The Future of Toronto Real Estate & What Every Investor Should Be Thinking About

Since a very young age, I have spent considerable time and effort seeking to dissect the minds and intellects of some of the greatest investors and entrepreneurs. What intrigues me the most is that they all tend to have one common trait. Everyone from Elon Musk and Jeff Bezos to Warren Buffet possesses the ability to think long-term with well-thought-out conviction. In turn, this enables them to take contrarian and decisive action in the present.

In his book From Zero to One, billionaire investor Peter Thiel revealed that he often asked prospective job candidates during interviews to “tell him something true and that nobody agrees with you on.” And you know what was interesting? Very few candidates, all graduates from Ivy League schools, could answer this question effectively and authentically.

If you are a student of business history (as I consider myself to be), you would know that most of the most significant investment opportunities unveil during times of fear and economic uncertainty. Much like the period we are entering today.

As I type up this article, one of those opportunities is right in front of you. You quite simply need to choose to think long-term and be willing to take action with conviction when no one else is, even if that means feeling alone.

The most recent data circulated by the Toronto Regional Real Estate Board published that transactions were down -(44%) in September – a twenty-year low. That is a massive drop in total sales. For reference, Stats Canada reports that GTA has grown by over 1.6+ million inhabitants since 2002. Just think about that.

In my most recent post, Sorry, Not Sorry, I point out that if we are to assume that there is no “Black Swan Event” forcing homeowners or investors to sell their homes, there is no forthcoming market crash. Will prices soften? Yes. Will transactions slow? Yes. That is precisely what happened in September (2022) and will likely continue to unfurl for the foreseeable future.

So how long will this inflation, these high-interest rates and geo-political instability last?

No one knows for sure. But to cite one of Abraham Lincoln’s favourite quotes, “this too shall pass.”

The real question is for my long-term contrarian thinkers who might think what I’m thinking.

With no imminent crash, softening of prices, a downward trajectory of the overall activity and a slew of buyers sitting on the sidelines – isn’t this an excellent time to make a solid long-term acquisition that will pay dividends in the future?

When pondering Toronto Real Estate, homeowners, investors, and consumers tend to overcomplicate basic economics and take things out of context.

Suppose you want to understand Toronto Real Estate in its most basic form:

The Toronto Real Estate Market is simply the story of supply and demand (or lack thereof). That’s it.

Demand has far outstripped supply for twenty-five years, causing prices from 1996 to 2021 to rise a whopping 453 percent. That is not a typo.

Okay, so what does the future hold?

A report published in June 2022 by the CMHC (Canadian Mortgage & Housing Corporation) estimates that Ontario needs to build 2.4 M to 2.6 M new homes in the next nine years to restore housing affordability.

Yes, you read that correctly, 2.4 to 2.6 million!

To provide some real deal context, the province of Ontario completed only 670,00 new homes in the preceding decade.

In a partisan effort to address the housing affordability crisis (when does that happen), all four major parties and the Federal Government have committed to building just 1.5 M homes in Ontario to address the issue.

To give a more robust frame of reference, Toronto had the lowest annual housing starts in Canada per 10,000 people last year. The city reached 56 per 10,000, down from 86 per 10,000 in 2003. In contrast, Vancouver had the highest housing starts at 93 per 10,000 in 2021.

Can someone please explain to me how anyone believes we will double the output of the last decade when faced with the following:

• Rampant inflation
• Increasing costs to borrow
• Significant labour shortages
• Doubling of development charges
• Multiplying costs to build

According to an (August 2022 Report) released by the Smart Property Institute – should the province reach its goal of building 1.5M new homes (never happening, BTW). Toronto, York & Peel regions would STILL be at a deficit of 370,000 housing units.

So consider these facts:

• We have a backlog of 2.1M applicants waiting to become Canadian permanent residents.
• Canadian immigration at an all-time high
• And the larger cohort of the Canadian population is Millennials comprising one-third of Canadian demographics all about to become first-time buyers.

It’s not rocket science to expect demand for housing over the next decade to be strong in the face of anemic supply levels. Or maybe it’s just me?

Those who have the patience (and logic) to avoid the noise and “the fear of the moment” will see that, over the long term, there is no better or safer investment than owning Toronto Real Estate.

In a Forbes interview with Warren Buffet, he stated, “What people need is emotional stability.” “One has to be able to think independently, and when one concludes, they don’t care what other people are saying; they can follow the facts and their reasoning.” I mean, there is a reason we think he’s no joke.

Personally, we at Fox Marin could not be more excited about the opportunities ahead.

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This article was written by Ralph Fox is the Broker of Record and Managing Partner at Fox Marin Associates. Ralph is a Torontonian native who recognized from an early age that the most successful people in life apply long-term thinking to their investments, relationships, and life goals. It’s this philosophy, along with his lifelong entrepreneurial drive and exceptional business instincts, that help to establish Ralph as a top agent in the real estate market in downtown Toronto.