Why have all the predictions about Toronto's housing market been wrong?
March 29, 2021
In 2011, there were about 28,000 new condominium apartment sales in the Greater Toronto Area (GTA), smashing the previous record high. For years all we heard from the media was that Toronto was overbuilding condos, and that eventually the oversupply would drive down prices. That didn’t occur. Strike 1.
What we also heard repeatedly was that investors would sell off their units at the first sign of soft sales, flooding the market with listings, and driving values down. In 2013, the new condo market was experiencing much slower absorption, there was no massive sell off by investors in the resale market or via assignments. Strike 2.
There were numerous articles warning of rampant speculation in the new condo market in 2015, so-called experts were positive that new home product was way overvalued. Pundits claimed as soon as capital appreciation slowed, the market would be doomed. Well, new and resale condo prices hardly grew in 2015, and rents were flat. People kept buying and prices continued to increase in 2016. Strike 3.
To continue the baseball analogy, the market bears, having struck out, are now screaming from the dugout about foreign buyers. The condo market was being propped up by offshore capital. If a tax was implemented on non-Canadian buyers in Toronto, the market would tank. In April of 2017 a new tax on non-residents was implemented. The market didn’t sink; in fact, there was a new record high of 35,000 new condo sales and the highest annual price growth in nearly 30 years.
Despite their terrible predictions, many of these folks continue to be quoted on a regular basis and interviewed on TV. In 2018, these people again yelled, pre-construction housing is a terrible investment. New condo prices went up that year, and they went up in 2019, too.
Last year we all know what happened – a global pandemic rocked everyone’s world. The head of CMHC came out and predicted that house prices in Canada would drop nine to 18 per cent over the next year and a half. Not to pat myself on the back, but I said in March of 2020 that by September 2020, the GTA would be experiencing record resale housing transactions.
And wow, was CMHC wrong, spectacularly wrong, in fact. Canadians working from home and educating from home decided they needed more space and started buying bigger houses. The Bank of Canada worried about business investment, lowered the overnight rate, and announced that interest rates would be kept low. People in the GTA that had not lost their jobs, were not spending their money on vacations, concerts, movie nights, restaurants, fancy clothes, gas, new cars, parties and more. They decided to put those savings towards a new property, and take advantage of the rock bottom borrowing costs.
Since September, we’ve continued to see record or near-record monthly transaction activity in the GTA freehold housing market, with the condominium market now hot again, as well.
In terms of my consulting practice, I’ve been as busy as ever. Developers are still buying property, still planning future large-scale developments, and still planning on launching projects in 2021.
The party has to end sometime, but be weary of the people who are convinced they know when that will be. Trying to time the market is a fool’s game. If you’re buying for investment or personal use, buy for the long term. Even if you think this is the “peak” – there will be another peak down the road, that’s the only thing I am completely sure about.
About Ben Myers
Ben Myers is President of Bullpen Research & Consulting, a boutique real estate advisory firm, that works with landowners, developers, and lenders to better inform them of the current and future macroeconomic and site-specific housing market conditions that can impact their active or proposed development projects. Follow Bullpen on Twitter at @BullpenConsult or find Ben at bullpenconsulting.ca