few things. First, and this is a general statement: It is often safer to buy a house than a condo right now in this city. There are only so many homes left and not a lot being built, especially in desirable or emerging neighbourhoods. You will not see an oversupply of houses happen in this city. If you are buying a condo, however, don't panic. I think a smaller boutique/unique condo or a townhouse has a better chance of surviving a downturn. Giant nondescript condos in near strip malls with a weak and generic commercial strip where there are a large number of renters and high maintenance costs would be the worst place to buy right now. It may be the least expensive, but it will be a tough sell later, especially in a buyer's market.
Now, I say all of this not because I am certain a downturn is going to happen. Really, I don't know. What I know is that almost all predictions are wrong. There are always some folks who say the sky is falling as far as real estate is concerned. When I bought my first house back in 2004, I was told that I was buying at the top of the market, even though I sold it for more than twice the price 5 years later.
At the end of 2010, Toronto Life published a feature article on all the neighbourhoods that will tank in 2011, citing Leslieville and the Junction as the most in jeopardy. Yet, in 2011, they were two of the best performing neighbourhoods. And of course, on the other side, many in the United States had said there will be a small blip of a correction before prices took off again back in 2006. And we all know what happened there. My favourite crystal ball reader though has to be Garth Turner. He's writes blogs and even published a book in February of 2010 saying Canada's housing market will crash. Of course, I imagine if you say there is going to be a downturn long enough you are bound to be right at some point.