What Are The Best Real Estate Cities in Canada for 2014?

Sometimes around the middle of February I wish I was not Canadian. Not that being a Canadian is so bad, but I just wish there was somewhere we could go, as a Canadian, to sit under  palm tree all year round. Other that having to take on of all four seasons with winter as the longest, life in Canada offers you a lot of variety. You can live in as big city as Toronto, be tres European in a North American kind of way in Montreal, or you can be a pioneer and head up north to the territories' boom towns.

In real estate, not all cities perform the same way all of the time. Some cities are cheap, like Windsor and others are unimaginably expensive, like Vancouver.  Regardless of their average price point, each city performs better or worse than others in a given year. In this past year, the bigger cities have certainly pulled ahead in terms of price appreciation compared to other smaller Canadian cities.

And I think we are seeing that playing out throughout the country right now. Places like Vancouver are up in price by 5% whereas smaller cities are not. Regina is down 2.4 % from last year.  Alberta still going fairly strong with Edmonton at 5% and Calgary at 5. 2% year over year. 

In Ontario, the change is different depending on where you live. Ottawa is up a respectable 3.4% But the real price appreciation is here in Toronto, up by 8.9%. And if you own a detached home, you are up 14. 2%

Nearby towns are also doing well like Hamilton/Burlington, up by 7.5%.

So, Toronto is clearly leading the pack this year, with little brother, Hamilton not too far behind. But why are Toronto and Hamilton doing so well this year? Well, for the most part, Toronto is a major city that draws in a lot of immigration with a diverse economy. Big cities continue to grow, and houses in many parts of the city become increasingly more expensive. Will it always be this way? Probably, near most downtown neighbourhoods. Prices may slip at some point, but the big Canadian cities like Toronto are where most of the jobs that have no ties to oil and resources seem to go in this country. Toronto, and cities like Vancouver, almost function as separate economy. The GTA is the sixth largest economy in Canada, and that includes all provinces and the country itself. 

Hamilton is another story. Hamilton's rise in real estate was a hard won battle. That city has been trying for years to lure in artists and improve their downtown. And I have to give them credit. They did a great job. They have beautiful architecture at a fraction of the price of Toronto. And now we are seeing some of the frustrated Toronto buyers, particularly artists, pursuing a property in Hamilton where there is more space and lower prices. Just how cheap are we talking? Well it depends on your willingness to try more transitioning neighbourhoods. You could find a 3 bedroom house with parking and a garage for under $200K. It's a 10 minute bike ride to downtown but some of your neighbours will be looking like an extra from Deliverance.

If you are living in Toronto and Hamilton and own a property or two, you will feel pleased with this year's price appreciation. And you should be. Pat yourself on the back for a good investment. If you are a buyer, don't worry, the sky is not falling, and those kinds of big increases cannot continue every year, though I believe there is room for price appreciation, especially for houses,  in Toronto and Hamilton in the years to come. 

Real Estate and the Hipster Factor

I am not a hipster. Sure, I have my moments. My music selection is not bad. I do have a pretty good idea on where to find great food in an unassuming location, but I don't sport a french moustache or wear ironic tshirts (very often). Still, the cool factor of a given city does influence real estate and the neighbourhoods my clients reside. So, I cannot afford to look the other way.

Maybe you're so hip yourself that you're thinking: "Pfff! Toronto is so not hip." But you would be wrong. At least, according to Vogue magazine. According to these style mavens,  I'm not the only one who is aware of just how cool some consider Toronto to be. In fact, in their top 15 neighbourhoods in the world, Toronto's West Queen West ranked #2 , ahead of cool neighbourhoods in New York, Los Angeles and Paris. I'm not sure everyone would agree, but I think it's safe to say that the world considers Toronto cooler than it used to be. Because I have to tell you, in the 80s, Toronto was not terribly cool. It was that awkward, pimpled teen with the clothes that didn't fit right who really wanted to go out and own the dance floor at the high school dance, but felt it was safer to hang back by the bleachers.

But does cool really matter in Toronto? I don't think it's important that you are cool or hip to live in this city.  As I mentioned, I am neither cool nor hip. But I do think very positive things come out of cool or hip like independent businesses that create distinctive neighbourhoods or a sense of creativity that makes a neighbourhood  more distinct. Maybe hanging around too many hipsters makes you skin crawl. And if that's the case, I should make you aware that hipsters have often been the vanguard of where to buy next. West Queen West, Beaconsfield, Ossington, the Junction, and Leslievllle have all become little pockets of cool, and real estate prices have been reflected in that. Even the changeover in Yorkville was once the hot spot for hippies, the hipsters of the 60s.

On the rise, you'll find the Junction Triangle, Danforth Village and even the city of Hamilton as places that are also becoming centres of cool-dome. And that kind of buzz is really a draw. Neighbhourhoods that were once a little down on their luck with relatively inexpensive housing stock become purchases for artists and hipsters. Then someone opens up a cafe, and then a few new restaurants. Then the word gets out. People start to visit this cool neighbourhood and the main strip becomes a destination for wine bars, art galleries and gastropubs. Many hipsters may have moved on by this point, but those who saw the cool factor early will see their real estate prices increase. And that's what I'm hear to tell you about.

Now, not all neighbourhood are destined to be centres of cool, and I am certainly surprised by some neighbourhood that have risen to hipster meccas. But needless to say, being hip does make a difference to your real estate investment, even if you are not hip yourself.

Why Are There So Many Condos in Toronto?

It's been going on for more than a decade. Toronto is changing faster than anyone would have expected 10 to 15 year ago. How many times have you seen those side by side photos with the before and after streetscapes? The before, in a given Toronto neighbourhood, has a few buildings and parking lots. The after side transforms to a dense city packed with sky scraping condos. Some neighbourhoods have almost become unrecognizable from even 5 years ago, and the change is still coming. Toronto City council has approved almost 7000 new condo units this year adding to the nearly 70,000 already in construction. To put that in perspective, Toronto has the highest rate of development of anywhere in the world, mostly concentrated in the downtown core.

You may find this information exciting, making you a proud citizen of Toronto, or you may find it terrifying that there is that much development in our city.  Whatever you believe, the questions is:  Why Toronto? There are a lot of other very deserving, condo-loving cities in the world. Why this one?

I guess the first thing to do is to give this city a little credit. Toronto has turned itself into one of the most successful and diverse cities in the world. It is considered a economic hub and centre of culture.  It also has weathered the economic downturn of 2008 very well. Much better than most cities in the world.

Of course, this kind of development also has to do with the city policies when it comes to building in the GTA. The city really does encourage densification to reduce sprawl and protect the greenbelt around the GTA. It aims to create more dynamic neighbourhoods and fill unused "brown fields" or industrial land that is no longer in use with new neighbourhoods. Height restriction vary widely. Generally speaking, in the core you can go high. Not as easy as you leave the centre of the city. Regardless, developers are not building sprawling tracks of houses in the suburbs very often across the GTA. They are building up.

Another reason for increase in condo development has to do with  the number of foreign investors that buy properties here. As I've mentioned in other blogs, Canada does not keep records of foreign investment in their real estate.  And really, we should be keeping records. It's not that foreign investment is necessarily a bad thing, but there is a valid concern that it drives up prices in a given city. If you take a vacation destination like Costa Rica, many of the foreign investments came from Europe and North America making a lot of real estate more expensive for the locals Costa Ricans. The same concept applies in Canada.

Take Vancouver. The real estate price are much too high for the average wage in that city. Many have speculated that it is been driven up by demand from overseas. There is concern that foreign investment, particularly from China has driven up the prices in Vancouver.

The fear with foreign investors may become more of a problem if the real estate market starts to show signs of weakening. In that case, investors may pull out quickly and leave in a downturn, since they have no real interest in that investment city. This would mostly be seen in the condo sector where most of the foreign investment sits in Canada. Other countries like the U.S, Demark, France, Mexico, Japan, Turkey and Singapre keep track of foreign investment. Some countries add a 15% tax, like Singapore does, to non-residents.

I think the unknown is the part that makes some worry. There is no doubt that there are foreign investors in Toronto, though I don't believe the ratio of investor to owner is as high as Vancouver. Still, many investors around the world see Toronto as a safe place to invest. It also adds units to our rental market which allows renters to have a better stock of rentals from which to choose.

Still, I'm not entirely convinced that foreign investment has that much influence on Toronto. What I find interesting - the past two years has shown a shift from foreign investment from Toronto to rock bottom investment towns like Miami, L.A., Dublin and Barcelona. In the United States, rent is more expensive than owning in 94 out the 100 biggest metropolitan areas. That means condos are a good investment for many foreign investors. Though Canada's condo market is healthy, it may not be currently attract a new set of investors. So, that leads me to believe that this past year, which has had very strong condo sales, has been led by Canadians buying condos.

It's true that we need a better system to see just how much foreign investment effects our real estate markets. We don't want to artificially drive up prices. In my opinion, we really should be focusing on making sure this city is ready for the amount of condos it will soon have. We need a bigger transit system, without political delay, and a better infrastructure, or no one will want to invest here, local or otherwise. High density cities can be energetic, walkable, culturally-rich neighbourhoods where you can walk to every thing you need, but this fast-changing city requires proper planning to make sure these neighbourhoods thrive.