Transit services have become an important part of the real estate market – especially Toronto’s – dictating growth trends and establishing real estate price levels across the country. With recent developments in transit, we look into studies conducted by PWC, REIN Canada and others to see how transit will play its part in the future development of Toronto’s real estate market.
In recent years, we are seeing a shift in the perception of public transit and transportation in general. According to a recent study by PWC, there is a growing trend of urbanization within major metropolitan areas across Canada. The fact is, more people want to live closer to work and avoid expensive costs such as owning a car or paying for insurance, often opting for transit services instead.
The downtown core is expected to grow by 83% – from 71,000 to 130,000 – by 2031, in addition to a growth of 28% in employment within the same period. We see this growth with the development of condominiums on the waterfront and the rapid acceleration of projects within the packed downtown core. A recent TTC study has indicated that demand for transit into the downtown core will increase by 55% from 155,000 to 236,000 during morning peak hours, providing further evidence of urbanization.
Transportation Accessibility & the Effects on Price
What happens, however, when you make a specific region highly desirable by concentrating everything from jobs to real estate? Affordability goes down drastically. As Toronto’s busy downtown core becomes saturated with housing projects – on prime real estate no less – Torontonians must look outside the box to find more affordable options.
Accessibility becomes a driving factor for real estate prices. The closer a property is to transit or commuter highways, the higher the price. According to a recent report by REIN Canada, values of homes in various North American neighbourhoods with access to mass transit had premiums ranging between 3% and 40%, depending on the type of housing.
Hear what REIN Founding Partner Don R. Campbell had to say about the effects of transportation on real estate properties: (Watch the full interview HERE)
The TTC: Reshaping Toronto
With the rapid expansion of the TTC through the new LRT services, we are bound to see a change in real estate prices, especially along the planned lines. This is just the tip of the iceberg.
The development of the TTC routes will see a rapid growth in various developments, especially housing projects. This will be fuelled by two major factors:
- Commute Time – Current average commute time is approximately 80 minutes
- Rapid saturation of downtown Toronto
Many first time home buyers and investors will choose to invest in real estate in areas that were previously difficult to access, raising both the demand for those areas and their prices accordingly.
In addition, we will see a rapid shift towards the “urbanization” of outer communities as we see the growth and expansion of the transit lines. Communities located along Eglinton Avenue and Finch Avenue are two examples of communities that will see increased property prices and increased demand from business professionals and real estate developers.
Walking the Walk – The Walk Score
Expansion of transit is just one factor within the larger picture. A factor that has become a common piece of evaluation is a properties walk score. The walk score measures the ability to walk from a property to designated amenities, services and resources within a neighbourhood including transportation, schools and shops.
Transportation, especially transit, has become a significant selling point, with many developers giving incentives such as free transit pass subscriptions. However, combine walkability with transportation and you have a golden selling point. To mention that a property is “5 minutes walk from a subway station” is an appealing concept that drives up property values and lets home owners sell or rent at a premium. Not only that, being close to a subway means that the surrounding neighbourhood is likely to evolve over time, similar to what we see at Yonge & Eglinton with the rapid growth of new businesses, condominium projects and the under-construction Eglinton LRT line.
Transit development isn’t always a good thing. The LRT is a surface level means of transport (for the majority of the current plans) which will bring other problems with it including noise pollution, congestion, increase in traffic and in certain areas, an affect on the crime rate. For areas where the LRT service will be underground, in the case of the Eglinton LRT, residents who didn’t before experience the transit service underground will likely do so. With that said, the effect noticed through transit expansions will depend primarily on the median income of the neighbourhood that the expansion goes through.
As identified by the REIN study, two communities in Atlanta felt differently about a transit expansion. The community south of the tracks had a lower median income and valued the transit services above any negative effects. As a result, housing prices increased. Vice versa, the community on the north side had a higher median income and didn’t quite rely on transit services. The value derived did not outweigh the negative effects, and as a result, housing prices dropped.
End of the day, the value of a property is dictated by many different factors but transportation – especially transit – is high up on that list. As Toronto’s population continues to grow at a rate of 100,000 people a year, the need for sustainable and effective transportation is becoming a must. As the city grows, so do the transportation routes, creating demand for real estate across the city and as a result, raising prices. By doing your due diligence, you can evaluate the best investments based on emerging trends and make a sound investment decision.