According to Christie’s International Real Estate – the world’s largest private sale and auction house, home sales in Toronto are starting at the price of $3 million USD.
Juxtapose this recent survey of realtors around the world with the United States, and this puts Toronto above luxury villas in U.S. cities such as New York and Los Angeles.
But what makes the largest city in Canada the most luxurious housing destination in the industrialized world?
According to Michael Babad of The Globe and Mail, Christie’s found in their report that the “extremely low supply of homes in Toronto has pushed prices to $1-million to $2-million for relatively average homes in the city.”
With homes taking only roughly a month to clear the market, as opposed to upwards of three to six months for established U.S. luxury markets such as New York, Los Angeles, and Miami - the basic business notion of supply and demand applies precisely to Toronto’s sudden rise in the housing market.
However, with the housing market in Toronto improving, a possible bust could be looming.
Bloomberg reports that Toronto could see a decline in the price of condominiums by at least 10%, due to an increase in construction amongst a saturated market. While CBC Business reports that the increased construction of condos has overvalued the Toronto housing market by up to 25%.
We have seen this scenario play out in the United States after the real estate bubble burst in the late 2000s.
Canadian lawmakers are concerned about the potential of a burst in the housing bubble as well. Last month, Bank of Canada Governor Stephen Poloz spoke in front of Canadian lawmakers to reassure them that Canada was not in a bubble, retracting on the Central Bank’s statement in December of 2014 that the country’s housing market was overvalued at nearly 30%, according to the Wall Street Journal.
As we near the half way mark of 2015, it has yet to be seen exactly where the Toronto housing market will turn. Nathan Dautovich of Huffington Post Canada predicted that housing prices will peak, and condos will reach a peak in demand; both of which we have seen occur already this year, proving along with lawmakers fears investing in Toronto’s housing market will either be boom or bust.
