The old saying is that you can see where you’re going by looking back at where you came from. If that logic holds true, we will be in a good position to predict the performance of the Toronto real estate market in 2015, by examining what happened in the year that just passed.
The first big trend of 2014 was that the construction was rampant, in many major Canadian markets, throughout the year. Back on January 22, a report published by Emporis suggested that four of the five top cities in North America for high-rise construction were Canadian: Toronto, Montreal, Vancouver, Calgary. Information released by Statistics Canada (read the article written by Greg Quinn and published on the Financial Post website) revealed an interesting trend in housing permits issued in July, in Toronto and Vancouver specifically, that exceeded expectations. The value of municipal permits for multi-unit housing increased to 43.4%, to approximately $2.54 Billion, with the total permits in Toronto increasing by 29.6% to $1.65 Billion. A review conducted by Move Smartly, a record number of “condo completions” (new condo constructions) was achieved in 2014, with Realnet reporting 19,722 new completions from Q1 to Q3 alone, surpassing the previous annual record of 16,668 set in 2013.
The flooding of the Toronto market with newly built condominiums was so pronounced, it forced the Canada Mortgage and Housing Corporation to withdraw their offering of mortgage loan insurance for the financing of multi-unit condominium construction (read the full CMHC article). The decision did not affect individuals looking to purchase a condo, whose insurance for mortgage loans remained unchanged. The move was made as a result of blatant lack of demand, with no insurance of its kind issued since 2011, citing competition with private firms, such as MCAP.
Condo sales, thankfully, set new records in the GTA, offsetting some of the massive inventory build-up taking place. George Carras of The Toronto Star posted back on August 2 that condo sales in the GTA increased by 33% compared to a year prior, with 37 new high-rise projects under development totalling 7,588 new units. Over 70% of these units are being built within the Toronto boundaries, another record high for development within the region relative to its neighbouring municipalities.
For the year as a whole, 2014 also saw the affordability of homes plummet, as the average price of a single-family home rose significantly in every major market across the country. Back in February, a report issued by TD Economics that made its way around the internet, stated that Canadian homes were overvalued by 10%, a figure supported by research financed by the International Monetary Fund. The Financial Post noted that the report compared the income and rents of Canada’s major markets to other “advanced economies,” and found that as home prices remain high, even as home sales have stalled.