Real Estate: Vancouver – Toronto Bubble?

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Update Note: While many people thought the Real Estate Bubble would burst, in Canada, the prices of properties in Vancouver and Toronto have escalated more than anyone could have predicted. In 2017 properties that were selling for $300,000 are now worth double or triple that. “Average selling price of detached home in January was just under $1.83 million, a gain of 40% over same month in 2015” reports the Real Estate Board President Darcy McLeod.

A Tale of Two Cities MIA – Luxury Condo Buyers

In September 2012, the open-concept loft in the former L.J. McGuinness Distillers building, sold for $298,500. It had an asking price of $304,900, according to the Globe and Mail. With just less than 1,000 square feet, two stories, with the bedroom overlooking the living space below it came with parking—a rare find.

The same-sized unit in a building about six to 10 years old would fetch $450,000 to $500,000 if it were right downtown. Condos of this size are also hard to find as condo sizes shrink with the norm being closer to 500 square feet.

Condo sales in Toronto now represent 62% of all residential property sales. RealNet Canada Inc. reported that the average price per square foot for a high-rise condo came in at $529 in 2011, a 4-per-cent increase over the 2010 figure. However, the average condo unit shrunk 6 per cent, to 820 square feet. That’s 52 square feet less than the previous year’s average.

In September, Royal LePage stated, home sales in Greater Toronto Area were down 21 per cent from a year ago in September, even though prices were up 8.5 per cent. Stricter mortgage insurance rules have been blamed for the dent in sales.

Wanna make a Million in Vancouver Real Estate

Owners of high rise luxury condos in Vancouver are under pressure to reduce their asking price. It is a bad joke for Vancouver condo owners, ” wanna make a million in Vancouver real estate? Start with a two million dollar condo.” Downtown and Westside Vancouver MLS sales figures for late summer and early fall (2012) show that Downtown high rise condos over 1,250 square feet sold for an average of $1,880,000 with the an average selling price of 8% or $163,500 below their original list price.
It isn’t only the sale of condos that has softened in Downtown Vancouver. Throughout Greater Vancouver, sales of detached home sales dropped 19% over sales of the two previous Octobers. Although prices continue to rise slowly in New Westminster, and Port Coquitlam, overall pricing declined by 2.9% since the peak in April this year.
Notwithstanding, condo prices and prices in general in Vancouver are a stark contrast to prices in Toronto, with Vancouver remaining one of the most costly cities there is to live in.

Will the Bubble Burst?

Garth Turner, the former Minister of National Revenue and Ontario Conservative MP is predicting Vancouver real estate will drop as much as 40 per cent.

“The average household in Vancouver isn’t making enough money to afford the average home,” Turner said. “At the same time, we’ve had a lot of speculation in the market … and we’ve had changes to mortgage lending rules.”
Turner believes the steady decline in number of sales and price in the fall, is just the beginning. But Cameron McNeill, a condo marketer, says Turner is wrong. McNeill says the fact that people continue to buy proves the lack of affordability argument as inaccurate.

“The fact of the matter is, in Vancouver today, you can buy a condominium and you can rent it out and you will have 40 people in line trying to rent that condominium,” McNeill says. “If you have that much desire for people to live in a condominium, I think the market’s got no problem sustaining itself.”

Time will tell. If we could accurately predict economic trends, most of us would be much wealthier than we are. Hindsight is 20/20. The fact is, it seems we are in a buyer’s market in Toronto