Are Houses Overvalued in The Greater Toronto Area?
The real estate valuation in the Greater Toronto area is still short of the dangerous heights that might lead to a bubble as compared to other cities such as Halifax, Montreal, Ottawa, Regina and Winnipeg. The overall Canadian real estate however is estimated to be overvalued at 20-25 % percent which heralds an impending correction in the prices in near future. However given the rental prices in the Greater Toronto Area, the houses are slightly inflated but certainly not over valued.
The Escalation Pattern
While real estate prices rose by a whooping 132 % in the US between 1997 and 2006, the Canadian real estate witnessed a moderate escalation of less than 87%. This controlled rise can be primarily attributed to the conservative lending practices in Canada. During this period the average rise in real estate prices in the major Canadian cities have been quite conservative devoid of any speculative excesses. The highest escalation was seen in Regina with 14.7% hike whereas it was 12.4% in Calgary, 10.6% in Vancouver, 10.2% in Winnipeg, 8.1% in Montreal, 5.7% in Halifax and 5.7% in Ottawa. The increase in cost of houses in the Greater Toronto Area in the same period was a conservative 7.2 % which ensured that overvaluation was controlled if not completely prevented.
The Booming Condo market of Toronto
The low mortgage rates of about 3 % till now have ensured a steady increase in the demand for affordable houses in the Greater Toronto Area. The increase in the prices of condos has continued unabated so far but is likely to see certain degree of correction in 2013 as a situation of over supply emerges. However the situation is not as alarming as the US since the overvaluation in any case is moderate, at best touching 25% in a few specific localities.
Where to Look for the Right Price
Those intending to buy houses in the current scenario, need to explore the areas such as Leslieville, the Junction area or other places that are at a little distance from the downtown core yet approachable. The choice of location could imply a net savings of more than 10% and will also protect the buyer against future price correction that is being anticipated. Increasing the search radius to places like Upper Beaches and Trinity Bellwoods Park which are equally great neighborhoods as compared to Roncesvalles, Jane or Runnymede is definitely a smart move under the current circumstances.