Toronto More Expensive Than Vancouver!
April 24th, 2018 – There have been a few key trends playing out it the downtown Toronto condo market. Taken together they are driving the prices upwards for both the resale purchase market and the rental market. So that is good news for sellers and investors but bad news for buyers and tenants.
New Mortgage Rules
Would be home buyers have seen their total buying power decreased by the additional mortgage rules and stress testing criteria that was rolled out in 2017. While this may be helpful to ensure homeowners can continue to afford their mortgage payments into the future as interest rates rise, it has also taken away about 20% of the maximum value of what they now qualify for. If that was going to be $500,000 now it may be about $400,000.
This has pushed more buyers to consider buying a condominium over buying a house. And the statistics show us that Toronto house prices are in a period of modest decline, while condo prices are jumping upwards. Resale condo suites that do get put up for sale are commonly seeing multiple offers being made. So there is strong buyer demand, greater than the supply.
With strong economic activity comes job growth. The major employers in Downtown Toronto are continuing to expand their staffing levels and are offering good paying professional jobs, with significant salaries. Many of these new hires are interested in living downtown where they can enjoy the downtown lifestyle of restaurants, bars and nightlife. Their other alternative would be somewhere well beyond the City boundaries, possibly with a long GO Train commute into the City. With these two alternatives, it is easy to see why many would choose the urban experience!
Thinking they were being helpful and protecting the interests of tenants, the Ontario Government extended the reach of rent controls to cover all the newer downtown condos. Previously rent controls had applied only to buildings built prior to 1991. The new rent controls put strict limits on the maximum annual rent increases landlords could demand from their tenants.
With their ability to increase rents diminished, landlords generally sought another approach to protect their profitability. The figured if you cannot increase the rent substantially during the tenancy, then you had better get a much higher starting rent rate from the start and then accept the lower increases in the subsequent years and hope the tenant doesn’t stay longer than say 5-years. So, the net effect of imposing rent controls is that the prices of starting rents has jumped as much as 20%.
Toronto Rents Exceed Vancouver
Now if we take all these factors together: the mortgage stress testing rules, the increased employment from a strong economy, and the rise in starting prices caused by rent control, it is not at all surprising that Toronto rents have begun to exceed what people pay in rent for Vancouver. While their are a good number of new buildings being built, the demand for rental condo suites is greater than the supply right now, so this upward escalation comes as no surprise!
It is still a good time to be a buyer of downtown Toronto condominiums. With a longer term outlook, the price appreciation has nowhere to go but up. Whether you are looking to purchase a downtown Toronto condo as an investment or as a place to live, you can’t go wrong.
Let Ralph know how he can help you started on your journey of purchasing a fabulous home for yourself.