I can't help it. I get caught up in it like everyone else. As the new year begins, I want to stare into my tea leaves to see what kind of predictions I can make for 2013. There's just some thing about the start of a new year that really brings out the predictor is all of us.
Now remember, they're predictions, not guarantees. I'm making an educated guess, based on my experience and knowledge of real estate in this city. If someone says they absolutely, for sure, without a doubt, know where the real estate market is going, they're lying. Some know better than others. Some will be wrong and some will be right. Here's what I think:
1. THE TORONTO REAL ESTATE MARKET WILL BE VERY INCONSISTENT
What I mean by this: No property in Toronto can be treated as equal. In 2012, this kind of inconsistent market was already well under way where houses and condos in this city did not sell the same way. In 2013, houses will be in limited supply, unlike condos. Houses will continue to be more in demand and make some modest increases. Some condos will slip in price. Other, well-located ones in distinct buildings or great emerging neighbourhoods will not.
2. STARTER HOMES RULE
I think starter homes, that is, houses that are in the grasp of a couple or a single buyer looking to purchase their first house will be the most in-demand property type. Again, limited supply, and a healthy group of hungry homebuyers who just don't want to buy a condo, will fuel this. This is why emerging neighbourhoods, like the Danforth Village for example, still perform very well. They have homes available in that sweet spot under 550K in the grasp of some first time home buyers. More established neighbourhoods where houses run from 600K or more will not see quite the same performance. Why? Buyers who already own property are more likely to play the market. They will wait for the market to improve or change before listing their homes. Of course, like in 2008, if too many sellers try to play the market and fewer houses are listed, then less supply could means houses may go up in the established neighbourhoods as well.
3. CONDOS WILL NOT TANK
Sure, not all condos are created equal. Already in 2012, some condos have slipped in value in some areas. And there is a lot of concern about overbuilding and foreign investment. And these are very real and legitimate concerns. Since Canada doesn't really keep track of foreign investment, we don't know how may condo owners are end users who have some real investment in their property. And of course, we all look around us and see how many condos are going up. There's no denying it. It's very natural to ask: Who is going to live in all of these condos? Still, the condo market has really proven a necessary thing for the rental market. Condos have overwhelmingly supplied much needed rental units, and helped address the tight vacancy rate in this city. I'm sure many who bought condos to rent out in Toronto are as pleased as punch right now.
4. ANY REAL THREATS TO TORONTO REAL ESTATE WILL NOT BE SEEN IN 2013
I think what can truly put a damper on prices in real estate are interest rates. I don't think they are going to change much this year. The economy is improving, but I don't think, in the next year, it will improve so much that the government feels comfortable raising rates substantially. The other big killer is oversupply on the condo market. Again, hard to be sure about this one, but Tridel has recently put new units at Ten York on sale. Many real estate enthusiasts and investors watched this project closely. Since the were able to sell 600 of the 650 units, it's a good indication that the market has not flatlined. Instead, it appears rather healthy. But don't think condos are on easy street. The number of condo sales have dropped 22% over the last year for resale, down 30% for new condos.
5. THE U.S. IS BACK!
In some ways, many American cities like Miami will pull away international investors from Toronto and give us a break from the buying frenzy we have seen here 2 years ago. It will certainly create a more balanced market. But there's a bigger silver lining here. That is, the improvement of the U.S. housing market will lead to more products and resources required from Canada, and in turn, a better economy. After all, they are still our biggest trading partner by a long shot. And don't they deserve some real estate relief? I know we can look on as pleased Canadians who didn't mess up our real estate market and banking system in the same way, but enough suffering already for our southern neighbour! Of course, it doesn't hurt that their economic upswing will help us too!