Will The Toronto Real Estate Market Crash?
One of the biggest investments making headlines every day is always real estate. Here in Toronto, real estate has been elevated to another level out of this world. The investments are huge and comprise the largest percent of Toronto’s economy. Since Toronto is Canada’s heart and central nerve center, you must expect a stable market on almost every investment.
The real estate market of Toronto is one of a kind and so robust and vibrant hence putting Toronto at the forefront of real estate investment ranking. Due to the high market that has been rising for a couple of decades, practicing real estate investment has been reported to bring lots of fortune and returns. But now contradicting reports are coming up, concluding that perhaps the real estate market may stumble. On the other hand, there are still some reports that the real estate market is rising.
The many contradicting reports are misguiding and make thinking of investing in Toronto real estate shaky. To clean the hot air reports, we have gone above the rim to provide a detailed report on whether the real estate market in Toronto is heading for a stumble.
Real Estate Driving Factors
Before anything else, you must first understand real estate investment’s driving factors. Investing in real estate needs an individual who has lots of knowledge and information before investment. One of the things you must know is the driving factors. Once you’ve sorted that, you can consider getting into this venture.
Demography
The data from demographic research is important in determining the outcomes of any real estate investment. Any real estate experts understand how vital demographic data is to real estate investment. Demographic data is represented by population, gender, migration pattern, race, etc.
Understanding demography will be a key determinant of the right location to develop pre-construction homes. Besides that, demography will determine the pricing of the units and suites. That depends on the income of the prospective customer within a given area. Population, on the other hand, will help an investor set up a project in an area where there is so much market for the finished units.
Another instance is when dealing with income data. As an investor, you have to ask yourself how the income of the people around your project location affects the pricing of the units. Generally, investors need to carefully consider all the demographic data and develop a conclusive idea that fits well for the desired market.
Interest Rates.
Real estate investment is one of the most expensive forms of investment you can think of. Consider the interest rates so much when engaging in a real estate project. That applies to an investor and the buyer. Interest rates are so important in determining the outcomes of a real estate investment.
For any real estate project to sell out well, there must always be involved in mortgage lenders. That runs from the investors to the buyers. A mortgage loan will be needed to facilitate the project building by the investors and finance the buyers’ buying of the finished units.
The lender’s money must be returned and not the same way as before but with interest on top. Interest rates from lenders vary and are never fixed. Sometimes they rise, and sometimes they fall. When the interest rates from lenders go high, the demand for real estate projects such as new home construction will decrease. That is because it would be hard to go for a mortgage with huge rates. However, buyers will flock in once the interest rate drops, and the market will be under tight demand.
Economy
Economics is the primary lifeline and driving force behind the success or fall of real estate investment. The economy’s health and status determines the direction and trend in investments’ behavior. When looking at the economy, we have to zoom down on; GDP, Employment rate, prices of goods, inflation and production rate.
The economy’s behavior determines the overall outcome of real estate investment. When things go south, then investment follows that course as well. The effect is almost the same on residential and income-generating projects. However, the effect is divided for the Real Estate Investment Trust projects. If an income-generating project offers hotel services, then a downfall in the economy will affect it so much. The income-generating investment offering services in the office won’t go down as such.
Government Subsidies.
Government subsidies are another key factor regulating the real estate market. The Government gives a helping hand by providing cushioning to the investors and buyers from the harsh expenses involved when purchasing and building a home.
The subsidies and incentives vary depending on the cities and provinces where the projects are situated. Incentives such as tax credits and deduction help boost the real estate market.
Report On Real Estate Market In Toronto.
The Toronto, Real estate market has been one of the best places to find dream pre construction homes affordable. However, things are not going well, and the drop in Toronto’s real estate market is now investable. Reports say that the current downtown in real estate here in Toronto is one of the worst ever recorded in over four decades.
Below is a brief tabulation of the pre construction projects price comparison a year ago with the current year.
Condo
Floor plan |
Current price |
Price (6 months ago) |
Price (12 months ago) |
| Studio | $464(+5%) | $510 | $454k |
| One bd | $644(+4%) | $670 | $619k |
| 2bd | $882(+4%) | $836 | $838k |
Causes Behind Real Estate Market Drop
Tumbling Economy
Canada’s economy is tumbling with the interest rates increasing, Government doing away with incentives, and so. The central bank of Canada has pushed the interest rates to a surprisingly high amount. Compared to 2017, when the interest rates were 0.23%, the current interest rates have more than doubled to over 2.5%. As if that is not shocking enough, the largest bank in Canada has pushed the mortgage rates to over 4.5%.
Sadly, the trend seems to be no turning back, one reason being the current non-ending high inflation. The inflation being experience comes as a result of the previous pandemic that is yet to be wiped out.
The increasing oil and gas prices are making things difficult, with the current war in Ukraine being the major cause. Again, if you want to be on the safer side, you can choose to lock the rate for the next five years at 5.5%. That is just ridiculous!!
Conclusion.
The real estate market in Toronto has experienced the worst drop, with the current rates expected to exceed 24% coming next year. Experts fear that the current inflation rate being on the increase will continue into the coming year and still drag the real estate market.
If you are planning on purchasing new pre construction homes in Toronto, you might be extra patient before investing. Otherwise, if you take the real risk, you can take on the bull by its horns. G1Homes.ca is here is help you pick your next dream home. Check our website for the best pre construction condos, townhouses, semis and detached.