“Every financial market you can think of is in an uproar right now, but not Toronto real estate.”
-Rob Carrick Personal Finance Columnist, Published March 11, 2020
Stocks have fallen from the last week of February and now through March in Canada as well as globally. This is due to fears that the coronavirus will negatively affect corporate profits. Interest rates are plunging now because of the probability that the economy will face a recession.
Now as we look to the GTA real estate market we see no signs of slowing down at all. Interestingly the impact of this global pandemic on the GTA real estate market was minimal, our banks have continued to lend to home and condo buyers.
Even while sales may have slowed down for a brief period of time, prices in the Toronto real estate market remained staunch to its core. The areas of the market that were most impacted so far were the high-end prices and of course freehold, but commercial real estate may take the biggest hit with people not going to public places.
The GTA real estate market is unlikely to be greatly affected by either what’s going on in financial markets or the coronavirus.
If the coronavirus can be under control soon and the national and global economy rebounds from its effects, the GTA home and condo market will continue to soar and buyers will continue to make the investment and buy.
Take a look below at some great tips to help guide you in a time of uncertainty so you can feel secure in your real estate investments.
Make an investment with a buy and hold strategy. A buy and hold is a passive investment strategy where an investor buys stocks or commodities and holds them for a long period regardless of fluctuations in the market. Toronto pre-construction condos are great for this type of investment because of a 3-5 year building time, and issues that are happening globally should be well behind us.
Over the next few months, we are coming into a time to “get greedy”. Fear is coming into the real estate market and that affects people’s decision to make an investment. While there is nothing wrong with holding on tight the real wealth gets created by the investors that seize the opportunities available during these times.
Rates are dropping to historical lows right now and prices for real estate remain at an all-time high. This is a perfect time to take equity out to have it ready for great opportunities. Now you should expect financing to take a little longer than it has before so start now.
If you were thinking about investing in a bigger house, any weakness in the high-end market will be ideal to invest in. Let’s say you are in a one million dollar house looking for a two million dollar house, right now the spread is a million dollars. Let’s say the market goes down on average 10%, your one million dollar house would be $900,000 and the new house would be $1.8 it now only costs you $900,000 more. In reality, the more expensive two million dollar house may drop more because buyers at the higher end have incomes that are more variable so the trade-up can cost you less.
Return to the fundamentals and focus on areas with strong growth, high rental demand, and constraints on supply. Just because something is a lot cheaper and more attainable than it once did not mean it will go back up soon if it does not have strong fundamentals behind it.
The bottom line is that over time real estate is and will continue to be a great financial investment.
The price we paid for our first home will be a fraction of what our children will pay one day. Invest for the long-term and look to deals that the fearful and the over-leveraged did not take.
Feel free to reach out to us anytime for a second opinion on your portfolio and what type of strategy will best fit your investment situation.
From one investor to another.