We have all heard the headlines that we are currently in a real estate bubble but we have been reading these headlines for over 20 years. There are skeptics that like to embrace these headlines but there are also investors in those 20 years that have counted their blessings, that they invested.
Toronto continues to evolve and is recognized as a world-class city, joining the ranks of New York, San Francisco, and London. It may appear to be too good to be true but all the economic indicates indicated that the Toronto real estate market is destined to continue to appreciate. With the record, low-interest rates, and a projected immigration population growth of 1.2 million immigrants coming into Canada demand for real estate will remain high.
So if you are still wondering if investing in the Toronto real estate market is still worth it? The answer is yes and Sylvia Smith is here to tell you why and how to go about investing.
why should I invest in the Toronto real estate market?
Investing in Toronto real estate can be very lucrative when done wisely. At the end of 2015, the average price of a condo was $390,896 and as of October 2021, the average price of a condo in Toronto was 739,647 – that is a 52% increase in 6 years. Plus if you purchased the condo as an investment your tenants would have paid down your mortgage hence increasing your equity. These high equity gains are why Toronto real estate is one of the best places in Canada to invest in real estate.
These are based on average prices when investors follow a proven condo investment strategy they will make better and faster equity returns.
Stable and increasing demand for rentals
The increasing population and increasing demand for rentals in Toronto keep the rental market stable and place upward pressure on rents. Covid impacted that rental market in Toronto but that was only temporary and we are already experiencing increased demand for rentals in Toronto. With students returning to the classroom and immigration expected record levels we anticipate that demand for rentals will continue to increase.
Plus Toronto has very robust qualified tenants. With the growing tech sector, Toronto is attracting high-profile technology companies such as Google, Uber, Microsoft. These companies have all made a decision to set up operations in Toronto. These organizations pay well and as a result demand for rentals will continue to increase. In Toronto, the average rent for a one-bedroom condo is currently about $2,225 a month and we are starting to experience bidding wars for rentals once again.
Canad's strict lending practices that protect you
The Stress Test introduced in 2018 serves to protect buyers from going into default. When lenders approve a mortgage they approve at a higher mortgage rate to ensure that should interest rates increase the borrower will still be able to pay the mortgage.
Believe it or not, Canada has one of the lowest mortgage default rates. Canadians may be carrying high mortgaged but even during Covid default continued to drop. Canadians are very committed to making sure they make those mortgage payments.
Is investing in real estate better than investing in the stock market?
If you can afford to buy real estate the answer is a definite yes. The Toronto real estate market has had steady growth and has proven to be way more stable than the stock market. I am a strong believer that the real estate market is actually a great hedge against economic slowdown as long as you have stable tenants and the rent covers the expenses.
The beauty of investing in real estate is that if you own your home you can use the equity to borrow for the down payment – hence in essence place $0 of your own hard-earned money to purchase an investment property plus you own a tangible asset. Hence the return on your real estate property will always outperform the stock market. Here is an example of potential returns.
If you buy $60,000 in the stock market and the market goes up 10%, you will make $6,000.
However, if you placed the $60,000 on a property that is worth $500,000 and the market goes up 10%, you will make $50,000.
Investing in real estate is a low-risk, high-return investment. As your gain is made on the full value of the property plus if you own a home you can leverage the equity in your home to borrow your down payment hence making your money grow even more – this is frequently referred to as $0 down to purchase an investment property.
are condos a good investment in Toronto?
When investing in real estate in Toronto, the condo market is the best type of property to purchase. Toronto condos have gone up on average 13% per year since 2015. But of course, different areas of Toronto perform better than others. So understanding the Toronto market to maximize returns on your investment will be critical. The other benefit of buying a condo is that there is way less property management involved compared to a house.
So will Toronto continue to be a great place to invest in a condo? Yes absolutely but don’t hold off as ‘the best time to buy real estate is yesterday’ because the longer you wait to buy the less return you will make.
My response to this question is may surprise you. It all depends on where what and the price you pay. My personal opinion is if you have the down payment and you can get financing today you are better off purchasing an existing condo. Yes, that is correct even at “Platinum Pricing and Incentives”. Builders are pricing new construction for future price appreciation –but of course, they are conservative so you will still see price appreciation in the 4 – 5 years it will take to build the condo. However, buying an existing condo unit will most likely be cheaper than buying a pre-construction condo. In the 4 – 5 years that the condo is being built you will be collecting rent and your tenant will be paying down your mortgage and of course the condo will appreciate in value.
Don’t get me wrong-a pre-construction condo can also be a great investment depending on your specific situation. If you decide to purchase a pre-construction condo make sure you are working with an agent like Sylvia Smith who has platinum access to projects across the city. This gives you access to the best floor plans, incentives, and lowest pricing available. When Toronto condo buildings launch sales the best units are released during the Plantinum phases by seasoned realtors and their clients. The best prices and inventory never hits the open market and the general public.
Investing in real estate is best done when working with a real estate agent who is also an investor. Sylvia Smith became a real estate agent because of the amount of money she made from her investment properties and she realized she had a passion for helping others achieve the same success by investing in real estate.
If you want to find a house or condo in the Greater Toronto Area and surrounding communities to invest in you need to partner with a real estate agent who is a seasoned investor and can guide and show you the ropes.
Sylvia Smith offers you the services of the best real estate agents in Toronto who know the city inside and out and has first-hand investment expertise. Reach out to Sylvia today!