Over the past few days the media has been peppering us with doom and gloom stories about the Canadian real estate market.
You'd seriously think the sky was falling.
I mean, REALLY!?!
How amazing that, although the volume of real estate traded has dropped and prices have increased in Toronto, it signals the END IS NEAR!
I mean, REALLY!?!
On Wednesday, The Toronto Star, told it like it is. That the market appears balanced with an uptick in prices. According to the May 2013 sales stats, houses in the Greater Toronto Area are now a precedent-setting $542,174. The Globe and Mail chimed in citing the same stats, noting that the volume of sales is down 3.4% from the year earlier. Essentially, we're talking around 400 fewer property sales.
And Bloomberg News posted a story on Wednesday that cites the rise in building permits issued and an increase housing prices signals Canada has "averted a housing plunge". Awesome, right?
However, on the heels of these stats the Organization for Economic Co-operation and Development announced they consider Canada the third most overvalued real estate in the developed world, fueling all the suppositions by analysts who say the market is heading for a price correction. Apparently all the signs are currently present - home sales are slumping, demand is down and prices "will likely follow suit". Today the CBC News offered a well-written insightful account on all the dynamics which put this into play, namely housing prices relative to the rents they can garner, and housing prices relative to the average incomes of Canadians.
So will prices drop? Maybe.
But I think it really depends on where you live.
First, I need to disclose that I am always troubled when a real estate market is measured on a national level, which is what the OECD uses as the basis for their analysis.
Why? Because all real estate oscillates within their own micro-markets.
What a property is worth on one street is influenced by its neighbourhood environment, which is shaped by the social and demographic dynamics of its area, as mitigated by the economic engine of the urban centre or region in which it is contained. In other words, while the value of your home may be impacted by the overall climate of the country in which it is located, there are exponentially more micro-variables which influence what any property is worth.
For example, the OECD says that the fundamentals of the United States real estate are now realigned after their market correction, but that doesn't mean the 'average' American can move to San Francisco or New York and buy themselves a home in the heart of the metropolis. So does that mean New York is overvalued? As long as there are people willing to pay the price, the answer is "No". In New York, prices only dropped around ten percent through their cataclysmic crash while the prices in Miami, spurned by rampant speculation, plummeted upwards of 70%. In other words, what happens in one part of a country does not necessarily reflect another. The same applies to Canada. What happens in Vancouver does not necessarily reflect what occurs in Toronto, nor what happens in Halifax.
It's at this juncture of this post where I concur Toronto does have to mitigate the potentiality of an over-supply of condominium housing and a drop in prices. And yet, just this week one of our condominium listings went into competition where the successful buyer paid a premium four percent over the list price to secure the property. This doesn't indicate the sky is falling, but signals the demand for centrally located stylish turn-key suites are still attracting Buyers.
Now, I'm not suggesting you buy any property. You truly need to exercise caution and heed my counsel on what to buy in Toronto. And once we jointly find a property which fits all the fundamentals of being a solid investment, my advice is you buy a place at the top of your budget, which fits your needs, and makes your heart sing. Why? Because you'll happily career-path to earn the bucks to service the debt on a place you love coming home too, which is spacious enough you won't be calling me in just a few short years because you can't accommodate all your stuff, your new partner, or your new baby! I'm an advocate of the Buy and Hold approach, so when The Globe and Mail publishes stories on the 'downside risk' of the Canadian housing market, you're prepared to weather any storm while living your life.
At urbaneer.com, we're here to guide you through the complexities of Toronto's real estate market. Did you see our Spring / Summer 2013 Real Estate Forecasts? Click HERE to read the one of the Freehold Housing Market, and click HERE to link to the one on Toronto's Downtown Condominium Market.
And please know we're here to help!
~ Steven and the urbaneer team
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