Uh Oh, Toronto is in a Bubble Trouble?

😱 Toronto Ranks 5th in Global Real Estate Bubble Risk

• According to the UBS Global Real Estate Bubble Index, Toronto ranks fifth in the world in terms of the risks of a real estate bubble.

• Miami, Tokyo, Zurich, and Los Angeles have higher risks than Toronto.

• Toronto's score on the index fell from 1.21 in 2023 to 1.03 in 2024, but it remains at elevated risk due to slower income and rent growth.

• Factors such as the ban on foreign buyers, rising inventories, and a subdued economic outlook may prevent a quick resurgence of the real estate boom in Canada.

Why it Matters:  The risk of real estate bubbles in these cities suggests potential economic vulnerabilities, as a sudden market correction could have far-reaching consequences for local economies and financial systems.

🏗️ Canadian Housing Starts Up 4% in First Half of 2024

• Calgary, Edmonton, and Montreal saw significant gains, while Toronto, Vancouver, and Ottawa experienced 10-20% declines.

• 68,639 units began construction, the second strongest figure since 1990.

• Despite the increase, more housing starts are needed to reduce the supply gap and improve affordability.

• Apartment starts increased by 2.5%, driven by purpose-built rental units.

• Condominium apartment starts fell in most cities, a trend expected to continue.

Why This Matters: The country still needs more housing starts to address the supply gap and improve affordability, especially in cities like Toronto, Vancouver, and Ottawa, where prices remain high. The increase in purpose-built rental units is a positive sign, but the decline in condominium apartment starts may indicate a continued shortage of housing options.

🏢 Toronto's Prime Office Spaces Rebounding

• Vacancy rates for central "trophy" office space fell to 6.3% from 8.2% (Q1 2023 to Q3 2024), while rates for older, less central B and C buildings rose from 20.9% to 25.6% in the same period.

• Overall, GTA office vacancy rate was 18.2% in Q3 2024.

• Companies are moving to smaller, higher-end offices, leaving older, less desirable buildings facing a "very bleak" outlook; the gap between top-tier and lower-end buildings is widening.

• Older buildings face challenges competing with newer, more appealing spaces, potential high renovation or redevelopment costs, and environmental sustainability concerns.

• Zoning requirements and sustainability concerns limit redevelopment options for older buildings.

Why This Matters: Thriving high-end office spaces in downtown areas can boost nearby businesses, while struggling older buildings may lead to economic decline in specific neighborhoods. The divergence between premium and older office spaces creates new challenges for city planners. They may need to reconsider zoning laws and redevelopment strategies to address the growing underutilized buildings.

🧐 Competition Bureau Investigates Canadian Real Estate Association

• The Federal Court has granted a court order for CREA to produce records and information relevant to the investigation

• The Bureau is investigating if CREA's commission rules discourage competition among buyers' realtors, leading to higher costs for buyers and sellers

• The Bureau is also investigating if CREA's Realtor Cooperation Policy makes it difficult for alternative listing services to compete

• The Bureau is inviting Canadians to share their experiences with real estate commissions and CREA's policies

• Feedback can be provided until November 6, 2024

• To share your feedback, you can visit the Competition Bureau of Canada's website and submit your comments and concerns

🏠Toronto September Market Update

• GTA REALTORS® reported 4,996 home sales through TRREB's MLS® system in September 2024, an 8.5% increase compared to September 2023.

• Buyers are taking advantage of more affordable market conditions due to interest rate cuts and lower home prices.

• New listings increased by 10.5% year-over-year, reaching 18,089 in September 2024.

• The average selling price in September 2024 was $1,107,291, a slight decrease (1%) from $1,118,215 in September 2023.

• The improvement in home sales was matched by a more excellent supply of new listings, giving buyers more negotiating power and leading to moderate year-over-year price declines.

• Price declines were more evident in the condo apartment and townhouse segments, popular with first-time buyers.

🤔 WTF of The Week

If you thought Toronto and Vancouver were expensive, you haven't been to China! Home price-to-income ratios in cities like Shanghai and Beijing are off the charts 📈😳 

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