This is a summary of some the points we found most important from the excellent article written by Ara Mamourian at The Sprint Team (thespringteam.ca).
- in 2017, the number of detached homes above 1.5Mil increased by 16.12%.
- In 2018, condos will outperform all other product types.
- Larger size condos will have more demand as living in a condo becomes the new normal.
- Look at the upward momentum in condo prices on the east side of the city (Note to readers: Ara focuses on the East End because that is his area and his area of expertise)
- Demand will continue to outstrip supply.
- Interestingly, it seems like it’s not just affordability that it driving this demand for smaller and affordable homes, but also a society-wide shift towards simpler living standards
- With the price of detached homes approaching 1Mil., the profit margin for speculators and flippers is practically zero.
- Thanks to the shortsighted Liberal policy, it appears that the rental market will be even tighter than the dizzying 2017 market
- With growing uncertainty in the market (e.g. NAFTA, interest rates, tightening mortgage rules, etc.), those who were on the fence and those who cannot afford ownership will be pushed into the rental market. On the other hand, landlords are well aware of the 1.5% rent increase cap and will maximize rent on the first day, which means that many renters will be forced to settle.
- Here is Ara’s ball-park rental rent on the east side:
- One bedroom apartments are going to coast a minimum of $2000/mth
- Two bedroom apartments are going to cost a minimum of $3000/mth
- Three bedroom apartments are going to cost a minimum of $4000/mth
Overall, it looks like the market will continue its upward trend in the core of the city. I agree with all the above and I feel that housing will continue to get more expensive. My only caveat is the fact that tail risks (e.g. unforeseen events or black swan events) cannot be underestimated. Just like the Liberal policy that shocked everyone in April, other events could easily surprise the market.
Happy new year’s day!