I wasn’t sure which way to take this year’s post. Meh..there’s no value in “predictions.” I can say anything, and if it happens, it happens…if not…well…whoops. Instead, I’d focus on reviewing the weekly trends of the past 95 weeks to help us see into the future. But, we can only see so far…I have no clue how the market will be in Q3/4 of 2022 but how Q1 will start is pretty clear.

Will the Bank of Canada raise its rates? 100% yes, they will. But, it’s not happening in Q1.

And, when rates do increase in Q2, there won’t be a crash, Toronto real estate prices won’t be affordable and there will still be a ton of demand for all real estate, from pre-construction condos to detached houses to rentals.

Let’s talk affordability

Affordability isn’t a problem that anyone can solve. I wish all levels of government would stop wasting resources trying to “figure this out.” Anything they do will bring more buyers into the market, adding fuel to the fire.

The government shouldn’t be helping people buy real estate in Toronto beyond the basic programs already in place.

Droning on about how unfair it is for “the children” who can’t have the same buying experience as previous generations is a pointless convo.

Sure, it’s a simple case of supply and demand. Like every graduate of econ 101 can tell you. But, let me be clear: there will never be enough development in Toronto to meet demand.

Laneway houses aren’t a solution… instead, they’re away for existing homeowners to generate even more wealth. Not helping those that are struggling with Toronto prices…but, they’re cool as hell and I’d create one in a heartbeat on my property.

Allowing for multiple homes per lot similar to the as of right zoning in California or New Zealand, which allows up to three homes per lot (depending on size) or allowing investors to build multi-residential properties on typically single-family oriented residential streets (missing middle) won’t make Toronto more affordable…it’ll provide more rental stock and more purchasing options for folks.

Still, there’s no way to out-build the demand.

Building more condos won’t make Toronto more affordable. Do you think developers will sell the next project for cheaper than the last? What? Build all the condos you want, but they’re not getting any cheaper. They’ll be built because there’s demand for them, and they’ll all be sold at record prices per square foot before a shovel is even in the ground.

They’re being built and trading at prices Toronto has never seen before. And, that will continue to happen. $1500 per square foot on average this year, $1750 next $2000 in the next five years. Building more is great, but it’s not a path to affordability.

Will ending blind bidding make Toronto more affordable?

Stopping blind bidding (which we’re totally for) won’t help affordability either. So many people (most who’ve never even offered on a Toronto property) think that the winning offer is hundreds of thousands over and above the 2nd place offer. They believe that’s what is driving prices up. It’s not. The winning bid is usually quite close to the 2nd place offer.

I blame all of the “sold over asking” posts by realtors. Many who aren’t embedded in the market daily assume it sold way over a number anyone can justify. Again, not true. Comparables usually reveal a much less dramatic result.

I can tell you with 100% certainty, being on the listing side hundreds of times over the past 13 years, that maybe one or two times has someone gone over the top by more than a few thousand dollars.

But I’m all for full transparency and choice. So if a Seller chooses to allow an open bidding process for their home, I’m here for it.

Taxing foreign buyers over and above the 15% tax won’t help affordability either. Why? Because foreign buyers aren’t the problem here. We’re not Vancouver. The majority of buyers are buying a home for themselves or a home for a family member. Or they’re buying an investment (rental) in one of the world’s most in-demand markets.

Affordability isn’t a problem…homelessness is. Governments shouldn’t spend any more energy trying to make it easier for anyone to buy real estate. 100% of all Section 37/45 funds should be directed to putting roofs over the heads of those that don’t have access to housing—nothing else.

Demand for Toronto will always be on the rise. From people all over the world.

Want that to stop? Then close our world-class universities and colleges.

Close the door to all tech companies who’ve made Toronto a massive hub for their success.

Close the financial institutions based here.

Turn away the crypto entrepreneurs that are changing the world.

Tear down the CN tower…get rid of the Raptors, Blue Jays, Leafs (actually, please get rid of the leafs, you’d be doing me a favour)…tell Drake to stop pumping up Toronto.

Close the door or destroy all of the things that make Toronto one of the best places on the planet, and you’ll have the affordability you’ve been wanting.

OR

Understand that Toronto will never be affordable again like you want it to be.

Toronto will become a rental first city like many other global powerhouse cities.

There’s no shame in renting…it’s going to be a lifelong reality for many who choose to stay here.

Again, there will never be an opportunity for you to start just like your parents or grandparents or any previous generation did. That ship has sailed.

The definition of a starter home has changed.

A starter home is no longer the small house that needs a bit of work…it’s now the 400 sqft condo. For some, anyway.

You need money to live here….especially if you want to buy here. But not as much as you might think.

You can get started in a condo with less than $30K. Maybe you even have that saved in your RRSP already…draw that out and get started. It’s not going to be in the area you want…and you’re probably not going to love it. Hell, you may not even want to live in it…that’s fine! Rent it out and have it build equity for you.

Use that equity to buy again a few years later.

Wait a few more years and do it again.

Not all of us are lucky enough to have parents that can help. You can be mad about it or try and make it happen a few steps lower on the property ladder and let the market work for you.

If you care about affordability, then the conversation needs to revolve around putting a roof over the head of people that do not have access to housing. If you do not believe that housing is an absolute human right…then please see yourself out!

Now let’s talk about affordable housing…

Do you hate inclusionary zoning because you think it’ll make Toronto condos even more expensive? Did you know that 22% of the sale price of a new home is tax?

What’s another 4-5% to ensure more people have a place to live?

If you’re not sure what inclusionary zoning is, it’s making it mandatory for developers of buildings greater than 100 units to include a percentage (starting with 5% and increasing to 22% by 2030) of affordable housing (for developments near transit hubs). So that’s going to create bigger buildings (maybe) with more units (perhaps), but it’s also going to pivot a lot of developer attention to smaller community-based projects of 99 units or less.

Get ready for main street commercial/residential properties to skyrocket in value in the coming years as boutique buildings become all the rage.

Anyway, did that all sound too negative? I’m sorry! I’m so frustrated with the useless conversations in real estate land by people pretending to care about affordability but completely ignoring the real issue.

This isn’t about Bobby and Sally being all sad because their grandpappy could buy a detached house for $64K, and all they can afford with their measly $250k/year income is a 1000 sqft condo in grimy Corktown. It’s not about them! Although they seem to get a lot of attention in various publications.

It’s not about the hipster couple who was “fed up with Toronto prices” and went to live their best lives on a butterfly sanctuary in prince Edward county….anwyay, I’m getting off-topic.

A little bit about me…

My family came to this country with nothing. The typical story you’ve heard over and over again.

They came here, got jobs and bought real estate as a middle-class working family. They probably wouldn’t be able to do it the same way today. But is that a problem? I say no.

The reality for today’s potential buyers is very different.

You probably can’t afford a house as your parents did…but you can afford something smaller… What’s wrong with starting there?

Seriously…I want to know…what’s wrong with starting with a smaller condo instead of a house?

If you want to create a comfortable retirement for yourself, then you should do whatever you can to buy whatever you can afford whenever you can afford and it and keep buying until you’re ready to retire. Then you can either sell up or use the equity to live your best-retired life.

We’ve seen some incredible gains in the past 10 years, but we’ve also seen some scary dips.

Gains and dips are realized if you panic and sell. Profits, however, can be leveraged to make more investments.

A small percentage of condo owners panicked and sold mid covid. But that wasn’t because of covid…do you know what else was happening at that time? The city of Toronto began restricting Airbnbs, so the most affected buildings were those like ICE condos that Airbnb investors heavily owned.

Panic Selling is never a good idea.

Regardless, panic selling is always a terrible decision. There’s no way that your piece of Toronto real estate will lose you money if you are disciplined and understand that real estate and most other investments are long-term exercises in patience.

If you hold through the temporary down markets, you will win at the end. There’s no doubt and no way you can dispute this.

Too many people talk about real estate like they’re day traders.

So with all of that being said, what the hell are you supposed to do as a young Torontonian trying to get into the market? Or first-time investors struggling to get their first investment property?

No doubt, you’re thinking about retirement…whether it’s even possible with how expensive the city is.

Thinking about retirement, your finances, investing, comparing yourself to people that may be ahead of the game…comparing yourself to successful investors who’ve been in the game for a very long time…you’re doing all of these things.

The first thing you should do is stop comparing yourself to anyone else. Stop comparing yourself to their situation, their luck, their income…to their anything.

Look inward and ask yourself what you want and what roadblocks you’re putting up for yourself. Then start to research the market.

Do you read the Tuesday Market Report?

This blog is an excellent place for you to start. Be right alongside the most competent agents in the city to help you make smart buying and selling decisions. Other agents throughout the city use our stats to help their clients too.

Over the past 95 weeks, I’ve been able to spot trends and help our team of real estate super-humans advise clients at a level that 99.9% of Toronto’s realtors can’t even comprehend. We’ve sent countless “let’s get the place ready for sale the market should give you want you want in about three weeks” or “let’s wait another week…supply has been creeping up, so we may have more options in about ten days” These insights have allowed our clients to make astute and successful buying and selling decisions.

It’s only possible to see these trends and patterns if you’re closely watching the urban markets every single day. There’s no other way!

So what’s in store for next year?

Q1 2022 will start with some aggressive price gains in the condo market, and houses should also see severe competition. It’ll depend on how many new listings hit the market in January.

Honestly, many are terrified of Omicron, so I expect a slow trickle of new properties.

We should see about four weeks of increasing supply then a levelling off.

As we get to the mid/end of Q1, the interest rate conversation will heat up, bringing more people to market.

We should start Q2 much better supplied than Q1, but buyer demand will remain unchanged when rates begin to go up, and Sellers will still be in the driver’s seat most of the time.

Pre-construction condos will sell out in record time, and developers will start to push the price limits even further unit we start to see average prices in the mid to high $1000’s/PSF regularly.

This will put (is putting) upward pressure on resale condo prices, and the gap between pre-con and resale condos will narrow as we approach Q3. The gap between houses and condos will also narrow as condos get more expensive.

At the end of the year, I wouldn’t be surprised to see an average condo price near $1mm and the average house at $2mm. But that might be a bit too aggressive. We’ll see. Urban Toronto has proven to be one of the most resilient markets on the planet.

You should worry less about timing the market; instead, focus on getting into it as soon as possible and letting it work for you.

You should understand that being a landlord is a huge responsibility if you’re an investor, and it’s not always about cash flow. You can be out of pocket each month and still have a solid annual ROI (we have spreadsheets to show you this)

You should 100% follow this blog to be among the 40,000 subscribers who benefit from the city’s most relevant real-time market report.

But most importantly, you should have fun. Not take everything so seriously and do something nice for someone every day.

That’s all I have today, everyone. Have a wonderful day, and may 2022 bring you all the fantastic things you deserve.

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