It’s not a bubble.

Bubble bubble bubble. It’s all anyone says these days about Toronto real estate. “It’s all just a big bubble, and sooner or later it’s going to pop.”

Experts across all forms of media postulate and rant from their soap boxes, citing past trends and patterns across not just Canada but North America as a whole. Some say bubble. Some say not. Some point out history as proof. Some say it’s not done yet. Some say we’re already on the way down. Truth is, nobody really has any idea.

This is not a bubble. This is a rise.

The reason this is a rise and not a bubble come down to 3 very important variables. And it’s those 3 variables that make all the difference.

Toronto city hall housing bubble

The GTA explosion.

The 2016 Census pegged the population of the GTA at 6.418 million. Read that again. SIX AND A HALF MILLION. Toronto alone as a city is 2.81. Toronto and the GTA have experienced significant population growth year over year, and that trend isn’t likely to end soon. In fact, with Canada being cited as the second best country in the world to live in two years in a row (As per US News and World Report) we will continue to be a very desirable place to relocate. Toronto will be a major draw for immigration of all sorts, worldwide.

 

What land?

We can’t build houses if we don’t have the land. It doesn’t get any simpler than that. And what land IS available in the GTA is likely slated for condos, or perhaps town homes. From a builder’s standpoint condos and town homes make more sense than houses because you can fit more units in the same area. That means more people per square foot, while still generating decent prices per unit. Condos in particular pack the maximum amount of people in a small area, and have recurring revenue through maintenance fees.

There is land available on the outskirts of Toronto, but even that is now generating record prices (https://www.bloomberg.com/news/articles/2017-03-03/million-dollar-home-contagion-spreads-to-toronto-suburbs) . Even that land is limited by acts like the Greenbelt Plan, which restricts what type of housing can be build on the city’s outskirts.

The Financial Post posted up this article about land available for housing in Toronto, and it shows how many factors limit availability, including developers locking land down while they wait for pricing to rise even more.

That leaves houses to maintain their holy grail status, as they become a rarer and rarer commodity.

 

Toronto is moving on up

You don’t hear people saying New York is in a bubble. Or Hong Kong. Or San Francisco.

“Toronto is world class. It’s making its name known. We aren’t just some quaint little city up in Canada. We are a leading city for business development and growth, and I see it growing every day.”

Graham Alloway, Alloway and Associates

Fact is, Toronto is moving up the status ladder. Toronto is becoming a world class city. It might be hard to imagine if you’re local, but people worldwide actually consider Toronto as a vacation destination. I remember being in the Caribbean, and when I told somebody that I was from Toronto they would mention wanting to visit there. Honestly it surprised me a lot.

Tourism Toronto reported 40+ million visitors in 2015 (http://www.meetingscanada.com/tourism-toronto-reports-record-numbers-for-2015/). I couldn’t find the numbers on 2016, but I can’t imagine there was a drastic drop.

Toronto is also the center of business for Canada. Huge. Number 2, in fact. So all those people coming in for business? They have to live somewhere.

As Toronto’s status grows, so does the cost of living here.

So is that it then? Are houses just going to grow and grow and move further into the realm of unavailability?

We don’t think so. Eventually, that growth has to stop. This 20% year over year growth can’t be sustainable; it’s unrealistic. Eventually it will slow. But will the price of detached or semidetached have a 30 percent plunge as in years past? Nobody can say for sure, but we seriously doubt it. There might be a slight settling, but a crash of years gone by seems very unlikely.

So what do you do?

“Get in. Just get in the market. Do it responsibly, and make sure you have a good agent to help you do it. The longer you wait, the more you will miss and the harder it will get. “

Heather Rovet, Broker, Realawstate