TORONTO MARKET OVERVIEW: PART ONE

It’s the one you didn’t see coming that hurts the most. The Toronto real estate crash of 1989 and the fall of Lehman Brothers (and the subsequent spillover into the subprime mortgage crisis) in 2008 were major events that most experts did not see coming, but inflicted financial pain to many. Conversely, many experts are predicting that the real estate market is on a dangerous trajectory and precariously over-priced yet prices continue to escalate?

 

Toronto market overview

 

This time consumers and investors can see it coming and are choosing to filter out the experts. Over the past year many of the real estate pundits have been wrong in their assumptions that the National real estate market is overheated and on due course for a severe market correction. Much of this hype has centered on the much touted condominium market; especially in Toronto, which is the most active in North America at this time.

 

Federal restrictions on mortgage lending criteria has attempted to slow down the real estate marketplace with shortened amortization periods, greater down payment requirements and more onerous debt coverage ratios. Despite these attempts, the real estate market for both residential and commercial real estate remains buoyant; however, the availability of properties to purchase is limited. As well, mortgage lending rates remain favourable and at historic lows with a good supply of funds still available, albeit more onerous to obtain.

 

Most recently, the focus in commercial lending has shifted to bond rates where yields have increased by 40 to 60 basis points, putting upward pressure on mortgage rates. Economic indicators have shifted to the south to the US, which appears to have bottomed out, and are now on an upward trajectory, still nothing to write home about but at least it is positive.

 

Canadians in general still remain optimistic about purchasing real estate despite flat income levels and excessively high personal debt. With the lack of product to purchase and capital appreciation of properties continuing, what has transpired is a slowdown in the volume or velocity of sales. Yet what remains uncertain is whether this slowdown in volume is due to pricing pressure or due to the lack of listings?

 

Stay tuned for Part Two tomorrow.

 

*Image courtesy of Songquan Deng

 

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