THE GTA (Greater Toronto Area) REAL ESTATE MARKET, by Gitta Levi of Century 21 Heritage Group

I recently attended a group discussion at the Toronto Real Estate Board, headed by Jason Mercer, TREB's Senior Manager of Market Analysis, entitled "The Market According to Mercer". None of us have a crystal ball, including the economists, bankers and real estate agents, but what Jason Mercer had us consider is past history, affordability, prices, sales, resales and the new home and rental markets.
Based on statistics from the Toronto Real Estate Board and Statistics Canada, some interesting facts emerged.

Is the current real price level of a home in the GTA cause for concern? The issue is not the level of real price now, but rather how high it was two decades ago. The real estate market peaked in 1988, with the average home price around $400,000, the same as 2010. Income on the other hand has increased from the 1988 level of of approx. $50,000 per household to approx. $100,000 combined family income in 2010. When comparing price to income, buying a home in today's market is actually more affordable. Mortgage rates are as low as they were in 1951, with interest payments and % of disposable income dedicated to mortgage interest less of a burden in 2010 then they were in 1990, and relatively flat from 1996, with a small spike in 2007. When the bank qualifies a home purchaser for a mortgage, they consider the GDS (Gross Debt Service), i.e. the cost of carrying a mortgage including principle and interest, plus some utilities. This amount should not exceed 32% of your gross income. When we look at real estate history , prices from 1986 to 1995 with, with a small spike in 2007, a mortgage on the average priced home was not affordable.(This is one of the reasons that we saw so many "power of sale" listings during that same period).

Another very important factor to consider is the Canadian economy--it continues to grow, albeit very slowly. In the Bank of Canada Business Outlook Survery of Autumn 2010, when business owners were asked about sales volume expected increases over the next 12 months, 55% of them expected greater sales volume with another 20% expecting about the same growth that they had experienced in 2010.

What are mortgage deliquency rates like compared to the U.S? If you compare stats from the U.S. Federal Reserve Board and the Canadian Bankers Association, the differential is staggering! Since 2007 to the present, U.S. rates have steadily risen to above 10%, whereas Canada has remained very close to .05%.

Unemployment is another key factor. The GTA Unemployment rate, from Statistics Canada (historic) and TREB (forecast) will not decline to "normal" for 2+ years. We currently stand at approx. 9% with a forecast of 8% (normal) for 2012.


The "Market" is confident that the Bank of Canada will keep inflation in check and interest rates will increase more slowly than originally expected.

So where does Jason Mercer see the Toronto Real Estate Board average GTA selling price going into 2011 and 2012? The average selling price will have room to grow, but at a much slower pace, with 3% the average growth rate vs. 8% in 2010. New listings in the GTA will grow, but at a moderate pace. The "Market" will remain balanced, but tight enough to promote price growth. The new home market, mainly high-rise or condo market has seen good growth and has remained resilient. 71% of the high-rise builders co-operate with TREB members in selling GTA condos (as per RealNet Canada), so your trusted Real Estate Professional can help you with your purchase. Condos remain affordable housing for end users and great investment properties. CMHC stats show that there are less vacant units in condo buildings vs. "purpose built" apartment buildings, since, in general, they are newer with more modern finishes and amenities. Rental rates continue to grow, with 1+1 and 2 bedroom units continuing to be very desirable.

Where do you fit into "the Market"?
*Currently renting? Rental prices continue to rise. If you have a job, or if you have RRSP savings, or have saved enough for a downpayment, consider buying. Home ownership is affordable.
*Up-sizing? The gap between your current home to a larger property is shrinking. Affordability is the key, so this may be the right time for you. Find out what "price differential" you can comfortably afford.
*First-time Buyers? Low mortgage rates and a "balanced" market are key factors to consider. If you qualify for a mortgage, the time is right for you to be buying.
*Investors? Rental rates to continue to rise and there are many new and "nearly new" condo buildings ready for you to purchase. If you have a downpayment the tenant will be paying most of your mortgage.
*Down sizing? After selling your current home and getting something smaller or less expensive , you will probably have money left for an investment condo--something to consider.

This may be the right time for a consultation about your real estate future. Feel free to email Gitta at gitta@gittalevi.com, or call Gitta directly at 416-587-8222. I'm never too busy to answer your questions or help you decide what would be the best "market" for you.