Anyone who thinks they can predict the value of real estate 5 years down the road is fooling themselves and, probably you too. If you browse the web you will find a plethora of differing opinions. There are the positive ones, the over positive ones, the sky is falling predictions, etc., etc.
The only thing these predictors have in common is that given year after year attempts, they are bound to be right eventually.
So, how do you take an educated guess at real estate values? Bluntly, use your own common sense. Look at the figures for immigration into Toronto. Are they decreasing, increasing? Immigration will have a profound effect on real estate values in Toronto. Canada sees roughly a quarter of a million immigrants per year. A quarter come to Toronto. These newcomers are no different from someone who is born in Canada: they work and strive to own their own homes.
Another factor affecting real estate prices: transportation. A quick drive on the highways in Toronto at rush hour is a quick lesson in the downside of working in Toronto while raising a family outside of Toronto. While many folks choose to live in the 905 area due to more house for the money and bigger lots, many don't last out there for very long. The commute is just crippling and it gets worse every year. This tells me that real estate in the city will continue to appreciate. This also tells me, in a city with not many subways, that it's difficult to lose on any home whose location allows you to walk to the subway. Frankly, given the city's inability to build more subways, the value of homes close to the subway should outperform those who aren't over the years.
Not all real estate is created equal, however. There is a marked difference between condos and houses. Common sense tells you that there is far more sky than land. Toronto can continue to build up but it only has the land that it now has. So for me, houses will out perform condos. Having said this buying a condo is a better investment than renting and for many, the lifestyle they afford is an important aspect of their life's enjoyment. From a strict investment point of view, however, I would always choose land. Having said this, I am also a fan of condo townhouses, which have not seen the price adjustments affecting condos currently. The reality is that you can certainly raise a family in a condo townhouse and, because they use up more land, they have more value. Their maintenance fees also tend to be lower and more stable.
I have a particular philosophy when it comes to helping people buy homes. People are very emotional when buying. I consider it my job to always keep two things front and centre in the minds of buyers: interests rates today will not stay as low as they are - budget for a 7% interest rate; not a 3 percent mortgage rate and, think about resale even before you buy the house. I drive my friends crazy. They're always saying, "for heaven's sakes, we haven't even bought the house yet and you're talking about when we sell it". Yes, I am always talking about this. 42% of Canadian's net worth, on average, is real estate. It's not unimportant.
Funnily enough, although people don't worry enough about resale value before they buy, it's all they think about once they've bought. This is what I tell my clients about the value of their homes: If you don't have to sell, it doesn't matter much what your house would sell for in today's market. Don't put yourself in the position of having to sell and you should do just fine. How do you end up having to sell? Usually because you spent more on the house than you could actually afford or you bought a house far to small for your growing family. Don't buy anything that will put you in the position of having the sell within 5 years of buying. It is virtually impossible to make money reselling a home that quickly what with taxes, normal rate of appreciation, costs of selling etc. The market generally won't make you enough money in 5 years to cover the costs associated with selling.
To conclude: buy smart and the Toronto real estate market should continue to treat us all very well.