Your Future Awaits! Sorting Out The Real Estate Predictions of 2015

By nature, predictions are whimsical. That's why many of them are wrong. The real estate predictions of 2015 that I have come across are often a mix of doomsday scenarios and rosy outlooks, like every year for the past decade. So, let me filter these predictions, analyze them for you and offer a few thoughts of my own for Toronto real estate in 2015.

Let me start by saying what is a little different in the predictions for this year. Generally, they are fewer of them that are alarmist than in the past. Yes, we are hearing that prices can fall by 15% according to RBC, and yes we have someone named Hilliard MacBeth, an Albertan based porfilio manager who wrote a book entitled When the Bubble Bursts: Surviving the Canadian Real Estate Crash, calling for a nasty downturn in Canadian real estate. She predicts that house prices will fall 50%. Ouch. This may sound scary, but keep in mind that a book like this comes out almost every year. Why? Because these books sell! Think of Garth Turner in 2008 who wrote The Greater Fool: The Troubled Future of Real Estate calling for a 30% drop in Canadian real estate that year and more to follow in the subsequent years.

Even though we have some negative predictions this year, there are  fewer doomsday predictions than in previous years. I have a feeling that the public may be suffering from what I call "CLF" or Chicken Little Fatigue after years of hearing the sky is falling in real estate.  I suppose at some point, someone will be right. Some Canadian cities will have a slip in real estate prices, but not this year in Toronto.

All in all, I find all predictions a little more cautious for 2015. There will be smaller gains, but gains nonetheless. That seems to be the general consensus. Price appreciation but not as much as 2014.

The focus of the 2015 predictions has been largely around interest rates. As the American economy improves, many believe the Americans will start raising their interest rates, and in turn, Canada will raise their rates as well. Most predictions I have read point to the forth quarter for such things to happen. Some worry that the rise in interest rates will effect the housing market. I agree, it will slow it down. Others, however, think the interest rate hike will be the straw that broke the camel's back for the indebted Canadian, leading to a downturn in the real estate market. I don't believe it will cause the real estate market to crash, but it may put the breaks on some very big price increases that have happened over the past few years. I imagine if the rising interest rates start to effect the housing market too negatively, the government will put the breaks on the increases or even reverse them. Housing has become too big of an industry to just let slip.

From a more localized,  more Toronto-centric perspective, some of the trends that have been happening the past few years will become more pronounced in 2015. The low supply of houses and townhomes will remain in great demand since very few of them are built any longer, and the demand continues to increase as the city and region grows. Houses will increase in value at a much faster pace than condos.  Small boutique style condos in improving or established areas will generally perform better than giant condos. The dream of owning a house will still be affordable for some first-time buyers in the right emerging neighbourhood, though condos will increasingly be the terrain of first time buyers were the prices are more reasonable and the supply of new condos keep growing as the city grows.

For those who want a house with a smaller price tag, house hunters will turn to second tier cities like Hamilton where detached houses with a yard are comparable to the price of a one bedroom and even a bachelor condo in Toronto. Access from Hamilton to Toronto will continue to improve. Hamilton will be a good choice for many who love the urban lifestyle. It is still a city of 500, 000 people. Unlike Mississauga or Brampton or Oshawa or any other Toronto suburb, Hamilton does not suffer from suburban sprawl or a dominant suburban culture. Its downtown is coming back after decades of decline. This phenomenon is not exclusive to Toronto. Such migration to second tier cities is happening all over North American. In San Francisco, many house hunters head toward Oakland. Expensive cities like New York or Chicago have triggered some middle class folk who want more space to head to Austin, Denver, Nashville or Charlotte. The thing about Hamilton is that it is close to Toronto and the new GO station will link up quite nicely. So, you can have your Toronto job or social life, and live in Hamilton. Commuting time is required though.

In terms of Toronto neighbourhoods, we will continue to see some of the advanced emerging neighbourhoods steal some of the sparkle from the more estalblished neighbourhoods. The general shift of wealth from duller north Toronto to the more vibrant south destinations will continue. The cool quarters will continue to attract more demand. Roncesvalles, the Junction, Leslieville, West Queen West and Brockton will continue their quick ascent. Danforth Village will continue to draw in many first time buyers, though not all houses will be in the first-time buyer price range in this neighbourhood in 2015. Areas along the Eglinton Crossway that is currently under construction will be a good bet for a long term investment. This includes Mount Dennis, a neighbourhood with some of the lowest prices in Toronto. Mount Dennis even has its own indie coffee shop opened in 2014! And that's always a good sign for a burgeoning community hub. Like last year, bargain hunters will see the western flank of Scarborough that borders Toronto begin to take off.  Corktown and the Distillery District will really start to shine as all the construction wraps up and the Pan Am Games begin. This may be one of the top spots to buy a condo this year and next. It is a well planned area with a lot of amenities near by. High Park, Leslieville and the Junction Triangle are all places where condos have not been overbuilt and fit in nicely with the neighbourhood.

All in all, it appears it will be a tame year. Of course, anything can happen! No one called for the price appreciation we saw in Toronto houses and a healthy condo market in 2014. 2015 could be just as surprising.

Traffic and Toronto Real Estate: A Dysfunctional Relationship

Sometimes in Toronto we need to be grateful. We didn't have a real estate crash like most cities in the world back in 2008 and 2009. We were not dragged down to half our population from the 1950s like other nearby post-industrial cities such as Detroit or Buffalo, and we are considered one of the smartest, most livable, most future-proof cities in the world. Of course, not all cities can be so wonderful  and successful without having their downsides.

As Toronto changes from big city to a mega-hub of a city, we are going to experience some growing pains. And one of the most painful results of of this growth is traffic. As a real estate salesperson who spends a great deal of time in his car, I have to admit that driving in this city is worse than it has ever been. Don't believe me? Well, maybe you will believe Forbes Magazine that places us as the 6th worst city in North America for traffic this year. On average, we are 27% slower at arriving at our destination than without traffic.  In the mornings we are 49% slower. During the evening commute home, we are 62% slower. And the scariest thing of all: Our standing as the worst North American city for traffic is moving up in the ranks. Just a few years ago, we were in 9th place.

Clearly, this is not the kind of top ten list where you would like to reach the top. If  the city, the province and the federal government could get their act together in the transportation department, we might be able to get off this list and live a little better. Still, I think we are going to see more traffic. And this traffic is going to effect how people make real estate decisions in this city. In fact, it already has.

So, with traffic going nowhere soon,  you may want to buy close to something that is not affected by traffic. Namely, the subway. Even if you never use the subway, it will make a difference to your sale price when it comes time to sell. Can't afford near the subway? Well then, you need to be a forward thinker. Look to locations around the Eglinton Crossways (currently under construction) that will be able to usher you downtown with relative ease. It's not a subway, but most of the light rail route is underground and therefore, not subject to automobile traffic.

Also, keep an eye on new subway plans like the relief line, though allow yourself to be cynical on this one. Make sure the work has started before you buy close to a new subway line here. We've all seen how much governments can change their minds on transit in this city the past ten years.

If you work out of the city, you may want to locate yourself near the highway like the Gardiner or the DVP. Still, just because it is close to the highway, does not mean you can get on it easily. Take the City Place condos that are right by the Gardiner. Getting on that thing from Spadina, at the best of times, is an exercise in waiting.

Of course, if you are looking to buy in downtown Toronto, the need for a car is less of a concern for more and more people. In fact, traffic is, in part, responsible for making downtown and local neighbourhoods better because people don't need to leave their six block radius to live their lives.You can walk everywhere in many neighbourhoods - walk to work, the gym, the grocery store, the farmer's markets, the bakery, the butcher, the health food store, the yoga studio and to your fave brunch hangouts. Traffic has strangely had a positive effect here. More people will be giving up their auto because you don't need one downtown. It's hard to believe there was a time when you could not find a grocery store downtown because the demand wasn't there. You may not need to leave your enclave. And if you do, you can rent a car.

Even in neighbourhoods outside of the city's core like Mimico or Danforth Village, they are becoming self-contained entities with their own coffee shops, restaurants, and local events. This is the reason why I am seeing the walk score appear a lot more in Toronto listings. Walking is important to many Torontonians. People want to be able to walk to where they want to go, and they only want to drive if they must. Why? Because driving drains the life force out of you. It is a soul crushing event. A little driving here and there is very manageable, even fun, but after 3 or 4 hours a day, it will take its toll. Walking allows you to easily exercise and bump into your neighbours and interact with your shopkeepers.

Of course, the biggest effect of traffic does not have anything to do with downtown and its surrounding villages. The big change has been in the suburbs which rely on easy access to the downtown.When Toronto was just a regular city, it was easy to leave work downtown and drive home to the green suburbs in time for dinner. Those days are gone. People don't want take up a big chunk of their day traveling in and out of the city. They lose too much quality time with their significant other, their kids, their pets, their gardens, their bowling teams or their TVs.  It's wasted time in a busy schedule. So nowadays, the further out of town you go, the less expensive most suburbs become. You exchange cheaper housing for more time in the car.

Even in the suburbs themselves,  the GTA's traffic woes have led to better real estate prices around the GO stations. So, keep that in mind if you are buying outside the city in the future. Near a GO station is often a good place to invest, especially if the GO station is under construction.

All in all, traffic is not going anywhere, even if there are improvements and serious long term commitments from all levels of government. Even with improved transit, this city will continue to grow. So, the best plan is to know how traffic is going to affect this city. And then you can make wiser real estate choices when the time comes to buy and sell.

Can You Still Afford to Buy A House Near the Subway?

The winter of 2014 may have marked an end to an era for many first time buyers and savvy investors looking to purchase a Toronto house or investment property.  Slowly but surely, neighbourhoods along the Bloor/Danforth line that were once affordable have been disappearing.  Now, it looks like the last two neighbourhoods of house affordability near the subway are turning over. Up until this year, one neighbourhood in the east and one in the west were still in their early stages of emerging as a revitalized neighbourhood for many buyers who wanted to be near the Bloor subway. The Danforth Village and Wallace-Emerson were the last two areas to go. In the west,  Wallace-Emerson has become a place of bidding wars and steep competition. The local indie businesses have arrived here from Body Harmonics Pilates to The Hub, the new indie coffee shop. Nowadays, some are even throwing around the terms "new Queen West" to describe the influx of hip stores and trendy shops arriving. 

In the east, the Danforth Village from Main Station to Victoria Park has been a growing destination for first time buyers, and investors that continue to roll along the Danforth line to the end of the old Toronto city limits. Though it does not quite have the hip factor as far east as Vic Park yet, this is also a place of competitive bidding wars, strollers, and great transit. Though there are a few spots where a first-time homebuyer can pick something up for under $500K at the moment, even affordable houses in this neighbourhood are becoming as rare as spotting a sasquatch in a tutu downtown.

Of course, buyers who have bought here will be thrilled that they have invested early enough to benefit from the rapid price appreciations of these emerging neighbourhoods on the Bloor-Danforth line. Many blossoming investors and first time buyers may feel a little blue at this news. There may be a sense that they have missed out on a time when buying a house near quick and easy transit was possible. 

Before you release those bitter tears from your sad eyes, and  run off to buy a suburban house in Milton, let me tell you that there is hope. The end, for you, is not nye. You can buy a house or investment property in an emerging neighbourhood near good transit in Toronto in the years to come.  The only problem - it's not built yet.

So, perk up first-time buyers and investors because the Eglinton-Crossway is coming! Maybe you do not spend much time up on Eglinton, but it doesn't matter because this transit plan will transform many neighbourhoods and create quick access to downtown. 

How fast will these trains move? Well,  the expert estimations of Metrolinx have a trip from the far west destination of Mount Dennis to the Kennedy station in Scarborough at 40 mins. Not bad at all. That's 60% faster than the current buses plus there is a good portion of this LRT that will be underground from Keele to Laird and a dedicated lane above ground in all other portions of this line, making it traffic proof. For more detail, check out this map.

Who's going to benefit? In the west of Toronto, you will see neighbourhoods like Mount Dennis, Caledonia, Keelesdale and Weston become much more connected to the downtown, turning them from inaccessible outposts to easy transit hubs. And right now, these neighbourhoods carry some of the most inexpensive real estate in the city. Places like Weston even have some incredible Victorian and heritage homes. Again, you don't have the yoga shops and espresso bars yet, but this is why this place is still inexpensive. Eglinton, from east to west, will see an improvement on its commercial strip, though some businesses may suffer during construction.

The big winner in the central location will be Oakwood. Still undervalued, in my opinion, and soon to be a great access point to the rest of the city.  It will make its northern frontiers much more appealing, in addition to being a spillover neighbourhood from the Wychwood neighbourhood to the south.

 In the east, parts of Scarborough will feel significant improvements, especially in neighbourhoods like Clairlea-Birchmount that will also receive the overflow from the Danforth Village once those homes become too expensive for first time buyers and investors on a budget. 

Maybe you're thinking: Houses are too much work. Condos are where it's at.  If that's the case, this transit line should interest you as well. In many of the neighbourhoods mentioned in the east and west section of the line, there is little or no condo development, and believe me, it will be coming, and those first roundsof condos will be priced lower than the ones to follow.  

Service on the Eglinton Crossway is scheduled to start rolling in 2020.  So, you may need to wait to have a good return on this investment. Still, this is the largest transit expansion in Toronto's history that literally crosses the entire city. There are real opportunities to be had. So, make sure you don't miss the discount house prices near good transit. It won't last forever.