Inside Toronto Condos

Risk Factors for Toronto’s Real Estate Market

By: Webmaster
2011-09-21 15:28:14

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We know that for the most part Toronto has fared well after the Panic of ’08. Real estate is growing nicely (too nice?), GDP is growing, and according to tweets from Jamie Johnston, Broker of Record for Re/Max condos…he can’t find anyone willing to work:

We know that for the most part Toronto has fared well after the Panic of ’08. Real estate is growing nicely (too nice?), GDP is growing, and according to tweets from Jamie Johnston, Broker of Record for Re/Max condos…he can’t find anyone willing to work:

We know that for the most part Toronto has fared well after the Panic of ’08. Real estate is growing nicely (too nice?), GDP is growing, and according to tweets from Jamie Johnston, Broker of Record for Re/Max condos…he can’t find anyone willing to work:

We know that for the most part Toronto has fared well after the Panic of ’08. Real estate is growing nicely (too nice?), GDP is growing, and according to tweets from Jamie Johnston, Broker of Record for Re/Max condos…he can’t find anyone willing to work:

We know that for the most part Toronto has fared well after the Panic of ’08. Real estate is growing nicely (too nice?), GDP is growing, and according to tweets from Jamie Johnston, Broker of Record for Re/Max condos…he can’t find anyone willing to work:

There was a problem connecting to Twitter.

This is fine and dandy, but what are the risk factors for the city? Let’s take a look (in no particular order):

  • Growing income disparity and shrinking middle class

From Dr. Martin Hulchanski’s 3 cities report we find a disturbing trend of folks living in certain neighborhoods are making less income than they were 20 years ago (see here). This trend can lead to the ghettoizing of Toronto. As Hulchanski puts it, Toronto will go from “City of Neighborhoods to City of Disparities. This can make the City 3 neighborhoods less desirable.

  • High Debt to Income ratios

Particular with people making less than $50,000 a year, debt can cripple potential buyers of real estate. TD economics notes that Toronto area consumer insolvencies are triple the national average. As rates rise and debt grows this could limit how much mortgage, if any, people can afford.

  • Rising cost of living

City of Toronto user fees, certain foods, public transit, fuel are all rising faster than incomes. Rising costs will put stress on what people can put towards their principle and interest.

  • Transportation

Mayor Ford’s wish to cancel Transit City may not be such a good move. Access to Transit is one of the top factors people look at when buying a home. Since Transit City would serve more residents at a cheaper price, it would be a better bang for buck for increasing property values than a Sheppard subway extension.

  • Affordability

Developers are pushing the limits on price increase, and on the resale end, it’s proving very difficult for people to find a decent property under $300,000. High prices may start to push people out to other areas (Guelph, Hamilton etc.).

  • Interest rates

It’s a matter of when, not if, interest rates will go up. Will a sustained oil shock push rates up sooner than expected? If rates rise, people can afford less and may be forced to sell their home or be priced out of the market completely…

Keep an eye on risk and understand them before you make your buying decisions.

image source: thinkpanama

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