As reported by Urbanization, 25,000 condo units are expected to hit the Toronto real estate market this year. A recent revision sees this number down nearly 6,600 units from the previously reported 32,000 units. Although this number beats the previous high of 22,473 units completed in 2020, 25,406 units are still insufficient to meet the annual home demand.
In a time when interest rates seem to be at an all-time high – which isn’t the case – investors who have been on the sidelines are intimidated by this infusion of condos. Increasing mortgage borrowing costs are causing a drop in sales and home prices in the city, and many wonder what this means for investors. Now is the best time to invest because we are in a buyer’s market.
Depending on your investment goals, now is a good time to buy pre-construction, assignment, or resale condos. As sales are low, the price of homes is also low, giving investors an opportunity to buy now. One of the most successful investors of our time, Warren Buffet, once said that it is wise to be fearful when others are greedy and greedy when others are fearful.
As Ford plans to build 150,000 homes per year in Ontario over the next decade, 25,400 units seem like a good start. Nevertheless, the province is still making up for the low numbers incurred during the pandemic period, when 13,885 were recorded in 2021. Although not enough homes are being built to meet the goal of 1.5 million, we can expect the market to pick up as immigrants and demand rise.
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The Bank of Canada has increased interest rates to 4.5%, likely in an attempt to quell inflation and stabilize the market. Despite this, demand for housing is projected to grow over the next decade. Nevertheless, Canadians are struggling to obtain mortgages with five-year interest rates close to 5%. This should not, however, prevent investors from entering the market. Keeping in mind that investing in pre-construction condos should be a long-term affair rather than short-term thinking, one might think that current interest rates are at all-time highs when looking back over the past five years.
The highest interest rates in Canada were seen in the ‘80s when the rates reached a historic 17.93%. If you examine interest rates over the last 30 years, you will find that they averaged 5.78% from 1990 until 2023.
Furthermore, investors should know that the Bank of Canada aims to lower interest rates and inflation. Inflation is expected to fall in mid-2023 and reach its target of 2% in 2024 due to declining energy prices and improved global supply. This will result in a further drop in home prices, but it won’t last forever.
Currently, it is an investor/buyer’s market, and this opportunity will only last eight to twelve months, and the worst is over. The interest rate increase has scared the market, and we can expect maybe another increase in March – now is a great time to invest,” says Brigitte Obregon, Founder, and Broker at GTA-Homes – Re/Max Ultimate Realty Inc.
The property market is showing a shift with rising mortgage rates and falling house prices. This has led to an increase in assignment sales, as buyers and investors find it hard to secure financing or are seeing their investment’s value dip. Fortunately, for prospective purchasers, these conditions are providing a great opportunity to purchase pre-construction, assignments, and resale condos at relatively low cost. Furthermore, developers of pre-construction units have also become more generous with incentives compared to February 2022 when the market favored sellers.
Understanding the pressing need for housing in Ontario is critical, as it falls 1.2 million homes short of the G7 average and must construct 1.5 million new residences in the upcoming decade. This results in a predicted surge in demand, particularly around Toronto, in ten years’ time. Despite 25,406 new condos being erected, this figure is not even close to meeting the incoming influx of immigrants to Ontario. Thus, it’s important to invest in real estate now before prices rise again.
Get in touch with one of our agents for more information about investing in the GTA condo market through our website www.pyramineinvestment.com
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