The Roof Isn't Falling In on Toronto's Housing Market
Much has been written in the mainstream press of late lamenting a cooling trend taking place in the Toronto real estate market. And while the recent shift in sales activity might be best viewed as a letting out of steam in a potentially over-heated market, to judge from recent news reportage the world as we know it might actually be coming to an end. Phrases such as "Market Unraveling" and "Boom Goes Bust" serve the attention grabbing criteria of headlines, but don't reveal an accurate picture of what's actually happening in the market. And perhaps the most unfortunate effect of this kind of media fear-mongering is that it greatly impacts the average buyer or seller in their decision making process.
What is missing in these headlines, but which becomes apparent when reading these articles in their entirety is the distinct differences that exist between Toronto and other, clearly over-inflated markets such as Calgary and Vancouver; cities where property values have escalated to dizzying heights in recent years. In light of the size of the correction taking place in these locales, a "cooling" or a return to a more "balanced" market perhaps isn't the worst case scenario.
I recently spoke with Maureen O'Neill, President of the Toronto Real Estate Board, and asked for her reaction to the negativity seeping into news stories about the Toronto market. "Media is always looking to alarm, and unfortunately the headlines about a negative spin have not always matched the content of these articles", said O'Neill, adding, "that although sales volumes have been declining the market is nevertheless stable. This is actually a healthy balanced market."
In addition, the mishmash of national sales and price statistics the media presents as "proof" of the market's demise can themselves be confusing. For example, 2007 was actually what is known as a "peak year," with sales levels being the best ever as recorded by the Toronto Real Estate Board. "2007 was a banner year", remarked O'Neill, "it was the best year ever in Toronto history, with 2006 coming in as the second best year ever." So in this context, it's easy to see why current numbers, down from two peak years in a row, but probably more indicative of a normal sales climate they nevertheless might be viewed as disappointing. O'Neill stressed that "while we do not have the 2007 market, the market is still very active, with lots of sales and prices are up. In the City of Toronto the average price is currently $394,563, up seven per cent from the $370,037 figure recorded a year ago.
Recent journalism about the Canadian market has also consistently referenced to the indisputable housing melt-down south of the border, insinuating that countries' housing collapse might pull us down into their economic black hole. Here again, this sounds ominous, services the media's agenda, but ultimately steers far of the truth.
"Most of the media's concerns have been shadowed by what has happened with sub-prime lenders in the U.S.", said Ms. O'Neill, pointing out that "our economy is strong unlike the States, with good interest rates, strict lending practices and regulations to safeguard this, low inflation, high immigration and employment levels at an all time low. This makes for a much more positive picture" she said.
As Ms. O'Neill referred to, the unfortunate situation taking place in the States is the result of un-regulated, greed-fueled lending practices that have defined that country's credit climate, and ultimately signaled its collapse. In comparison to the United States' Wild West approach to banking practices, the Canadian government recently announced it would be implementing stricter guidelines aimed at solidifying the integrity of the Canadian mortgage industry. This will include axing zero down mortgage products, pulling back the recently introduced forty year amortization allowance (back to a maximum 35 years), and setting mandatory credit score levels to be approved for a mortgage. In essence, the barn door is being locked before the horses get antsy.
While no crystal ball exists when it comes to the predicting the exact trajectory of the real estate market, influenced as it is by multiple economic forces and dependent on the classic equation of supply and demand, history nevertheless highlights the positive reality of real estate cycles. If one looks at the ups and downs of the local market, over time, the value of property in Toronto over decades has continued to rise. And while always a major concern given the role owning a home plays in one's fiscal situation, property is always more than a key portfolio investment. The best real estate decisions reflect the current needs and realities of people's lives.
And for someone still nervous about buying their first home because of the media's negative spin, what advice would Maureen O'Neill give them? "Always think long term," she said. "Real estate has tripled in some cases over the past decade in Toronto, and a decade from now they will be glad they invested in real estate."
David MacLean
Sales Representative
Bosley Real Estate Ltd., Brokerage
416-465-7527
dmaclean@bosleyrealestate.com
www.LivingInTheGTA.com
