Ricky Chadha – Globe and Mail

Ques­tion: I heard one of the bank econ­o­mists online say­ing that there was only a four or five-month sup­ply of new con­dos on the mar­ket in Toronto, but that buy­ers should wait a lit­tle longer to see if prices come down any fur­ther. It seems to me that prices are bound to bot­tom out soon. Do you think I should wait?

Answer: There has been on and off spec­u­la­tion for some time that the hot Toronto condo mar­ket is bound for a slow­down. But reports on the future of the real estate mar­ket always dif­fer. On one hand, you have some media report­ing doom-and-gloom sce­nar­ios while oth­ers remain opti­mistic about future growth in the condo sector.

Com­ment: Media write doom-and-gloom, cit­ing econ­o­mists from other coun­tries and pun­dits with 10 years worth of wrong answers. Or, real­tors and indus­try groups – who know bet­ter – with oppos­ing opin­ions. Who has been right year after year? Oh yeah, us, the realtors.

Mar­kets do fluc­tu­ate and nobody knows when peaks or val­leys will begin or end. The one thing that’s cer­tain is that the Toronto mar­ket has con­tin­u­ously taken hits and bounced back over time.

Com­ment: What hits? The burst­ing bub­ble of the 1990s, but that is it. Out­side of that one event, there has never been a year where prices dropped.

But if you are in the mar­ket for a new condo, you have to ask your­self a sim­ple ques­tion: “Why exactly am I buying?”

Whether you’re look­ing to buy a place you plan on liv­ing in for a num­ber of years, or to rent out as an invest­ment prop­erty, the mar­ket will likely fluc­tu­ate up and down through­out the time you own it. You can’t con­trol that, and there are no guar­an­tees, but over time you should real­ize value.

Com­ment: Exactly. Year to year is moot, but I can guar­an­tee you that your condo will be worth more in 5 or 10 years than it is worth today. Cars will also cost more, as well as milk.

Sure, the mar­ket may bot­tom out in a month or six. You will still have likely gained some equity, and you can expect to see sig­nif­i­cant growth in the long term based on past trends.

Com­ment: Bot­tom out? It has not even peaked and has not begun to go down? How the hell can it bot­tom out?

Look at all the major finan­cial mar­ket indices. The Dow Jones and S&P 500 have taken major hits in bad mar­kets, yet peo­ple who held their posi­tions are bet­ter off than they were before mar­kets crashed, cor­rected, declined or what­ever you want to call it. But that under­lines there are many options for where you put your money – real estate, the mar­kets, pre­cious met­als, under your bed…

It all boils down to oppor­tu­nity cost – the cost of NOT mak­ing the invest­ment in real estate or another asset. That is some­thing I can­not answer for you; your choice as to the best place to put your money for growth requires some soul-searching on your part. It’s not sur­pris­ing that I would encour­age invest­ment in real estate, but I find an asset you or a ten­ant can live in beats one that’s on paper. Every­one needs a roof!

Let’s get down to brass tacks and look at some num­bers relat­ing to the Toronto market.

In Toronto, resale condo units were down 16.9% in the first quar­ter of 2013 ver­sus the same period last year. Prices were rel­a­tively flat year-over-year (0.5% decrease), with the aver­age condo price hov­er­ing around the $333,000 mark in Q1 2013 (Source: TREB Condo Mar­ket Report Q1 2013).

New con­do­minium com­ple­tions were in a steady decline for the major­ity of 2012. How­ever, in 2013 they’ve resumed an upward tra­jec­tory. Cana­dian Hous­ing and Mort­gage Cor­po­ra­tion (CMHC) is esti­mat­ing approx­i­mately 17,000 new condo units in 2013, com­pared with 11,000 last year. That’s a lot of con­dos com­ing on stream, but many are des­tined to be bought by investors and enter the rental mar­ket where, accord­ing to a report this week by Toronto-based condo research firm Urba­na­tion, aver­age rents have hit a record $1,856 a month.

Com­ment: The new con­dos com­ing onstream are already bought. Con­dos only get built once they have been paid for. A typ­i­cal build­ing is 90% sold but the time it is com­pleted. So no, those con­dos will not be bought by investors, they have already been bought.

So, active list­ings will likely remain high com­pared to pre­vi­ous years. No one can pre­dict what that will mean for prices, but you will have a broad choice and can expect some com­pe­ti­tion in cost and the abil­ity to negotiate.

Com­ment: Resale condo list­ings have increased a bit, but new con­dos have slowed to near zero. Thus the sup­ply is only on the resale side, thus we are see­ing more sales and higher prices in that seg­ment. No sur­prise there.

Every­thing still boils down to that basic ques­tion: “Why am I buying?”

If you are mov­ing for per­sonal rea­sons such as qual­ity of life improve­ment, you may not want to wait. If you are an investor look­ing to acquire a rental prop­erty, then urgency may not be a fac­tor – there is clearly choice and oppor­tu­nity. That said, wait­ing would also be a delay in your oppor­tu­nity for monthly rental cash flow and a start to build­ing equity with your newly acquired asset.

As always, the mar­ket­place is never the over-riding fac­tor – your choice must be based on what works for your own hous­ing and finan­cial needs.

Com­ment: Wow… so many words that did noth­ing to answer the actual ques­tion. In the future, prices are only likely to rise, as are inter­est rates. It may sound pat, but my answer to the ques­tion of when to buy is always “yes­ter­day”. Prices and rates were either the same or lower in the past, so the longer you wait, the more it will cost you. No mat­ter why you are buy­ing, wait­ing will never save you money. Never. If you are an investor, buy a resale condo that you can rent out imme­di­ately. New con­dos just take your 25% down and you make noth­ing on it for years as you wait for it to be built. Time is always of the essence.

—————————————————————————————————–
Con­tact the Jef­frey Team for more infor­ma­tion – 416−388−1960

Lau­rin & Natalie Jef­frey are Toronto Real­tors with Cen­tury 21 Regal Realty.
They did not write these arti­cles, they just repro­duce them here for peo­ple
who are inter­ested in Toronto real estate. They do not work for any builders.
—————————————————————————————————–

sync loft newly listed

Related posts:

1. Some see condo prices at bot­tom I think this time next year you will find people…
2. Dis­sect­ing the Condo Bub­ble Instead of run­ning out and sell­ing your condo before it’s…
3. Are condo prices set to fall? The con­do­minium mar­ket in Canada shows “emerg­ing signs of oversupply”…
4. Toronto condo prices may or may not fall In Toronto, condo devel­op­ment has been boom­ing, with 286 projects…
5. Toronto condo prices: best bang for your buck Indeed, the demand for Toronto’s lux­ury con­dos orig­i­nates from a…