2017 Outlook and recommendations for the Greater Toronto Area real estate market (continuous exchange rate effect)

I hope you have been doing well.
Last month, I completed business trips to Vancouver and Seoul.
I would like to express my gratitude once again to everyone who consulted with me,
and promise to do my best to ensure that all plans and preparations proceed smoothly.

The tumultuous year of 2016 has passed and the new year of 2017, the Year of the Rooster, has arrived.
It has already been 16 years since MyBestHome first formed a good relationship with you.
During that time, we have been leading MyBestHome, and thanks to your trust and support, we have become a reliable and trusted real estate website, “torontoprecondo.ca,” recognized as “certified” within the Korean community in Toronto.

We deeply bow our heads in gratitude to you for all of this.

Moving forward, as a proper help to customers’ family finances in the Greater Toronto Area,
we will make the best decisions based on our experience and know-how in various forms, from children’s education and medium- to long-term financial planning for each household to secure asset growth and retirement planning.
We will also repay your trust in us with reliable results.

With the start of the new year, if we look at the outlook for the Greater Toronto real estate market for 2017,
we cannot expect explosive growth like last year, 2016.
However, we anticipate steady growth in the double digits this year.

The basis for this expected real estate growth is fundamentally the same as last year’s growth projections in 2016.


1. Absolute supply shortage compared to demand : The demand for real estate from mostly economically well-off immigrants and students who need housing, whether it is houses or condos, is far greater than the necessary demand, due to a severe shortage of supply, which is serving as a strong foundation for rising real estate prices. Every year, the accumulated excess demand due to supply shortages is becoming a greater pressure factor for rising real estate prices.

2. Continued low interest rates : The United States began raising interest rates last year and is planning to do so several more times this year. However, Canada has completely decoupled from the United States in terms of economics and financial systems, making it difficult to raise interest rates in conjunction with the United States. Given the current difficult economic conditions and overall conditions in Canada, it is expected that the average interest rate in 2017 will remain at 3%, or slightly lower. These low interest rates are still connected to the desire and demand for real estate purchases, and are another important basic factor in the rise of real estate prices, along with an increase in sales.

3. Continued undervaluation of the Canadian dollar : The Canadian dollar has been depreciating since the second half of 2012, and this year, 2017, marks the fifth year. Considering the domestic and external conditions of the Canadian economy, as well as trends in international oil prices, it is predicted that there will not be significant fluctuations in the value of the Canadian dollar this year. It is expected to maintain a range of 70-80% against the US dollar and 850-950 won against the Korean won. This steady undervaluation of the Canadian dollar is continuing to promote capital inflows into Canada explosively, and is considered a greater factor in the rise of real estate prices.

However, it seems that in the future, there will be a slightly higher upward pressure than downward pressure on the value of the Canadian dollar, as the Canadian economy improves and oil prices rise. The psychological effect of having gone through a significant correction period for the fifth year since the Canadian dollar began to fall is also contributing to the upward trend. For households who want to send money to Canada, it is recommended to reduce risk by dividing and exchanging or transferring money, especially if the exchange rate is in the 800 won or minimum 900 won range like last year.

4. Government efforts to suppress transaction volume through mortgage regulations:
The government, which felt a sense of crisis due to the skyrocketing real estate prices that spread throughout Greater Toronto last year, has introduced a regulation on the maximum amount of mortgage applications for real estate purchases. While there seems to be some effect in suppressing purchasing power, significant effects have yet to be seen.
As for the demand for huge real estate investment funds pouring in from immigrants and study abroad families who come in with cash from all over the world and from exchange rate gains, Ontario’s mortgage regulation will not have a significant impact.

5. Psychological inflation of real estate : In the past 1-2 years, the real estate market in Greater Toronto has increased quite a bit. Even a small detached house is almost impossible to find in Toronto for less than a million dollars, unless it is in a notoriously bad neighborhood. The perception of real estate prices has changed significantly from before, with a huge difference in the concept of value. Although inflation is not the cause of rising prices, as consumer prices generally rise by 2-3% annually, real estate prices have risen significantly, and the psychological inflation of real estate, where the perception of people has risen sharply, has already taken root. Therefore, it is becoming another social factor that prevents a decline or stagnation in real estate prices.

6. Conclusion / Recommendation :

Based on the few important factors and predictions above, if there are no external negative economic shocks outside of Canada, it will not be easy to see explosive growth like last year, but a double-digit rise is still expected.

Our recommendation is to actively look at real estate investment this year. If the price of a detached house in Toronto does not fit your budget, consider expanding your interest to the suburbs of Greater Toronto. If you have a limited budget to invest in a detached house, we recommend actively considering townhouses or condos.

Especially, the price increase of condos compared to houses has been quite low until last year. However, the transaction volume has almost doubled since last year, and the price increase rate in downtown, midtown, North York, and areas with good transportation is very high. Therefore, we recommend considering investing in condos as well.

Until 2015, in terms of the quantity of Toronto condo sales, small units with 1+ den were more prevalent than larger units with 2 bedrooms or more, with a ratio of 60:40. However, since last year in 2016, the trend has shifted to 40:60, with a significant increase in sales of larger units with 2 bedrooms or more. This indicates that as housing prices continue to rise, more and more prospective homeowners are choosing to purchase condos instead of houses. Please keep this in mind when considering buying or investing in property in the future.

I have always said in my writing and in any situation that “the era of 2-bedroom condos in downtown Toronto reaching $1 million is not far away, and downtown Toronto will become the Manhattan of Canada.” Now, we are almost there, and the downtown core has already reached the era of 2-bedroom condos at $1 million. However, it does not seem likely that the era of 1-bedroom condos at $1 million, like Manhattan, will be in the future of Toronto’s downtown core.

Currently, the overall real estate prices in the Greater Toronto Area have risen significantly, making it difficult to make a decision on investing or purchasing property. However, as long as the three basic conditions mentioned above – absolute supply shortage, low mortgage interest rates, and low exchange rates – remain, do not be afraid to invest.

Although the supply shortage may not improve significantly over time, the low mortgage interest rates and undervalued Canadian dollar may change to some extent depending on international situations and fluctuations in domestic conditions. Therefore, it is advisable to take advantage of this current time period when all three conditions are favorable to investment, as it will be more beneficial in terms of investment returns than waiting.

I am currently staying in Seoul for an extended business trip this year.

I wish for a healthy New Year in 2017 for each household, and for all business and household plans to be fulfilled with great blessings.

Thank you.


Ian Kim
Sales Representative
Website: www.torontoprecondo.ca
Email: ian@torontoprecondo.ca