Should You Invest In Toronto Real Estate In 2023?

Should You Invest In Toronto Real Estate In 2023?

Real estate investing is a great option for you to build wealth. With so many cities, how do you decide where to invest? Toronto is our favourite city to invest in! Here are our top reasons why you should invest in Toronto real estate for 2022.

1. Strong Market Appreciation

Land increases in value quickly when it’s scarce. This is the fact in Toronto because we’re running out of land to build more houses in Toronto. The limited land in Toronto means the supply of residential properties, especially houses, will always be limited.

On the demand side, Toronto’s strength is based on a diverse and stable economy. We’re the second fastest growing urban centre in North America and Canada’s tech hub. This drives a constant stream of people moving into our city because of job opportunities.

The fundamental combination of limited supply and growing housing demand makes residential real estate in Toronto appreciate much quicker than other cities. Over the past 10 years, Toronto residential real estate has on average seen a strong market annual appreciation of 8.3%.

Home Price Index (January 2005 = 100)

Toronto Market Appreciation vs. Major Canadian Cities
Source: CREA, April 2020

2. Lower Price Fluctuations

Some cities see periods of high appreciation followed by periods of lower, or even no appreciation. This can happen when single-industry cities that see a decline in production.

More volatile prices can also be driven by speculation, where real estate prices may see a sudden spike from investors buying into development plan announcements. If things don’t go according to plan and expected demand isn’t met, property prices in these cities will likely drop.

Unlike those cities, Toronto’s residential real estate is backed by an actual need for housing. Even with many condo projects in the works, Toronto isn’t approving housing fast enough and is underdeveloped by 26,000 homes.

Because Toronto’s residential real estate is driven by real demand, there is more stability in the Toronto residential real estate market, making it lower risk compared to other cities.

Toronto Housing Crisis

Toronto housing crisis
Source: City of Toronto Housing Market Analysis 2019; CMHC 2020; 2016 Census

One of the best tests of a market is to see how it got impacted by our latest global pandemic. Even though we did see a dip in prices during COVID-19, house prices have bounced back quickly  and semis have exceeded pre-COVID levels as of July 2020. The strong support in real estate prices really show the strength in the Toronto market.

3. Steady & Growing Rents

Rental income is an important source of returns. The best rental properties have stable cash flows which brings excess cash flows on top of paying for the property’s expenses and mortgage payments.

Toronto’s steady demand for housing trickles down to the rental market – generating stable rental income for investors. As property prices remain high in Toronto, there is a growing percentage of people who can only afford to rent. This translates to a high demand for rental properties in Toronto and almost no rental vacancies.

Our strong economy also means a higher cost of living in Toronto. In order to keep up with this standard of living, Toronto’s tenant pool tends to be more responsible and have higher income levels. This means they are more likely to pay rent on time.

When you combine a growing population with an increasing percentage of the population who are renters, this creates continuously growing demand for rental properties. On top of more steady cash flows, Toronto also has the highest rent growth rate compared to other cities in Canada.

2020 Rent Growth By City

Toronto Rent Growth vs. Major Canadian Cities


4. More Gentrification Opportunities

Toronto’s strong economy and growing population attracts a lot of attention from both the public and private sectors. Many of these projects are aimed to increase housing supply and enhance communities. 

Toronto continues to top the active crane count in North America year over year, and currently sits at 124 active cranes as of Q3 2020. Public transit developments also contribute to gentrification and is another major priority in Toronto.

Toronto Public Transit Plans (As Of June 2020)

Toronto transit plans

Areas situated in the crossroads of development projects that improve a neighbourhood may get an added boost in property values. With more development projects in the works, properties in Toronto are more likely to benefit from higher growth in appreciation due to gentrification.

5. More Value-Add Appreciation Opportunities

Unlike other cities with newer homes, Toronto has many century old homes that need a lot of work. If you are able to purchase and renovate these homes to bring it up to its highest and best use, you can unlock a lot of value.

For example, a property is purchased for $1,000,000 and $100,000 is put into renovations. After the upgrades, the property is appraised for $1,200,000. This is equivalent to a value-add appreciation of $100,000.

6. Higher Cash Flow Potential From Upgrades

Along with increasing the value of your property, an upgraded property can mean that you’ll attract a better tenant pool which is willing to pay higher rents for a nicer home.

In addition, not every city needs and allows secondary suites. Because of Toronto’s housing crisis, Toronto needs and allows the process of converting a single family home into a duplex, and a duplex into a triplex. By doing so, you can increase rentable living space which means higher cash flows for your investment property.

On top of this, laneway suites programs to further increase the potential of livable space in existing Toronto properties which can further increase cash flows in an existing property.

How We Can Help

With a good balance of cash flows and appreciation, Toronto residential real estate makes an attractive long term investment.

In an economic downturn, history tells us that real estate drops less than other investments like stocks and bonds and rebound quickly. On top of this, residential real estate is a necessity. During a financial crisis, the government will make financial subsidies to help with necessities, making residential real estate investments more defensive compared to other types of investment properties.

Our team can help you through your real estate investing journey:

  • Direct you to lenders who can get you the best mortgage terms
  • Recommend the best properties based on your requirements and preferences
  • Get your investment properties up and running,
  • Help you grow your real estate investment portfolio

Are You Ready To Start Investing In Toronto Real Estate?

Normally exclusively available to our clients, you can get our Toronto Investment Property Guide FREE for a limited time.

  • Real Estate Investing Basics
  • How Much Capital You Need
  • Cash Flow & Investment Return Projections
  • Learn What’s Best For You!

Are You Ready To Start Investing In Toronto Real Estate?