The question on everyone's mind is, "Will Toronto turn into the Next Vancouver?" Is our real estate truly becoming too overpriced than it already is? Or is Toronto real estate prices finally meeting its true potential as one of the greatest cities in Canada and eventually catching up to international property values such as New York and Hong Kong? Will foreign buyers play a significant role? Will Toronto eventually have to turn to an increased foreign buyers tax or some sort of ban/tax to try to slow it down like BC?
The BC government in June and July showed foreign buyers bought over $885 million worth of Metro Vancouver houses and condos in just over a month. With the BC government now enforcing a 15% tax on foreign purchases, the move comes with great criticism.
With very mixed reactions between industry lobby groups, government, realtors and residents, there are a lots of uncertainties. Realtors say it is hurting the market with deals falling through in August and the mind set of buyers wanting to wait it out. Some BC property developers with foreign investors may suffer from this tax cost and charge it to local residents as they may not want to absorb that extra margin and property prices may continue to rise as a result. Some investors may simply get a friend or family member to purchase on their behalf to escape the tax. In another scenario, more investors in BC may flock to Toronto real estate instead.
If this occurs in Toronto, real estate prices will continue to increase until our local or provincial government decides to step in due to mounting pressure from voters and mounting fears of devastating collapse like what has happened in BC. The CREA (Canadian Real Estate Association) reports that Vancouver average real estate purchases rose 11.3% from June 2015-2016, from $922,326 to $1,026,207. Toronto's average price rose 16.8% from June 2015-2016, from $689,184 to $746,546. Toronto is still not close to Vancouver's average prices and our population is larger and international status is considered to be more well known, although Vancouver could be considered more desirable to live by Chinese Immigrants because of location. Vancouver is conveniently located for travel to and from China and its ports for trade are well positioned. However, Toronto's economic and financial strength and international appeal also makes it very inviting for Chinese investors. Toronto is also home to a large population of Chinese immigrants from Hong Kong and Mainland China. High Chinese population in Richmond Hill and Markham in the York Region will continue to invite wealthy Chinese investors. With a growing population of immigrants from India, Pakistan and the Middle East, the suburbs such as Mississauga, Brampton and now Milton have also continued to see growth in real estate purchases and seen significant price increases. Every year for the past 5 years, homeowners in our city have been counting their property value jumps with big smiles.
When we say Toronto when talking about real estate on a wider scale, most residents will think about the "Greater Toronto Area" (GTA). The GTA region is definitely an attractive investment for foreign investors and new immigrants coming into Canada if they have the capital. However, as a tax payer and resident calling Toronto home for over 29 years, I don't disapprove of the idea of helping the market cool down a bit to prevent a significant and shocking collapse. However, I don't believe the tax would be the answer. How should Toronto respond when the time comes? That question is not as relevant at this time.
Back to the more relevant question, "Will Toronto be the Next Vancouver?" It is inevitable that average Toronto prices will reach current Vancouver's prices sooner or later. Although Vancouver's economic strengths are similar to Toronto's often competing in many commodities and services such as film production, mobile and gaming, tech start ups and food and wine, Toronto's immigrant population is more widely diverse and larger. If the city plays its cards right with Toronto Mayor John Tory's transit expansion plans and if there will be no plans to block foreign investment, Toronto has the potential to reach higher average real estate prices higher than Vancouver in the long run as the city aims to become more desirable to live by international standards.
In light of these views, I would be confident to advise any new immigrants and first time investors in Toronto real estate to start planning NOW and buy a property that meets your needs sooner than later before this wave meets its end or when our government decides to step in.