2014 Canadian Real Estate Outlook

There are two sides to every story. There are proponents of continued rise in the overall Canadian real estate market and there are those who believe a major correction is long overdo.

Let’s look at the advocate of a continued strong Canadian real estate market. Canada is one of the top immigrant destinations in the world. Every year, tens of thousands of new immigrants all over the world are permanently relocating to Canada. Therefore, there is a strong continue demand of housing throughout Canada, especially Toronto, which is one of the top Canadian cities for new immigrants.

Furthermore, the increase awareness of the Canadian real estate market as a result of the expanded exposure and international reputation had gave rise to more international investors purchasing properties in Canada as long term investments. Despite the perpetual increase of property prices of recent years in Toronto, compared to many international cities around the world, it is still considered a ‘bargain’ for many international investors.

The flip side to the Canadian real estate market is a major bust! Some thinks that the market will encounter a correction very shortly as the demand and supply is reaching an equilibrium as evident by the slowing volume of sales. Others who are more pessimistic are projecting a major crash in the real estate market similar to the one we encountered in 1990 which lasted for several years with $1.5M dollar listing homes that sold at 50% of its asking price in the early part of 1990.

The Canadian economy relies heavily on its natural resources. Volatility in commodity prices and worldwide demand shifts could impact the Canadian market positively and negatively. As of current, it seems to have a negative impact on the economy. Furthermore, the job growth in Canada does not paint a rosy picture for the coming few years. Many new university graduates are having very difficult time finding jobs.

As aforementioned, a surge in international investors had come into the picture in the Canadian real estate market. It had definitely help fueled the demand and correspondingly drove up property prices especially in certain pockets within Toronto and Vancouver which are known to be ‘hotspot’ for foreign investors. The negative consequence of partial reliance on foreign investors is the fact that any sudden withdrawal from these investors could negatively impact prices with property supply.

No one has a crystal ball so it is impossible to provide a definite projection on what the Toronto real estate market entails for 2014. There is a possibility of a major correction or a continue rise in prices or perhaps a stabilization of prices that remains until the next ‘boom’ market. However, based on various economic factor coupled with the current trend in the property market, it would be prudent to remain conservative on your property investment decision and really pick an area that has long term resiliency and appreciation potential. The days of randomly buying properties throughout the GTA and expect an annual 30%+ return are long behind us and will not be back for a little while.

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