Canada's Condominium Magazine
The mayor of Toronto is taking all the credit for getting a subway for Scarborough, though there are several other high-stakes political players with sticks on that particular ice. The provincial Liberals and the federal Conservatives are both keen to get Toronto’s votes, and bribery is a tried and true method. However, regardless of how said subway is eventually built, one thing we can be sure of: it will affect the value of properties on its route.
It has been decisively shown that homes that are close to public transportation are worth more than similar homes that aren’t. A study* of several major US cities, including Boston, San Francisco, and Chicago, found that even in times of crisis, as in the real estate crisis of 2006–2011, homes close to transit outperformed other homes by an average of 41.6 per cent. When real estate prices fell due to the economic crisis, those homes that were near public transit maintained more of their value than homes in non-transit areas.
The type of transit was important to the stability of property values as well. Where transit service was frequent, property values remained higher, a phenomenon now known as the “transit premium.” This can be shown dramatically in areas like New York’s Upper East Side, where a New York realtor says apartment (condo) values drop “by around 15–20 per cent for every block” you go away from the subway line. This realtor said that eight minutes was the limit for most buyers: more than an eight-minute walk to the subway is considered too far and a “deal breaker” for many a real estate purchaser.
We don’t have such precise numbers for Toronto, but we do know that development follows subways. And we know that many of the most desirable neighbourhoods in Toronto—the Annex, Yorkville, Rosedale, Saint Lawrence Market, Kensington Market, King Street West, Bloor West Village—are all well served by transit. That is not the only factor, but it’s important, especially to first-time home buyers. A survey by BMO last spring found that for 28 per cent of these buyers, being near transit was a top priority, as was having a short commute to work.
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.
How Transit Affects Toronto’s Real Estate Market; The Red Pin
The same value enhancement applies to commercial property. Rents for commercial space within 500 metres of subway or light transit lines tend to be as much as 40 per cent higher than in other areas, and vacancy rates less than half.
Because of this trend toward intensified urbanization, Toronto’s downtown core population is forecast to grow by 83 per cent by the year 2031, according to a Red Pin report for the Real Estate Investment Network. The TTC expects demand for its services to increase by 55 per cent in the dowtown core over the same period. And the development of new TTC routes will see growth in residential construction, fueled by those twin home buyers’ desires: a short commute and a walkable neighbourhood.
It is not only the downtown core, however, where this intensification is taking place. The Rep Pin report notes that urbanization is occurring in the “outer communities” in areas along Eglinton and Finch, communities where property values will also rise as demand increases.
*The study was carried out by the American Public Transportation Association and the National Association of Realtors.