Despite what is going on right now in the market with government intervention and interest rate hikes (which I will not address here), the market has slowed down. I actually like it better this way because it’s not as crazy and rush-rush-rush as it was earlier in the year. However, I do have to confess – not having a super heavy workload so that I can take some time to enjoy the summer season is a big plus.
Please understand that what I’m about to tell you is not a prediction per se, but rather it is based on my gut instincts combined with years of expertise in the real estate market. As they say – listen to your gut! I truly believe that we will see the biggest and final land grab of Southern Ontario and the Golden Horseshoe within the next 10 years. This is not a prompt for you to buy land or buy a property with access to land, but for you to hopefully understand the macroeconomics of how Southern Ontario could become one of the greatest places in the world to live and invest in.
Let me illustrate a few points that leads me to this overall gut feeling.
Immigration: Southern Ontario gets a ridiculous number of QUALITY immigrants per capita each year (immigration based on population) and will likely increase under the leadership of Justin Trudeau.
Supply: We do not have enough housing supply for all of the new immigrants coming into the city let alone our own citizens. We get approximately 20,000 condo units and 1,000 houses in the GTA being completed each year. If we’re getting 100,000 people each year coming to the GTA, then the question evidently becomes – well, where are these people going to live?
Income: With the new minimum wage set to increase, we are about to see a drastic change in the cost of living from housing, food, utilities and much more. This level of inflation is going to also put pressure on the entry level housing market whether it is to rent or to own. Also, keep in mind that the income in Toronto is high compared to other Canadian cities.
Price: The cost of owning a property has sky rocketed as well. Generally, entry level homes, which are 1 bedroom condos now (it was a townhouse a few years ago), are going to appreciate consistently as everyone needs a place to live. Your entry level home no longer gets you a piece of land, but instead, you get a piece of a condo complex.
Not Enough Land. Some of you may argue that we are confined to the green belt, which is a very real problem, but communities outside of the green belt still thrive as long as there is access to and from the city (i.e., Kitchener, Waterloo, Cambridge). However, our transit system (GO, TTC, VIVA, YRT) isn’t growing fast enough for the urban sprawl which has lead to intensification at urban cores. It’s getting to the point where commutes can easily become 2-4 hours round trip. At that point, you’re really not connected to the city anymore. Did you know, the 404 actually ends in Newmarket?
Urban Intensification. With the shift to affordable housing and intensification in major city cores (see point above), we are going to see a lot more condo high rises being built. You may have heard of the term Manhattanization. We are very likely going to be heading towards that. Brace yourselves!
The Dream of Home Ownership. Many of us grew up with the dreams of a big house, a white picket fence, having a backyard and our own private lot. However, the difference between want and capability will continue to get bigger and bigger as build-able land decreases. In the major cities of China, owning a house is practically impossible with the population and the landscape but that dream is still within grasp for the Chinese in Canada. I’ll mention this again – if 1% of the Chinese population are millionaires, that millionaire cohort in China is larger than the entire population of Canada… scary and shocking thought, isn’t it? Do you think 15% tax is going to stop them?
Safe Haven. Canada has always been known to be a safe and peaceful country. Wouldn’t you want to park your family and money here so that you can enjoy life rather than have it all be taken away from you in some way shape or form?
There are many more reasons why I believe land scarcity will become a very real fact of life in the future, but I’ll save you from reading my essay and stop here at 8 reasons. Don’t forget that each of the points above are intertwined with one another. Whatever your home ownership dreams may be and/or whatever your investment horizon is, I strongly encourage you to give the above insights some real thought and think about what this may all mean for you.
Until next time, Happy Real Estate-ing!
Zhen
