Toronto Real Estate in 2014: Year End Review

In 2014, real estate predictors were wrong again. Like 2013, the think tanks, banks and number crunchers were mostly on the wrong path, showing us that the art of real estate prediction is a tough business, right up there with crystal ball reading and UFO sightings. Once again, those predictors who represented financial organizations tended to be more negative in 2014. Pimco, for example, felt there were be a 20% correction in the housing market this year. This is not, of course, as dire as 2012 where some were calling for a 50% drop in home values.

The government, often cautiously pessimistic called for a soft landing. I'm not sure if they thought we were going to have a soft landing, or if they were trying to will it. And the rosier and upbeat predictions, not surprisingly, came out of the real estate industry calling for some respectable increase in home value. CMHC, for one, called for an increase in value but not as good as 2013. Well, as it turns out 2014 was a lot like 2013. The predictors were wrong again, and now that we're coming to the close of this year we can look back and see what did happen in Toronto real estate.

HOUSE POWER House prices increased a lot this year. Percentage increases vary from neighbourhood to neighbourhood, but the average single home shot up 13 % from last year, which is slightly higher than the previous year's increase. There were fewer houses listed for sale this year than 2013 adding to a chronic shortage of houses available in many of Toronto's neigbhourhoods.

Bidding wars in many established and emerging neighbourhoods were frequent. First-time buyers had to work hard to snag a house in the Toronto market this year as emerging neighbourhoods with affordable house prices, like the Danforth Village, became more competitive. 2014 was a classic tale of supply and demand as far as houses are concerned. Very few developers build houses or low density condos very often any longer because there is a better financial payoff for them in high density condos, not to mention that the city of Toronto encourages densification in most parts of the city where zoning allows.

CONDO POWERThere was a lot of concern at the beginning of this year for the condo market. More new units came to the Toronto market this year than any other year before it. The fear was that the condo market would be flooded with new condos and the crash would begin. The last few years have not always shown positive gains for some condos in this city, but this year has been the bestsince 2010. We are not seeing the kind of gains you see with houses, but the healthy condos, particularly low rise ones or well-managed and designed large ones, performed quite well with respectable gains. The demand stayed very strong this year for condos despite the number of units hitting the market . But why? Some suggest that the tight market on houses has pushed more buyers into the more affordable condo market. Some say, the millennials, the nextbiggest demographic since the baby boomers, are buying them up, keen on living in the city.


THE CHI-CHI-FICATION OF QUEEN WESTNow that Vogue has called Queen West the second coolest neighbourhood in the world, the desire to live here has exploded. Most Torontonians already new about Queen West for awhile, but now it is the terrain of incoming Americans and other buyers from abroad. Many hipsters may have left Queen West looking for less obvious cool neighbouhoods, but the demand is stronger than ever. The demand has grown almost as fast as the new trendy businesses arrive, particularly along Dundas West, just north of Queen St. It's become foodie's paradise, and the experimental neighbourhood for trying things out, making Yorkville look provincial and Annex seem so 90s. Best of all, you don't have to be hip to live here any longer.

All in all, a very positive year if you currently own a property. Does that mean buyers and investors have no chance of getting into the Toronto market? Not at all. You just need to look in the right places. 2015 promises to bring something a little different. And that will be the subject of my next blog!

The Million Dollar House

Remember when $1 million dollars was a lot of money? It was not too long ago that the term "millionaire" meant you were in the leagues of Thurston Howell or Howard Hughes, a yacht-owning, caviar munching member of the luxury class. Today, one million dollars is still a lot of money, but it hardly puts you in leagues of the super-rich. In some Toronto middle class neighbourhoods, it is quite common to be a millionaire, especially when it comes to real estate. I've seen teachers, labourers, even cleaning ladies become millionaires when they sell the houses that they purchased in the eighties, in once humble Toronto neighbourhoods, for seven figures thirty years later.

Nowadays, as far as Toronto is concerned, the established neighbourhoods have no problem hitting the million dollar mark, but even the more advanced emerging neighbourhoods like Leslieville, the Junction, and Beaconsfield are closing in on the million dollar mark and, in some cases, surpassing it.

Now, there are two ways of looking at this phenomenon. One is to say wow, houses are sure overpriced in this city and we are due for a serious and much needed correction. And that may be true, but I would more likely think that we are undergoing a certain transformation in this city that is fundamentally changing how this city functions. And it's changing so fast, it is hard to keep up with which neighbourhoods are emerging next.

For example, you may have visited or lived along Queen Street West when it was the cool part of town and a cheap place to rent from a nice Portuguese landlady at at reasonable price in the nineties. The thing is, the cool thing, whether you like it or not, has been made public. When Vogue calls you the 2nd coolest neighbourhood in the world, some may roll their eyes, but it does say something. When people move to this city from New York, Chicago, London or even Oshawa, they will Google the cool neighbourhoods, and up pops Queen West. And that's where the newcomers want to go because they do not know much about Toronto, but they want to live somewhere uniquely urban.

So, this humble strip becomes a destination. The hookers who used to hang out across from Trinity Bellwoods take their business elsewhere. The 20 something cool t-shirt shops or that place to buy a bong gives way to designers and top notch bakeries and restaurant. It is not as chi chi as Yorkville. It still has some grit to keep it interesting. But there's no denying that this neighbourhood is becoming wealthier. A Northcott home, for example,  that was once a rooming house, became a house featured in a architectual and design magazine.

Now, I'm not saying all of this to affirm how awesome Queen West has become for the jet set and the super fancy. I do, however, think something very interesting is happening in our city. Living downtown is becoming a luxury for those of us who like to live in houses. The hub of wealth in Toronto is shifting from the midtown to downtown centre east and west.

I'm also suggesting that those who bought up early when places like Trinity Bellwood near Queen east or Beaconsfiled sure made a killing when this neighbourhood was still emerging and had some of the roughness from its past. That's why there's been an explosion of Canadians buying property abroad in Florida, Hawaii, Australian, Europe and South America. They have built up equity in their home here in Toronto.

Of course, there's no guarantee that the equity in your home will always be there. The market can change, but I still think house-buying in Toronto is a good idea. Here's why:

1. Houses are good investments in Toronto because they don't build them very often any more in the city limits. It's simple supply and demand. Supply is limited, but demand grows.

2. Traffic is making the idea of a short commute to the city centre a lot more appealing. The closer you are to downtown or easy access to it, the better. The time is coming where the cost of a home may depend on the distance it is to the downtown.

3. There are other emerging neighbourhoods to watch. I don't know if we'll ever see something as trendy as Queen West or Ossington or Leslieville occur as fast, but it's happening in the area around the Junction Triangle along Bloor and Lansdowne, and along Wallace. It's happening in the Danforth Village, the area along St. Clair West, up to and past Dufferin. And there are other neighbourhoods that are still less expensive that I believe will be worth a lot more one day.

You have to roll the dice, be patient with the rough-around-the-edges neighbourhood, and chances are, they will improve in value. Not every neighbourhood in this city, but some key ones.

The momentum for living in Toronto (and many other cities) is growing. Toronto will be a very different place in 20 years. Maybe, if you take a leap of faith with your real estate investments, you could be a millionaire like Thurston Howell or Howard Hughes. Sure, a million dollars may be worth even less in 20 years, but you will likely prosper from Toronto's transformation.

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.