Oh boy. I’ll be honest, as soon as I wrote this post title, I regretted it.
For the last decade or so, predicting real estate has been a bit of a chump’s game.
If I had a dollar for every time an economist, business magazine or bank predicted the collapse of the Canadian real estate market, I would have enough money to buy a detached home in Toronto. Well, I would have, if the price of detached homes hadn’t risen by 11.8% in the last 12 months alone.
Still, I admire those people who have the confidence, year after year, to come up with predictions about where the real estate market is going. In particular, I admire their resilience to do it again the following year when they were spectacularly wrong.
One of the best examples of this is the magazine Canadian Business. I’ve had a subscription to the magazine for years. I recently went through some old issues and took a picture of the cover from February, 2013.
As many of you recall, 2013 was not, in fact, the year that Canadian real estate plummeted by 20%.
As a Realtor with the Toronto Real Estate Board, the detailed data I have access to is for the GTA. When I looked at what had happened in 2013, I saw this.
Instead of plummeting 20%, it went up 9% in the GTA. As for staying down for years, well, the average sale price, across all types of homes, is up over 20% since February, 2013.
So why am I jumping into the prediction game if it is such a difficult thing to get right?
I’m giving my prediction on what will happen to the real estate market this year because it matters to my clients. Whether it is a client I help buy a semi-detached home in Toronto, a client I help sell a condo in Mississauga, a client I help find an investment property in Brampton – it matters what happens to the real estate market.
So here’s my prediction, short and sweet.
Across the GTA, housing prices will continue to rise. Semi-detached homes will see the biggest average price increase as the increasing unaffordability of detached homes pushes buyers down the property ladder. Condos will absorb the lower budget buyers and see modest (under 5%) gain over the year. As mortgage rates rise by small amounts (up half a percent this year), some buyers will postpone their purchase until they can better afford what they want, keeping rental rates steady.
There. I promise to update you in a year and see how I did. Unless I’m horribly wrong, in which case I will delete this post and deny ever writing it.
Regardless of what happens to the real estate market this year, my focus with clients is on making sure their real estate has the right fundamentals to do well in any market. If you or someone you like needs help with real estate, I’d love to be responsible for what comes next.
Regards,
Jeff
Good article, and thanks for the Canadian Business flashback, Jeff. Not only did CB get it wrong in predicting the future of the Canadian real estate market in 2013, but they also got it wrong about Blackberry 10 (flop) and Tim Hortons (ended ’13 at $58/share and merged with Burger Kind in Dec. ’14 @ $85/share).
However, perhaps the CB prediction came a bit too early. Canada faces strong economic headwinds due to the collapse in commodities prices, and our dollar has reached 13-year lows against the US Greenback. We’re importing inflation due to a devaluation in our dollar, yet our own central bank is powerless to raise interest rates to prop up our dollar in such a challenging economic environment. Not to mention that there are few tools left to trigger economic stimulus in the proverbial economic tool chest.
I predict 2016 will be a time of great economic challenges for Canada’s economy and regional real estate markets nationwide. The real estate downturn in Western Canada (due to falling oil prices) could result contagion to markets that have been more resilient to a downturn, such as Vancouver and Toronto. Speaking of which, it’s been speculated that much of the rise in housing prices in the former has been due to Chinese nationals looking for a safe place to ‘park’ their money offshore. With China’s economy facing growth challenges, and Chinese stock markets well into bear-market territory, the ongoing influence on Vancouver’s housing prices by Chinese buyers could be greatly diminished.
In light of the foreign and domestic economic headwinds facing our country, I would speculate that those looking to sell their home, do so in haste. The days of watching your property appreciate in value (on paper anyway) may be coming to an end.
/my $0.02