2011 Ontario Market Overview

The biggest question that investors and homeowners should have leading into 2011 in Ontario is, “Will the many levels of government control themselves and not meddle with the housing market for a whole year?” As it is an election year, this is doubtful.

Government meddling (including Toronto adding additional Land Transfer Taxes, Provincial Government adding HST expenses landlords can’t pass on to renters, and the 2010 ridiculously low rental increase percentages) has had completely unpredictable and long term effects on the province’s real estate market and its ability to provide affordable housing in a province that needs it the most.

Economically, the province will be divided into two regions, one with job growth and one with job stagnation. The regions with the job growth will dramatically out-perform the rest of the province. Here’s a quick overview:

Ottawa: Ottawa will continue to be the consistent performer in the province’s real estate market. Investors and homeowners are poised to see their market perform at a non-spectacular but very acceptable level. Vacancy rates will begin to decrease later in the year, and a balanced market will ensue.

Hamilton: Hamilton is poised to be one of the top real estate performers in later 2011; however, a lot of question marks still sit poised on the sidelines to derail this. Once again, these are not truly economic fundamentals, but government issues including, but not limited to, where (if at all) the Pan Am stadium will be built, and whether or not Metrolinx will build out the proposed LRT. The Economic Development team is working hard to bring jobs to (and back to) Hamilton and the results are already starting to be felt. These jobs lead to inevitable real estate value increases.

Kitchener-Waterloo-Cambridge (Tech Triangle): KWC is the economic and real estate winner in the province in 2011. Job growth is already being felt across the region and this is just the beginning. The leadership, both in the government as well as the corporate arenas, are working hard at turning this area into Canada’s job growth region and investor and homeowners should be doing what they can to support this policy as it will inevitably lead to money in their pockets down the road. In all cases, it is important that investors choose their neighbourhoods carefully, focusing on regions where demand is occurring and where they can create positive cash flow.

Toronto: A tale of many regions – all in one city. Some neighbourhoods are poised to outperform (i.e. Scarborough and the Beach) while others will lag. Finding positive cash flow properties is going to be critical for Toronto investors as they won’t see values skyrocket, as was witnessed over the last few years. New condos will still come on the market and will be sold on a ‘per square foot’ or ‘replacement cost’ basis rather than comparison basis. This ‘break it down to small numbers’ selling strategy is what the auto industry had to start doing to move their vehicles (selling by $$$ per month instead of stating the full price). Best deals will be found in the secondary and resale markets with an increasing number of motivated vendors hitting the market later in the year keeping a cap on price increases. Remember, ‘Average Price’ means nothing in a market as large and diverse as Toronto. The overall Toronto market will underperform.

The rest of the province will experience a return to sane markets – not too hot and not too cold.