Recession hits Toronto real estate in a big way!

Per the Toronto Real Estate Board in December 2008 home re-sales in Toronto witnessed a tremendous dip by 45 % in comparison to the figures of Dec' 07. Even the average selling price of property came down from $394,931 in December'07 to $361,415 in Dec'08. Per real estate specialists, the steep decrease in these values point only in one direction: the recession. It has hit the real estate in a big way! The entire Canadian real estate market is facing the bad conditions, however, the intensity is not as high as in Toronto.

Economists are addressing it as an usual boom and recession cycle of the Canadian economy. Maybe it's the usual business cycle but it needs to be analyzed against the boom of 2007. According to an economist at TD Economics, named Pascal Gauthier, "In 2008, Toronto made much less sales after witnessing significantly high pace sales in 2007." He emphasized that we have to view the figures in the light of couple of important facts besides the gloomy recession. He clarified that the phenomenal increase in sales of 2007 were also due to land transfer tax.

With the real estate bubble burst, the real estate has become reasonably affordable in the areas like GTA which offered a relieved to buyers. From an optimist's point of view, even for sellers it is not unpleasant news as they do need to buy after selling a property. Thus, if they are selling at a lower cost, they will also get to buy a new property at a lesser price.

The market is speculated to remain positive for buyers as with the completion of new houses the property on sale will be more than the existing market demand. In such a situation, re-sales prices may fall further.

Per Economic Research, in December 2007 new listings for Toronto had jumped to alarming high rates. Even per data available with the Canada Mortgage and Housing Corp. (CMHC) there was an increase by 27% in the new homes in December 2008 also in comparison to the ones that came up the year earlier to it. Also, in 2008 the emphasis had been more on condo sector with this vertical witnessing a record boost of 137%. The key factor was the high sales in 2007. They called for ample of funds for investment in home construction business. However, on the contrary a decline was recorded in the home starts category of low-rise housing, including – semis, singles and townhomes.

Interestingly, analysts believe inventories of unsold homes will step up, thus the level of rise is still under the controllable limits. Economists are of the view quick shift in the equilibrium of the real estate market has set the potential buyers to wait and watch for further decline in prices. As the recession has made the consumer pessimistic in approach, some of the buyers are regularly checking the market by listing their property in the market.

Prominent structural hardships has made it evident that it may take few years for the market to recover the loses. Per market speculations, till 2011 the dip in prices will continue for the real estate industry.