Canadian Real Estate Market 2016

How long will the honeymoon last for hot real estate markets?

Canadian Real Estate Market 2016 – Overall Scenario & Impact on Local Real Estate

Three elements are being brought up in many conversations around the future of Canadian Real Estate Market: falling oil prices, overbuilding of condos and an impending interest rate increase. Economic forecasts maintain that Canadian real estate market will remain stable in most places through 2016, and likely go for a “soft landing” in Toronto and Vancouver, when interest rates start rising.

Observations made by Some Key Economic and Finance Professionals

“The risk of a market crash is low under our base scenario of a gradual pace of interest rate increases and continuing growth in the economy,” says Robert Hogue, senior economist with RBC Economics.

Diana Petramala, economist with TD Economics feels that “Following an estimated expansion of roughly eight to 10 per cent in 2015, average home price growth in Ontario and B.C. is poised to slow to just three to five per cent next year.”

A condo market report by Genworth Canada and the Conference Board of Canada says, “Rapid house price increases in Toronto and Vancouver have been driven by single-detached homes and row units. Price increases for apartments have been much less frothy. Accordingly, nowhere do we see a condominium bubble about to burst.”

Sal Guatieri, senior economist with BMO Capital Markets, says has to say the following for Toronto: “The city is building a lot of condos for good reason — they’re needed by the tens of thousands of people moving to the region each year who can’t afford a detached home (partly due to development restrictions) or simply prefer the condo lifestyle.”

Canadian Real Estate Market 2016 – Future of Mississauga and Toronto Condos

In my humble opinion, this is the right time to invest in condos, both in Mississauga and Toronto. This category will see much more growth in the coming years as compared to detached properties. While current oversupply of condos in Toronto may not instill confidence in investors, one needs to look at vacancy rates of owned condo properties. Currently, looking at prices alone, it may make more sense to invest in Mississauga condos, as opposed to Toronto. Also, vacancy rates are still pretty low in Mississauga’s Square One condo market and landlords continue to get good rental returns on their tenanted properties. Downtown Mississauga is a growing condo hub and a happening place.

Price of a condo in Mississauga is approx. $60,000 to $80,000 less than a comparable condo in Downtown Toronto. The rent to selling price ratio is slightly more favourable in Mississauga. Based on above price difference, an investor looking to buy in Downtown TO with 20% down payment will have to come up with an extra $12K to $16K in cash. One also pays almost double land transfer tax in Toronto. However, investing in Toronto makes full sense if you work in Toronto and are looking to buy for yourselves to live, or if your children are studying in Toronto, and you are looking to buy a condo for them.

For all the reasons above, the rental and resale condo market in downtown Mississauga and Toronto will continue to thrive, fueled by newcomers, first time buyers and a new and fast growing segment of downsizers.

Another major event set to reshape Canadian Real Estate Market 2016 – Introduction of land transfer tax across Ontario

“We’ve certainly hoped it was not going to happen,” says Patricia Verge, president of OREA (Ontario Real Estate Association), about the tax rules being implemented province-wide. “But we’ve heard from the minister’s office that it is absolutely going to allow municipalities to add this to the bill.”

Toronto is already reeling under the pressure of having to pay double land transfer tax. Should this bill come to pass, it will hugely impact the resale market in Mississauga and the rest of the GTA and Ontario.

For anyone who is currently sitting on the fence regarding buying, selling or investing in condos, the time to act is now. This is your window of opportunity to buy, sell or invest in condos and other properties in Mississauga.