Friday, 15 January 2016


2016 seems to be off to a turbulent start for economies around the world. Canada is no exception. I'm sure there are empty outlet store parking lots as far as the eye can see are all over Buffalo, New York right now because of our falling dollar. China's shaky stockmarket threatens put a drag on other economies, and oil prices keep on slip sliding away. It's not a coming apocalypse, but these are some significant events to monitor.

In terms of stock investments, I'll leave that to the experts, but I will add my two cents when it comes to how this early start to 2016 could effect housing market here in Toronto. So, let's talk Chinese stock markets first. I can say wholeheartedly that I have very little insight into what may happen in China's plunging stock and how the world will be pulled in. Some have suggested that our interconnected economies will lead to an economic crisis in China that may reverberate to other countries around the world, like the U.S. housing market meltdown did in 2008.  Others say as Frankie says: Relax. 

What I can tell you, as far as Toronto real estate is concerned, the Chinese stockmarket may put more pressure on the Chinese to seek out more stable investments outside of stocks like Toronto real estate. A very similar thing happened here in Canada and the U.S. when tech stocks tanked in the early 2000's. Many people turned to real estate as a safer, long-term investment. This did not turn out so well for some Americans, but this is what people do when they are losing money in stocks. They put it somewhere else. I don't think Toronto would be the top city worldwide where the Chinese would invest, but there is a significant amount of Chinese investment here already (and Vancouver). So, chances are we could see more of it this year because of the stockmarket in China.

You know what else is going to lead to more foreign investment in Toronto and other Canadian real estate? The low Canadian dollar. And our dollar does not seem to have finished its slip. It all has happened so fast. Alberta, once the proudest bird in the chicken house is not looking so healthy these days.  Oil and other commodities are less in demand as they were in previous years. A lot of Canada's economic kick came from these sectors, especially in the Prairies and Newfoundland.  Along with the sinking oil prices goes our dollar.

Our low dollar  this year may make us think twice about visiting L.A. or Miami or Aunt Minnie's trailer home in Upper State New York because it will be expensive to travel to the United States whose economy is showing increasing strength.

On the flip side, I would suspect we will see more Americans coming here, not only to visit and dance in the streets at Caribana, but to buy property. And who can blame them?  Remember, they just received a 30% discount on our real estate from not-too-long-ago.

This may appeal more to the sellers of Toronto who will see more buyers coming from the U.S., but there may be a silver lining for buyers as well.

This slowdown in our economy will likely lead to an interest rate cut or two. This, in turn, will make rates even more appealing than they are right now for buyers. And you may qualify for an even better rate and possibly more money.

Also, it may take time, but the lower dollar could assist Ontario with its manufacturing exports once again. It doesn't seem to have happened yet, but we are a much cheaper place to manufacture things now. And hopefully we will finally learn not to depend too heavily on oil, and diversify our economy even more.

Overall,  I think Toronto real estate will have a decent year. We may see more foreign interest in our city due to our weak dollar discount.  I don't think we are going to see an overwhelming push of investment from the U.S. or the Chinese to the point where Canadian buyers should be worried en mass, but it does give us some perspective on just how many variables, even outside of the country, can influence Toronto real estate.

Thursday, 7 January 2016

2016 - Should We Bother With Real Estate Predictions Anymore?

People don't like to be wrong. And when it comes to real estate predictions, wrong is what most people are. It doesn't matter if you're a crazy troll making comments on how dumb all Canadians are for buying real estate in the past ten years, or if you are from an analyst from a think tank with all the real estate data and economic algorithms at your finger tips to make predictions. It's not  an easy game.

For the 2016 real estate predictions, I think the predictors are becoming aware of how wrong they have been in the past. So, the sky-is-falling predictions seem to be less common this year. I'm seeing a lot more levelled, even non-commital predictions. CMHC, for example, says the housing market in Canada will barely keep up to inflation until 2017. This basically tells us, according to them,  that house prices will not rise by leaps and bounds like it has for the past few years, and it tells us that it won't sink either. Not too extreme one way or the other.

In 2015, no one was right on their predictions, not even the very optimistic real estate brokerages of Canada. Everyone called for less gains than 2014, and for some, there were certainties that some kind of correction would occur. Everyone complained about affordability and the number of condos in the Toronto real estate market. What really happened? A better year for price appreciation in 2015 than 2014, one of the stronger years for condos in a long time, and all of those new condo units still seem to have been absorbed in 2015.

It's not just 2015. It's 2014, 2013, 2012, 2011, 2010 and the list goes on. Each year there are predictions on where the real estate market goes, and each year, it's wrong. It's not to say there there could never be a correction or a temporary price slip. Of course there can be. When or if that will happen in 2016 cannot be guaranteed by anyone.

So, instead of offering my 2016 predictions as a whole,  let's look at what I think are important factors that could effect the real estate market in 2016.

1. House Supply I'm sure some of you are tired of hearing me say this, but I am saying it again because it is an important point: There is a limited supply of houses in Toronto. This will not change. As the city grows, very few houses are built. So, demand goes up. You are still going to see news stories about how dumpy house in an established hood sold for a million dollars this year in my opinion.

2. Condos Are The New Sponge Condos will absorb more people than ever before. I think over the past five years we are seeing more families with kids in condos. This includes families who prefer to live in condos in central neighbourhoods and those who do not like their options for houses in Toronto. We'll also see a lot more boomers selling their houses for the easier-to-maintain condo. Overall, we still see reasonable demand on condos. In turn, we'll see more demand for community centres and places that would benefit kids in condo neighbourhoods. Condos will not be for retirees, those who hate yard work and young folks exclusively. It will be for everyone.

3. Poor Economic News  This may bring some of the air out of the real estate tires as news of a poor Canadian economy over the next year will make Canadians feel less inclined to buy property. It may instill enough fear to disrupt the steam engines of Toronto and Vancouver real estate. Of course, the flip side of this: Ontario and British Columbia will benefit from the low dollar. Alberta, you may be out of luck until oil rebounds.

4. Greater Investment In Toronto Infrastructure This is a good one to look at for investors or for those who would like property with better appreciation. With Trudeau in, we should see a lot more money coming for improvement of our infrastructure. At long last! So, keep an eye out for improved transit lines or even a few new ones.

5. Size Adjustment This is a hard pill to swallow, but Torontonians will have to learn to live with less space. There are a lots of benefits to living in the city. Space is not one of them. The good news is that there will be less to clean. Living in Toronto, like many big cities in the world, will be for the spatially challenged. More so than ever.

6. More Investors Though there are much more foreign investors going to the improving U.S. market, our lower dollar sure makes our higher prices seem lower to others, particularly Americans who will start to see our property as a kind of bargain as the  Canadian dollar slips.

7. Interest Rates  They won't budge. I could be wrong here. There will be inflation, but I suspect the government won't increase interest rates if they feel the GDP won't grow all that much in 2016, and projections are on the lower side.

8. Conversions, Low Rise and Boutique Condos No matter where the market, houses will still be king. Low rise condos, conversion lofts and townhomes will also do well. This year giant condos may do well depending on their location and the fitness of their reserve fund.

I think that covers most of the broad strokes. Now if I dare to generalize a little, even though I said I wouldn't, I don't think we'll see the wild increases we saw in 2015, but that's exactly what I said after a very strong showing for real estate one year ago.  I was wrong then. Maybe I'll be wrong again.