Mortgage news and talk of the housing markets are constant water cooler conversations here in Canada. The new regulations to slow certain housing markets and whether or not these new measures will actually achieve their intended goals means that everyone is hyper-focused on the housing situation within our borders, and many people haven’t considered the role of the housing markets relative to others around the world.
And although detached homes are the headline-grabbers with their high prices and next-to-nothing availability, condominium markets are really the ones worth looking at in a global context. After all, condos are the primary source of housing in many of the world’s largest, busiest, and most dense cities, cities that attract immigrants, businesses, and highly-skilled employees alike.
Condos.ca recently looked at the condo market in Toronto and how it fares in terms of affordability compared to other cities, which their research analysts did by taking the price of the condo divided by annual income in order to get the number of years of average income it would take to purchase the investment.
“Based on this data, the Toronto condo market is not actually overinflated relative to other major cities,” their research found. “It’s a hot market that’s for sure, but not overheated. This global comparison shows that condo investment in Toronto is very likely to continue to see potential growth in value over time.”
Vancouver was not the focus of the study, but we can see that even at $900 per square foot, it falls somewhere in the middle range of prices for a condo, and about half of what it is in New York.
Carl Langschmidt of condos.ca encourages you to replace the words “condo bubble” with “condo bargain.” Although prices have increased over the past decade, relative to 18 other world-class cities, a condo in Toronto is one of the least expensive.
Lack of supply is a contributing factor to the escalating condo prices in Toronto, and although there was some talk earlier this year of oversupply becoming an issue, that far has largely fallen by the wayside. Ontario’s population is projected to grow by 30 per cent, or almost 4.2 million, over the next 26 years, meaning that by 2041, the population of the province would be almost 18 million, according to Statistics Canada. What’s more, the Greater Toronto Area (GTA) is projected to be the fastest growing region of Ontario. Projects have the population of the GTA increasing by almost 43 per cent, more than 2.8 million, which would make it more than 9 million by 2041. This would make the GTA’s share of the population of Ontario almost 53 per cent in 2041.
“With this predicted population boom, condominiums are going to be a much needed source of accommodation, since there simply is not enough land to continue to develop freehold family homes in the downtown core,” the research analysts conclude. “With steady population increase, matched with continuous new development across the entire GTA, we predict investing in the Toronto condo market to be a smart move with lasting value.”
And the parallels aren't to be missed in Vancouver. The Real Estate Board of Greater Vancouver reported that the population in the Lower Mainland is forecast to grow by 30,000 new residents each year or 1.2 million residents by 2041, for a total population of 3.4 million, according to Metro Vancouver’s Metro 2040 Residential Growth Projections report.
Of the members of the G8 – highly industrialized nations – the average square foot of a condo in Toronto is the lowest of them all.
So as we see the condo market start to resemble the detached home market in terms of low supply relative to demand and buying tactics such as bidding wars and bully offers win out, not to mention the sheer speed at which units are sold, our first instinct may be to panic – especially given the sluggish economy and the conversations as to whether or not it’s healthy for the housing market to be shouldering such a heavy share of the Canadian economy.
But put into context, this data shows us that the market in Toronto may still have a ways to go, and room to grow.
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