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Investing in Toronto Real Estate

Soaring housing prices across Canada has led to many new developments and a booming renovation industry. With Toronto showing astounding numbers in the housing market over past several years, and with no signs of slowing down, Toronto home owners and investors alike have been enjoying their position in one of the North America’s fastest growing cities.

The average price of a detached home is nearing $1 million in Toronto, which would make it the second Canadian city to join the million dollar homes club. The Toronto Real Estate Board’s July numbers show that the average price of a single family detached home within the downtown city limits is roughly $880k, up 11% from the same period the year before.

Toronto also has the most skyscrapers under construction than any other city, with 130 high rise projects versus New York City’s 91. While housing values have soared way past income values in Toronto, at an astounding 7.9 times the average income compared to an average of 5 times the average income in 1997, the number of new home buyers has remained relatively consistent.

In an article by Toronto Star’s Mark Weisleder, he mentions that although Canadian real estate is 20% overvalued, based on market fundamentals, these inflated prices exist because the demand hasn’t faltered and most trends point to a continued rise in property values regardless of how inflated they might seem.

There are far fewer places to build new homes as well; 22,000 low rise buildings and 8000 condominiums in 2001 vs. 22,000 new condo units every year and only 8000 detached homes built in recent years. One thing that has remained consistent, and is a very important factor to consider: the numbers of buyers coming into the GTA has remained relatively consistent. This has led many people to invest in one of the many condominiums sprouting up the city, as population and congestion alike continue to rise, with an astounding 17% of condo property in Toronto estimated to be investor-owned.

According to Altus Group, Canadians’ Total renovation spending is continuing to rise as well. $61.5 billion in 2011, to $63.4 billion in 2013, and forecasted to hit $65.2 billion in 2014, $67.3 billion in 2015. Residential renovation spending has more than doubled since the late 90’s, with the last lull shown in 1998 of only 2 percent.

While Alberta leads the charge in national renovation spending with the recent oil and natural gas boom, Toronto’s consistent growth over the past decade and it’s commitment to becoming a world class city has made the renovation and housing value steadily rise and has proven to be a great return on property investments.

Altus Group also mentions the profound effect television has had on the rise of home renovation:

”The increase is a combination of an increased willingness and ability to undertake renovation work. Willingness, at least in part, can be attributed to what is sometimes referred to as the HGTV effect. With HGTV Canada launching in late 1997 and starting the home improvement television programming craze, many homeowners did not know how badly they really wanted new designer kitchens and bathrooms then. The increasing willingness/desire was reinforced by improved ability/affordability to undertake renovations.”

The value of housing is directly correlated with the renovation industry; as housing values go up, so does equity in their home; and many home owners are tapping into that equity in the form of lines of credit to further increase the value of their home through renovation and restoration methods.

Housing prices are poised to continue to soar over the next few years. The Toronto Dominion Bank (TD) recently upgraded their sales expectations for the coming years as interest rates remain low and demand remains high.

Most home owners agree that property has proven to be a sound investment, and If the past 2 decades can be an accurate marker of what’s to come, Toronto’s realty and renovation market shows no signs of slowing down.



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