Hamilton and Toronto – Analyzing the Tale of Two Real Estate Cities

July 04, 2014

Much has been made recently of the cooling in the Toronto housing market. Prices at the high end have certainly stagnated, much as they had to a greater extent earlier this year in Vancouver. This slight cooling in the Toronto market has set off a firestorm of debate in the media as stories on the “Canadian Housing Crash” continue to challenge dwindling nationwide ink supplies. Savvy investors will know, however, that real estate trends vary by region, with some notable cities fairing rather better than their larger counterparts in recent times.

It’s important to note that while real estate has always required a microscopic understanding of regional marketssome industry insiders say that regional housing prices now vary perhaps more than ever before.

“If you are investing between 2010 and 2013, it is critical that you virtually ignore national real estate statistics. Sure they make a great story around the water-cooler, but these numbers will mis-direct many uninformed investors. During this period of economic recovery, we will witness large regional disparities in real estate market strength. In fact, real estate will become a more regional story than ever before.

Don Campbell, Founding Partner of REIN

As Canada enters into a period of changing economic realities, it seems many eyes are focused and fretting on the fates of the real estate market in larger cities such Vancouver and Toronto. Such peaks and troughs are a part of every real estate cycle and while the horror stories in the media don’t even come close to accurately portraying the slight slow-down in two of Canada’s largest investment markets, a slow-down is certainly occurring.

The Toronto condo market is one area in which a large supply has converged with a combination of dynamics such as changing mortgage rules and created a downward trend. Condo sales in the city of Toronto were down 20.5% in the third quarter of 2012 compared to the same period in 2011.

“With more listings to choose from and fewer sales, condo buyers have not been as aggressive with regard to offers, and sellers have had to price their units competitively,”

James Mercer, Senior Manager of the Toronto Real Estate Board

But just as the Toronto market is taking a small hit late in 2012, one of its regional neighbours 70km to the west is gathering strength, ready for a starring role in 2013. Real estate markets in cities such as Hamilton continue to thrive based on booming economic development and local policies that drive investment. Consider for example recent statistics from the Realtors® Association of Hamilton & Burlington that show a 13% increase in the average sale price in September of 2012 compared with that of 2011. The figures also show that properties were spending fewer days on average on the marketplace, declining from 54 days to 45 days between 2011 and 2012.

For those who wish to analyze the data surrounding growth markets in Canada, such as in Hamilton, there are positive stories at almost every turn. In addition to being named as REIN’s top city to invest in Ontario in 2012, the city was featured prominently just last year in a study by FDI Magazine as a one of the top 10 cities in North America for foreign investment.

In parallel with the rising recognition the city is receiving from investment experts across the globe, Hamilton’s development as a city has grown considerably just this year alone.  While construction is slowing down in relative terms across Lake Ontario in Toronto, Hamilton has experienced a record year, despite only recording the figures for the first nine months of 2012. The city issued $1.175 billion in building permits between January and September.

This figure is another marker of the amazing times this city is experiencing. Our economy is — I would use the word spectacular. Because every measurable is positive and exceeds our expectations.”

Hamilton Mayor Bob Bratina

Now more than ever, looking at a town’s future, rather than its past is considered the best way to make a proactive investment choice. With big city lights dimming slightly in Canada’s immediate future, there is room for growing markets to drive opportunity and Hamilton is certainly ready for the spotlight. As ever, those who make their decisions based on long-term trends and in-depth research into the market are best positioned to make proactive investment choices as we head into 2013.