The Next Hot Ontario Neighbourhoods to Buy In
They say the three most important rules in real estate are location, location, location. And while there are many aspects of a home that can be improved after it’s purchased, the location of a property is unfortunately one set-in-stone feature that you can’t upgrade, renovate, or beautify after you buy.
You might dream of buying on a block that checks off every box you have, but that can be quite costly and stretch you to your borrowing limit, especially if you’re a first-time homebuyer. Canadian homebuyers have seen their purchasing power drop by up to 18% since the stress test came into effect January 1, 2018. That leaves many with the difficult decision of compromising on the property type (i.e. buying a condo or townhouse instead of a detached house) or searching and searching until they find a more affordable location.
If you’re looking to buy a home in a currently-affordable neighbourhood that will hopefully appreciate substantially in value, you’ll need to make some predictions. But put away your crystal ball—there are some tried-and-true signs you can look out for that can forecast the next hot real estate market.
Please note that although this article focuses on Ontario (my backyard), a lot of the points and advice I give are applicable across Canada. So keep reading no matter what province you live in.
Identifying Neighbourhoods Likely to Increase in Value
If hindsight is 20/20, foresight might be something like 20/200. Trying to predict the neighbourhoods that are affordable now and will jump in value down the road is no easy task, but there are a few key indices you can pay attention to:
If you’ve got your heart set on a detached house, but you can’t afford the higher home prices of the big city, you may consider looking in the suburbs where your home-buying dollars typically stretch further, and where property values have room to grow after transportation improvements.
A former coworker of mine used to own a property in Vaughan, north of Toronto. She would spend $500 a month commuting on public transit, not to mention it took her three hours a day to get to work. She stayed because of the promise of a subway extension to Vaughan. Was it worth it? Eventually in December 2017, the new subway extension to Vaughan opened. Since my coworker was moving to Calgary to get married, she was able to cash out and sell her home right when the subway opened to reap the full benefit.
Plans to extend local highways and improve public transit can significantly increase the value of real estate long-term. Aside from Vaughan, look no further than southern Ontario where Highway 407 has been extended. The extension has helped push up the property values of these newly connected communities, such as Oshawa and Clarington. Likewise, properties along the new LRTs in Mississauga and Toronto are likely to benefit.
When I first started looking at properties in Cliffside (my neighborhood) I didn’t like the fact that some of the businesses seemed run down. But my real estate agent encouraged me to consider the neighbourhood’s potential, rather than be discouraged by its then-underwhelming appearance. My agent participated in the local BIA (business improvement association) and knew about some projects in the works to revitalize the community. By doing his homework, he kept me in the loop about developments planned, but not yet built.
You may have heard of something called the “Starbucks effect.” Since moving into my neighbourhood, I’ve seen it firsthand, literally. When a failing local donut shop was replaced with a Starbucks, it encouraged other businesses to improve the look and vibe of the area, gradually transforming the neighbourhood.
When looking at neighbourhoods to buy in, ask yourself: are there plans for a major retailer to open up shop anytime soon? These big-name businesses act as ‘anchor tenants,’ drawing a wide range of customers to a shopping area and encouraging new, smaller businesses to follow suit.
Also, if there are plans for the opening of a major local employer, such as a community college or hospital, not only can it increase your home’s value, it can give local landlords a larger pool of tenants to choose from and the chance to charge higher rents.
It pays off to have local politicians who are engaged. I’ve lived in some neighbourhoods where the only time I heard from the local city councillor was when he or she was up for reelection. I’m happy to say that doesn’t seem to be the case with Cliffside. My city councillor is quite active in the local community—he’s always speaking with constituents and looking for ways to make our neighbourhood a better place to live, and thus more likely to increase in value.
You can gauge a local politician’s level of involvement and efficacy by speaking directly to his or her constituents. You can also look at the politician’s past record of delivering on projects as an index of whether or not future plans will likely come to fruition.
Where Would I Buy if I Was in the Real Estate Market Today?
Cliffside and nearby Birch Cliff have seen a lot of positive changes in the 6 years that I’ve lived here. Rundown used car lots have been replaced with new condo developments. The main thoroughfare Kingston Road has seen major aesthetic improvements as well as increased pedestrian safety. And with its close proximity to the trendy Beach area and the subway, there still remains a lot of untapped potential for Cliffside and Birch Cliff as more and more dying retailers and used car lots are bought up by developers and replaced by condos and townhouses .
My neighbourhood is definitely on the upswing, which is great for me, as I bought at a time when prices were lower. But considering the increase in the neighborhood’s value and the new mortgage stress test, if I were house hunting today I couldn’t afford a detached home in Cliffside.
If I absolutely had my heart set on buying in Toronto itself, I’d go for a detached house near the Scarborough Town Centre. With many condo towers going up and still to be built and the subway to be extended there, this location seems like a good long-term investment. Likewise, anything along the LRT line being built on Eglinton seems like a good investment, too. These two areas remain relatively affordable today compared to the rest of the GTA, including my own community.
And what about outside Toronto? I spoke with a couple real estate agents who gave me their picks for other Ontario cities with good long-term potential for real estate.
What’s all the fuss about this steadily growing city on the Grand River?
“It’s one of the only places you can get a detached house for $300,000 that’s an hour and a half from Toronto. Because of the stress test and interest rates rising, it’s becoming even harder to borrow money for the purchase of a home, so the affordability of Brantford really helps counteract that,” said Cory Matthews, a sales representative at Royale Lepage.
Not only is Brantford affordable, it has some good future growth potential.
“It has a lot of manufacturing. Tic Tac and Nutella-maker Ferrero have factories there. That’s helping the local economy. Wilfred Laurier University also has a campus there. If you look around Toronto, it’s the only city that hasn’t appreciated as much. It’s long overdue for some strong home price growth,” said Matthews.
With Brantford’s economy pretty well diversified, it has the potential to weather an economic slowdown and be the diamond in the rough for real estate in Southern Ontario.
Hamilton has seen a bit of a renaissance, shedding its image as Steeltown. The downtown core used to be rundown and gritty, but younger families are now renovating homes and transforming it for the better.
“We have seen exceptional growth in Hamilton and surrounding markets over the last five years. This is due to several factors: the two main reasons for my clients moving to Hamilton are affordability and access to public transit that Hamilton didn’t have a decade ago. This trend should continue as lending rules continue to tighten buyers’ budgets. When people are forced to decide between moving their young family into a condo in Toronto or into a detached house in Hamilton with a back yard, many are choosing the spacious property in Hamilton. It’s a lifestyle choice,” said Matthews.
With plans for the GO Train to expand to Hamilton, look for property values to continue to rise in the coming years.
London remains an extremely affordable place to live, despite a rise in home values in recent years. Those values are likely to continue their climb due to investment in infrastructure and roads, as well as the addition of BRT (Bus Rapid Transit) and bike lanes throughout the city. These improvements will decrease traffic congestion and make the city more appealing.
“London is not only an amazing place to invest for student rentals around the various schools, it’s also a great place for single families with great culture in the sub-communities like Lambeth,” said Candace Keeling, sales representative with Keller Williams.
With the high-speed rail possibilities direct to Toronto, Keeling believes that the time to buy is now, as prices in London are unlikely to go down once the train is implemented.
Your Fixer-Upper Neighbourhood Might Be the Next Cliffside
It may be hard to believe, but many pricey Toronto neighbourhoods of today were once quite affordable, or even down market. The Junction is a perfect example. It used to be an industrial neighbourhood, but over the years it has been transformed into one of Toronto’s most sought-after areas. Likewise, Regent Park has been renewed from its once sad state. The same can be said for Leslieville and Liberty Village. These neighbourhoods have reinvented themselves in recent years and their real estate prices reflect it.
My own community of Cliffside, Toronto is night and day compared to what it was 6 years ago. I hope this positive trend continues for the years to come.