Common Misconceptions About Toronto Real Estate
The discussion around Toronto real estate is becoming more and more pervasive in our collective consciousness. So much that the unspoken inference is if you don’t have a firm opinion (not everyone can own anymore) and can’t add to the conversation, then perhaps you should be left out. And, no one wants to be left out in the cold, especially when it comes to the Toronto real estate market.
More often than not, the information that influences public opinion is wrong. There are so many misconceptions out there! And this has a direct negative impact on buying, selling and investing decisions.
The 3 Biggest Lies You’ll Hear…
In my 10+ years of experience as a real estate broker, you could say, I’ve really heard it all. Here are the top three biggest lies you’ll hear about Toronto real estate.
1. The latest report on the Canadian real estate market is…
The news is always making proclamations about the status of the Canadian real estate market. But, let’s get one thing clear. There is no such thing as the Canadian real estate market. Now, if you think I’m wrong, think about this. What effect does a 5,000-employee factory closing in Moose Jaw have on the sale price of a home in Ottawa? Or, what does the record sale price of a detached home in Moncton have on the detached house on the market in Oakville? The answer is, it doesn’t.
In fact, the direct factors that affect the real estate market are primarily local. Yes, there are specific effects that have a direct impact on Canada and consumer spending behaviour. For example, our National Government Policy and economic performance across Canada (taxation, immigration, lending regulation, GDP, etc.). Or, world events like war or recession. However, these are not the ultimate determinants of how a local market will behave.
Despite the unique position, size and velocity of Toronto, the real estate market has and will continue to perform on its own trajectory. Specifically, the city will remain independent from the performance of Calgary, Vancouver or Halifax. These cities and the behaviour of their real estate markets, will have next to no bearing on the ultimate sale price of a home in Toronto.
I would further argue that the GTA has to become big. Think about it this way. The GTA boasts a population of 6.5 million. It spans an area of 7,000 square kilometres! In other words, it’s so big in terms of geography and population that it will only continue to grow. Personally, I see the GTA as an average of a group of submarkets. The key here being, focus on the markets that are outperforming the average. Instead, look at the specific areas that we work in as a market in itself.
2. Freehold houses do not have maintenance costs.
Ah, but yes. They do! Nearly on a daily basis, we hear that buyers despise the idea of paying maintenance fees in a condo. This typically comes with the inference being that, you don’t have to pay for maintenance costs on freehold houses. Now, while I am not particularly fond of paying taxes, it does come with the territory of living in canada. The same is true in real estate. Here is the fact. If you want to own property (be it a freehold house or a condo) in Toronto, it will require maintenance fees and costs for upkeep.
Keep in mind, the major difference to consider when buying a condo versus a freehold home is that condo maintenance fees are upfront and in your face. With a freehold house, the monthly costs are not stated on the MLS, but they are there – pipes freeze and burst, basements flood, roofs leak, furnaces die etc. These things all cost money and can be in excess of the maintenance fees associated with owning a condo.
The bottom line is, whether you are buying a house or condo, you will be spending money on maintenance and upkeep of a property. Oftentimes, paying condo maintenance fees (the average in Toronto is around .75 cents per square foot) can be a bargain when you consider the upkeep costs of owning an 65-year-old home.
3. Look at all those condos going up. Clearly, there must be a bubble.
Currently, immigration in Toronto is running at about 100,000 immigrants per year. It is estimated that the average immigrant household is 2.1 persons per family. This means, the city requires an additional 44,000 new homes per year to keep up with this demand. And, this is happening at a time where we do not have enough existing inventory.
When you see a condo building under construction in Toronto, there are many considerations. One thing to keep in mind is that, the condo is probably only around 300-400 units in size. This is a drop in the bucket relative to the current demand and that’s only upon completion, which could be years off. As impressive as all the cranes in our skyline are, it is no way in and of itself an indication of impending doom of oversupply or a market correction.
Should I Buy or Invest in Toronto Real Estate?
Yes! Rather, the question should be, “should I buy pre-construction or resale“? And yes, we have an answer to that too. Read about the 5 Advantages of Buying Pre-Construction (Especially in the Toronto Real Estate Market).
If you’re thinking about buying or investing in property, don’t rely on the many common misconceptions that’re out there. And, when in doubt, ask Fox Marin instead. No doubt, the Toronto real estate market will only continue to go up. It’s up to you to void those big lies, and instead, do something about it.
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This article is written by Ralph Fox, Broker of Record and Managing Partner here 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.
