In a few weeks time, the predictions will start rolling out for 2014 with regard to Toronto real estate. I know I will be making a few of my own! Of course, it may be a little premature to be pulling out the crystal ball just yet. So for now, I think it would be interesting to look back over the year to see the difference between what was predicted at the beginning of 2013 and what actually happened.
I will acknowledge the art/science of real estate predicting is a tough one. It's very difficult to pinpoint when and if a housing market will tank or rise to new heights. Otherwise, we'd all be very rich on real estate. I am going to pat myself on the back because I made predictions that largely came true, but they were safe and less dire predictions not meant to create good headlines.
Many others went for the headlines. Maclean's magazine ran the story "Great Canadian Real Estate Crash of 2013" that claimed that the crash was already under way in Vancouver and Toronto in January of this year. It's funny. I'm fine with the doomsday scenarios when they are acknowledged as educated guesses, but Maclean's said the 2013 crash was a foregone conclusion. I bet they must be feeling pretty dumb right about now. At the very least, I am thinking they are dumb right now.
They were not the only ones who were calling for a slip in prices. The TD Bank head economist also predicted a 10% drop across Canada in 2013- a less dramatic headline, but, off the mark.
In 2013, I think it would be save to say that the naysayers were wrong again. Maybe they can't be wrong forever, but the market didn't crash at all. In fact, the second half of the year was very strong, despite government intervention to slow it down. Even the real estate brokerages, that tend to have rosier statistics than the banks, the think tanks, or the media, underestimated the 2013 performance. Houses, for example, had the best price appreciation this year than any other year in the last five years.
Some other trends that we saw in Toronto real estate in 2013:
1. Condos and Houses Performed Differently. I have mentioned at the beginning of the year that condos will appreciate much less than houses. Condos are built in large numbers in Toronto. Houses are not. Condos have even slipped in price in a few areas, and have climbed in a few others. They have not crashed, like many have predicted. Picking your condo wisely was the key to finding the good ones in 2013. Giant, boring, bland condos in lousy locations performed the worst. Boutique style, well-locoated with great design or in an emerging or established neighbourhood performed the best.
3. Condo Rental Market Was Hot, Hot Hot. Since many condo sellers were not ready to sell their condo at market value, many people decided to take advantage of the tight rental market to make some money on their condo investment. So, condos took on a much more prominent role in the Toronto rental market. And quite honestly, the rental market could use a little help since very few rental properties have been built in recent years to accommodate the growing population. I'm not sure we'll see such a strong rental market next year, but if first-time buyers continue to have a hard time finding properties, I suspect the rental market will benefit from that.
4. Year of Incentives. I predicted the incentives would be coming in 2013, and I was not disappointed! Since new condos have stubbornly priced themselves higher than resale condos, they needed ways to reduce their prices to more reasonable level. Instead of lowering their prices, they offer free maintenance fees for a year or free upgrades or a free locker. There were many ways of reducing your costs without the developer having to reduce their price. Regardless, you end up paying less in the end.
5. Mid Rise Revolution. Since the city implemented a plan to have height specification and certain building requirements on Toronto's Official Plan, more mid rises have been planned in streets outside of the core. In the core of Toronto, you can build pretty high, but along other city streets like Dundas West, the Danforth, Queen East, or Roncesvalles, you need cannot build just any old height you like. The sweet spot is between 4 to 11 stories with the possibility of asking the city for more or setting back your condos. You need to blend in with your neighbourhood. So, many midsize condos have come to market. My favourite of 2013 has to be the Duke Condo in the Junction on Dundas West. Cheaper than Ossington with the same style and proximity to a cool, local strip of independent and fresh businesses.
2014 will be different a different beast. Already, predictions for real estate in 2014 are wildly different. According to the Germans, Canada is the country most likely to have a real estate correction in the world. On the other hand, Central 1 Credit Union predicts that Toronto will have an excellent housing market where the cost of a house will double over the next 25 years, and today prices will seem cheap by comparison. Any way you slice it, some predictors will be right. Others will be so wrong.