Do you wonder why our real estate economy has continued to grow even when you suspect it should not? As a realtor engaged in the trade of property over the past twenty years throughout the City of Toronto, I’ve witnessed the property economy boom, bubble, collapse and recover into the massive economic engine it is. Here are my top five factors contributing to the on-going phenomenon of a prosperous property economy.
1) Migration and Demographics – Plain and simple, people keep locating to Toronto. We’re growing! In addition, the trend to smaller household formation for longer periods has had a dramatic impact on the housing market. No longer do people postpone buying property until they cohabitate or marry. Fortunately, this burgeoning demand for homeownership by singles, deemed a right rather than a privilege in Canada, is available from developers constructing entry-level efficiently designed condominiums in proximity to public transportation in our urban centre. Smaller units at “affordable” prices meet the needs of young urbanites, dominated by single women (one of the largest growing markets), the newly divorced, and the downscaling empty nester. In addition, the urban professional baby boom is keeping young families, who once might have relocated to the suburbs, downtown. As a result, the older freehold city housing stock that was once multi-unit rental dwellings is being converted into single family-friendly dwellings. With a declining pool of available rental housing options, dislocated renters are opting to become condominium buyers in order to stay centrally located.
2) “It’s just like rent” - Twenty years ago a five-year mortgage interest rate was around twelve percent. Today it’s available for less than four and a half percent interest. This means you can borrow about twice the amount of money and have the same monthly payment than you could twenty years ago. Add to that the opportunity to take longer to pay back the mortgage with a 30-year amortization rather than the once-conventional 25-year time span, and living with housing debt has never been easier. Becoming financially burdened in this manner is part of a collective “conspiracy” between governments and corporations. In a global climate where governments and corporations themselves are saddled with enormous debt, and who very badly need to keep fueling the engine of our global capitalist economy, indenturing the proletariat as much as possible through cheap mortgage rates keeps the national (and world-wide) economies flowing. This is one way how contemporary capitalism works today.
3) Wealthier Canadians - We live in an era where we are experiencing an unprecedented and massive transference of wealth from one generation to others. Basically, many of the Depression-era grandparents who squirreled away their money fearing the day Black Tuesday would return (it did last year but $US700 billion suddenly appeared as ‘economic stimulus’ to save economic Armageddon, with many other governments following suit), are bequeathing it to their baby boom children. However, those baby boomers don’t always require any money for they, in turn, rode the post-WW2 prosperity wave of their generation all the way to unintended riches. This means many Canadian grandparents and parents are, shall we say, ‘financially comfortable’ and welcome helping their offspring get into the real estate market. These folk are asking themselves why Junior should throw money away paying for rental accommodation when they can help provide the down payment. Moreover, why not if it’s prudent and possible? So, with the down payment funds happily transferred (with or without strings), family trusts are ensuring Junior’s monthly costs are, guess what, “just like rent”! Unfortunately, with all those young singles hungry for property carrying wads of cash thanks to dear ole grandma’s frugality, market values are prone to remain stable or rise.
4) The property ladder - With so many relatively new smaller housing options available, like smartly-designed stylish efficiency apartments perfect for one (but not two), and stacked townhouses perfect for two (but not really three – all those stairs and a baby carriage?), then moving multiple times seems inevitable. In fact, it’s become entrenched as part of the necessary ‘joys’ of the real estate economy with a cleverly coined expression called ‘climbing the property ladder’. Face it, hardly anyone buys their first property and lives in it for twenty years anymore. Having serial properties is as common as serial jobs and serial relationships. It’s become entrenched as a domestic rite of passage. In addition, it provides an excellent vehicle for taxation. I always picture the city and provincial finance ministers’ gleefully dancing under the shower of money pouring in from all the double-land-transfer taxes buyers have to pay each purchase again, and again, and again….
5) The role of the media - Twenty years ago there were a handful of home design and decor magazines. Today, there are several hundred catering to every conceivable taste in housing. Small spaces, urban dwellings, country homes, estate villas, vintage architecture…name your domestic style fetish and there is inevitably something for you! Add to this the rise of Home and Garden Television (HGTV) and you’ve got uncensored “House Porn” on a 24-hour loop subliminally convincing you that “you have not made it” if you do not have stainless steel appliances, stone counters or engineered hardwood ?flooring. Having a beautifully merchandised home equipped in the latest fashions and accessories has become commoditized into a lifestyle necessity. We live in an era where our consumer culture is spinning a thirst and driving demand for an improved property economy. Apparently, it’s working.
At urbaneer.com, we recognize there are many factors influencing the way you approach real estate. Even unwittingly! While we cannot change the way our property economy is evolving, we can guide you with a level of awareness and insight that only comes with comprehensive education and loads of first-hand experience. Want to learn more? Check out http://www.urbaneer.com to sign-up for our newsletter! Or read our urban blog on life in Toronto as a realtor! Plus we're just a phone call away at 416-322-8000!