Why investors should still consider the GTA market?
By: Nelly De Breze
Tags: Toronto, interest rates, sellers, buyers, home prices
Why the province of Ontario, and especially the Greater Toronto Area, will continue to be in high demand for real estate investors?
Many macroeconomic factors specific to the Canadian market favour an expansion of investment capital into the region, even with many headlines calling the current market a “bubble”.
For one, the underwriting standards of Canadian real estate are much stronger than some of our international counterparts, helping to continue attracting foreign investment into the country and helping domestic investors invest in the market.
While a ban on foreign investment in the residential real estate market is currently in effect for the next two years, this money only risks being redirected toward apartment buildings which have always been reliable revenue streams and offered strong protection in uncertain and volatile environments.
Money that would have been allocated to residential real estate coming from outside the country will then come from inside in the form of new families, retiring workers or immigration all helped by new government policies and subsidies to help first-time buyers purchase their dream house. Ontario will also continue being a key destination for out-of-provinces investment funds coming from elsewhere in Canada.
Second, the favourable policies of the Canadian government toward immigration will continue to attract many skilled workers into the province of Ontario. With the highest level of socio-development in the country and a high level of business friendliness is a favoured choice amongst international immigrants which will continue to spur the economic development of the province.
The biggest challenge in the upcoming years as a whole for the provincial market will be the lack of housing supply related to rapid population growth.
According to Statistics Canada and the Ontario provincial census:
“New projections released by Statistics Canada this week suggest that Ontario’s population will grow from 14.8 million to approximately 19 million by 2043 in a medium-growth scenario and could even surpass 21 million in a higher-growth scenario and could reach around 17 million by the end of the decade.”
However, this same obstacle should be viewed, from the point of view of an investor, as an upside, since the lack of supply means that, even with a temporary fall in housing prices following last year’s rapid spike, the long-term trend of the real estate market continues to offer a major potential of price appreciation over the medium and long term.
So while current market conditions may offer some challenges to investors with rapidly rising interest rates and an environment of declining prices, the fundamentals of the Ontario real estate market, especially for the Greater Toronto Area, have not changed and will continue to serve investors well for those who have the right time horizon.