Population experts project that Canada will reach 53 million citizens by 2100. By that time, Toronto will house about 17 million people. There will be significant changes in the acquisition and usage of buildings in the city. Nevertheless, nobody has sufficient information and understanding of the future to know how the Toronto real estate market will fare. With the data available in this Condo Mapper abstract, we can make intelligent hypotheses. Also, you should understand the relationship between the demand and supply curves.
Factors that will affect the demand for buildings in the Toronto real estate market
People living within the city are potential buyers and owners of its properties. Therefore, their sentiments, positions, and attitudes will affect the demand curve. Moreover, recognize the effects of the pandemic on customer choice.
- Client’s Reservation: How do potential clients view the Toronto real estate market? Their stance concerning wealth creation via this vehicle will impact the demand. Also, their financial capacity will influence their choice.
- Relocating from the city to a rural area: During the coronavirus pandemic, people fled the city for safety. Due to its overcrowded nature, several people may migrate to the suburbs and countryside. When they do, the demand for properties will drop.
- Number of family members: Currently, Toronto has an average family size of 2. As a result, the demand for larger houses is reducing. If this trend continues, home demand may follow suit.
- Merging of properties: When people marry, they often merge their properties. Also, they tend to become co-signatories to several accounts. Hence, they may prefer to maintain a house.
- Splitting of properties: The current divorce rate is 38%. If this number increases over the next century, there will be increased demands for more homes as spouses go their separate ways.
- Number of Immigrants: At the current pace, immigrants will account for about 47% of the population in the next 100 years. This trend represents a significant increase in real estate demand.
- Employment Rate: During the pandemic, millions of people became jobless. They could not cover their monthly mortgage. If not for government intervention, several homes might go into foreclosure. The increasing unemployment rate will impact the Toronto real estate market negatively.
- Prevailing mortgage rates: If mortgages become more competitive with favorable policies, it may increase the demand for properties.
Factors that will affect the supply of buildings in the Toronto real estate market
- Number of Available Homes: The quantity of new and renovated properties have a direct relationship with supply. If this number is high, there will be more buildings for people to buy. As a result, the prices might drop.
- Construction of New Buildings: Are real estate companies starting new projects? During the coronavirus lockdown, workers and professionals could not leave their houses. Therefore, fewer companies engaged in construction projects.
- Completion of New Buildings: How many new building projects reach completion and are ready for their owners? The fewer the Housing Starts, the fewer the Housing Completions.
- Unemployment Rate of Owners: When homeowners lose their jobs, they become incapable of fulfilling their financial duties. To generate cash, they put out their buildings for sale. Thus, increasing supply.
The interactivity of demand and supply for Toronto real estate market
According to Condo Mapper, there are different formulas to calculate supply and demand. Supply is the total of buildings listed for reselling (L), the number of Housing Starts (New), and the growth rate of rented properties (RS).
Mathematically, S = L + New + RS.
Similarly, demand is the total of properties resold within 12 months (S) and the rate of population increase (Pop).
Mathematically, D = S + Pop.
With this calculation, there are three possibilities. One, there is Housing Shortage – a situation where there are more buyers than buildings. It means that even if you have the money, there is no building to purchase. Two, there is Housing Surplus – a situation where there are more buildings than buyers. It means that people are not investing in real estate. Three, there is Housing Equilibrium – a situation where the number of buyers equals available buildings.
In this instance, there are more potential clients than there are buildings to purchase. When this happens, sellers wield more power. Buyers have limited options, and delays can be economically dangerous. Moreover, the prices of properties will likely increase.
When the number of properties exceeds the demand from buyers, sellers have a problem. That is, buyers wield more power. They have multiple options to choose from, putting sellers in a fix. Over time, the sustained surplus will cause the prices of properties will drop.
In this situation, the number of properties is sufficient for potential clients. As a result, there is little or no pressure on the prices of buildings.
Although the pandemic reduced buyers’ confidence, normalcy will return, and more players will enter the Toronto real estate market.