If I had a dollar for every time someone asked me if I’m worried about a bubble in Toronto condo prices, I’d probably have enough to buy another investment condo. I wish the term “bubble” was never associated with unsustainable property value. Bubbles used to be associated with good things: chewing gum, soap bubbles and names for pet puppies. 

Unfortunately the warnings of Toronto’s real estate bubble have persisted. Friends, family and self-proclaimed experts would always try and dissuade me from venturing into the condo market. Fortunately, the warnings were not enough to stop me and back in 1999, I purchased my first investment property. Thirteen years later, I still hear the same warnings AND I still own that first (but not last) condo I bought. The result: the properties have grown in value, and renting these furnished apartments has covered my carrying costs and generated a modest monthly profit as well. 

Was I clairvoyant? No - hindsight is 20/20, but the truth is that like any other investment, I took a risk, put in some hard work and had a bit of good luck. To pretend otherwise wouldn’t be fair, because the reality is that no one has a real-estate market crystal ball. All we have is our own opinions, but my advice about advice is don’t listen to anyone who touts their advice as a “sure thing”.

Which leads me to why I’m writing this … I’ve noticed that recently, local media in Toronto has fallen in love with this story. Every other day I’m reading an expert prediction about why Toronto condo prices will definitely fall soon. I prefer not to make predictions myself, but having lived here for the last 20-odd years and having seen the significant price increases of property investments over that time, I too sometimes get the feeling that condo / apartment prices in Toronto are starting to get a little out of hand … it almost seems like they have to come back down, as if there was some invisible force of real-estate gravity, lurking in the background, waiting to strike. 

As such, I’m always interested in to read about the reasons why these writers predict a real estate bubble in Toronto and see if I can find anything that strikes a note with me. So far, I’m still not convinced - after reading dozens of these articles, I’m starting to notice some gaps in the theory. First, it seems that whenever statistics are quoted, they’re usually broad statistics that don't differentiate between different markets and locations. The fact is that even within Toronto, a house in the suburbs will have different price characteristics than a condo in downtown. That needs to be taken into account.

The other thing I’ve noticed is that most of these articles fail to recognize foreign investment as a driver of higher prices. If they do mention it, it’s often assumed to be just a temporary phenomenon. My opinion is that foreign investors will continue to flock to cities like Toronto, which provide a safe-haven, a place where they can live if things turn sour in their home countries. In China, for example, residents have lived under a communist regime for so long that mistrust of government and lack of faith in the possibility of permanent economic prosperity are common.  For an increasing number of wealthy families that face unstable political environments, investing in Toronto Furnished Apartments would represent a sensible way to hedge their bets.

There is also a leveraging factor which occurs because Canada has such a small population – there are an estimated 3-4 million millionaires in China, and that number is growing every day. While that’s only a tiny fraction of the Chinese population, as far as Canada goes, they represent more than 10% of the entire population of Canada!

Some other important issues which don’t get mentioned very often include the following:

Even within Canadian culture, values are starting to shift. Time is becoming the new currency. Younger generations are starting to value their time more and are willing to give up space in exchange for the ability to walk to work and being close to all the action downtown Toronto.

Over the next couple of decades, aging baby boomers are going to push the demand for condos even higher. There are a lot of baby boomers in Toronto who are reaching an age where they no longer want the hassle of having to maintain a home and also prefer being close to restaurants, theaters, etc. 

Toronto is a world class city. It's clean, safe and diversified in its industries. It's serves as Canada's financial hub and also has strong service, tourism and entertainment industries as well. Over 100,000 immigrants arrive in Toronto every year and in comparison to other world class cities such as Vancouver, Hong Kong, New York, London and Tokyo, downtown apartments in Toronto are STILL underpriced. 

Real estate developers are no longer building apartment buildings. This has significantly impacted the supply of newer, upper-end rental units in the city … condos are now able to fill that gap without fear of “over-supply”.

A good test of the Toronto condo "bubble" theory took place back in 2008/2009, when real estate markets were collapsing all over the world. There were areas in the US, like Florida and certain parts of California that experienced 50%-70% decreases over the course of a few months. Places like Manhattan and downtown Toronto passed this “test” with flying colors. Downtown Toronto experienced a 5%-10% overall decrease (closer to 5% for marketable condos in prime areas) and recuperated shortly thereafter.

No one can say with certainty where prices will go, but whenever I get into a discussion about downtown Toronto condo prices, I always ask the person if they own any real estate. Most often the answer is “no, I’m waiting to buy until prices come down.” That’s fair, but I would hate to think that their hesitations are overwhelming enough to trap them in their own bubble. I wish I had the opportunity to reach out to more people who are afraid of the “bubble monster”, but we can’t win them all. On the fence? No problem, buy me a latte (preferably a bubbly one) and we’ll talk.

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 "TorontoFurnishedRentals.com offers companies and individuals furnished apartments, corporate housing, serviced apartments and extended stay housing in Toronto. Our customized solutions suit the needs of of travelers for business, vacation, immigration, or relocation. We also offer investors an unique opportunity to benefit from the Toronto furnished rental market - hassle free. " 

When it comes to accommodations in Toronto, two things immediately come to mind: leasing an apartment or staying at a hotel. However, depending on one’s needs, budget and length of stay, it could be that neither of these are ideal. In addition to location, size and other criteria, there are numerous options to consider for those that find themselves in Toronto for that period of time somewhere between just a few days and 1 year or more.

At both extremes, the process is relatively well defined. At one end, renting a hotel room for just a few days is usually the simplest option and can be achieved relatively quickly. The main downsides here for most people are the lack of a kitchen and the high prices of Toronto hotels. At the other end, for stays of 1 year or more, this is where most apartment owners will be marketing their units. The search process will of course be a bit longer, but someone searching for a long-term lease can engage the help of a licensed realtor to streamline the process. The main downsides here for most people are the leg-work involved in bringing in furniture and setting up all the usual utilities (including television, phone and internet), and some of the hoops one might have to jump through in order to finalize a lease agreement (background/credit checks, employer letters, references, etc.). 

In between those extremes, there is a large “gap” in the market where one must wade through a variety of very different (and not always well-defined) options. Traditionally, the options in this “gap” have consisted of renting a furnished room (with access to a kitchen), subletting an entire apartment (for example, from a vacationing owner) or requesting a long-term discount at a hotel or motel. The quality and suitability of any of these options can be hit-and-miss. For example, renting a furnished room in a house or apartment, while likely to be cost-efficient, can come with a host of privacy issues. Subletting an apartment can also be cost-effective, however finding a sublet that meets your needs with move-in and move-out dates in-line with yours can be difficult. Lastly, choosing to stay at a hotel for a few weeks (or months) would provide the most options in terms of location and quality, but the lack of a kitchen and higher prices could still be an issue. 

The Furnished Apartment Solution

One option that has been gaining a lot of ground in this “gap” market over recent years is the luxury furnished apartment. This is typically a fully furnished condominium in a new and upscale building, with good amenities, a fully stocked kitchen, linens, towels and telephone, internet and television services included. Whether they are managed directly by their owner or by a professional property management company, these managed apartments make a great hotel alternative. However, there are some notable differences between a furnished apartment managed directly by the owner and one managed professionally:

- The amount of leg-work involved in finalizing an agreement can be significantly higher with an inexperienced owner looking for credit checks, references, etc.

- Standards with respect to furnishings and equipment inside the apartment can vary widely when dealing directly with an owner, while a professionally managed apartment is more likely to be subjected to stricter quality control.

- The level of service and support provided can vary widely when dealing directly with an owner, while a professional property manager is usually more accessible and responsive.
Price – renting directly from an owner is typically more cost-efficient.

Although the cost of a luxury furnished apartment is much lower than a comparable hotel, it could be higher than one of the other traditional short-term solutions, such as subletting. However, as the number of these apartments being offered in the city grows, prices are becoming more stable and the process of arranging for a luxury furnished apartment continues to become more well-defined and streamlined. With a professionally managed apartment, the booking process is similar to that of booking a hotel room, with the exception that an up-front deposit might be required. The perks being offered during one’s stay are also improving, including cleaning services and access to professional management staff 7 days a week. 

The Clientele

Who would need a furnished apartment in Toronto? Clientele in this market can include families relocating to Toronto, professionals coming to Toronto for an assignment or training, film / television cast or production staff coming to Toronto for work, expatriates returning for an extended visit, people who find themselves in transition between selling and buying a home and anyone else looking for great value and a short-term hotel alternative. 

The Owners

The owners of these furnished apartments can range from large well-known builders who retain some of the units they build for these purposes to individuals owners who market their units either directly or through a professional property manager. 

For a builder, the on-going rental of these units represents a constant and relatively steady stream of cash-flow, which helps to offset the volatility they face in their main line of business (developing and selling real estate). 

For an individual owner looking to increase the amount of cash-flow being generated by their investment property, this furnished market can be a great alternative to the traditional unfurnished long-term rental market. Of course, the old adage about risk and reward going hand in hand applies here as well. Given the right location (for example, downtown Toronto), a luxury condominium can generate almost double the rent when marketed and managed as a furnished apartment. Obviously, with this increased “reward” comes with additional risks, including seasonal volatility and a slightly overall lower occupancy rate. For an owner who is new to the furnished market, their best course of action would be to engage a professional and trustworthy property manager. A competent manager should be able to navigate the market in such a way as to manage the risks and minimize vacancy to no more than 5% (or less than 3 weeks per year).