Condo market slows down in GTA?

[maryamhassani]

I am a newbie to this forum, so my question may seem unprofessional. I am thinking of buying a 2-bedroom condo around 750k in downtown Toronto, but a close friend of mine recommended that I wait for another 6-7 months, as the market will be slowing down, thus the condo prices. He said construction has slowed down recently in GTA, and that would impact the prices, how do you think?

 

[Eug]

I am a newbie to this forum, so my question may seem unprofessional. I am thinking of buying a 2-bedroom condo around 750k in downtown Toronto, but a close friend of mine recommended that I wait for another 6-7 months, as the market will be slowing down, thus the condo prices. He said construction has slowed down recently in GTA, and that would impact the prices, how do you think?

He might be right, or he might be wrong. We're all just guessing.

 

[agoraflaneur]

a close friend of mine recommended that I wait for another 6-7 months, as the market will be slowing down, thus the condo prices. He said construction has slowed down recently in GTA, and that would impact the prices, how do you think?

Well your friend gives contradictory advice. If building slows, prices tend to rise if demand stays the same.

Happily for you, construction should stay near record levels in the next few years (Urbanation is reporting 9000 units for this quarter will be launched). This could mean falling prices if demand stays the same or subsides. Though the developers can react by canceling or shelving/delaying projects as they did during the financial crisis.

We are all guessing, but my view is of a relatively flat market in terms of prices and increasingly too much demand during the next 2-3 years. Prices will continue to rise for a while, then pull back slightly over the next few years is my guess. There won't be a fall unless inflation increases a lot and interest rates rise quickly, which I don't see in Canada, or if there is another recession - which there will be inevitably this being capitalism, but likely not for at least a few more years given the recovery cycle.

So, buy away, unless you want to wait a few years, is my advice.

My prognosis: buy now if you want to, but look for a presale or a deal if you don't want to take the risk. You should have choice for that price.

 

[agoraflaneur]

a close friend of mine recommended that I wait for another 6-7 months, as the market will be slowing down, thus the condo prices. He said construction has slowed down recently in GTA, and that would impact the prices, how do you think?

Well your friend gives contradictory advice. If building slows, prices tend to rise if demand stays the same.

Happily for you, construction should stay near record levels in the next few years (Urbanation is reporting 9000 units for this quarter will be launched). This could mean falling prices if demand stays the same or subsides. Though the developers can react by canceling or shelving/delaying projects as they did during the financial crisis.

We are all guessing, but my view is of a relatively flat market in terms of prices and increasingly too much demand during the next 2-3 years. Prices will continue to rise for a while, then pull back slightly over the next few years is my guess. There won't be a fall unless inflation increases a lot and interest rates rise quickly, which I don't see in Canada, or if there is another recession - which there will be inevitably this being capitalism, but likely not for at least a few more years given the recovery cycle.

So, buy away, unless you want to wait a few years, is my advice.

My prognosis: buy now if you want to, but look for a presale or a deal if you don't want to take the risk. You should have choice for that price.

 

[daveto]

I am a newbie to this forum, so my question may seem unprofessional. I am thinking of buying a 2-bedroom condo around 750k in downtown Toronto, but a close friend of mine recommended that I wait for another 6-7 months, as the market will be slowing down, thus the condo prices. He said construction has slowed down recently in GTA, and that would impact the prices, how do you think?

It depends your financial situation.

My advice?

1. Make sure you can handle your mortgage at a 6% renewal rate in 5 years.
2. Make sure you're emotionally and financially comfortable with a 10-20% price decrease over the next 5 years. Even if you think it is unlikely, even if it is only a 5% possibility.
3. Make sure you're confident that you want to hold your property for 5 yrs or longer, as the transaction costs are heavy.

Finally, while I personally think that you'll be better off waiting 6-7 months, I would note that real estate is a very slow moving market.

 

[Flux Capacitor]

"a close friend of mine recommended that I wait for another 6-7 months"

this is the same advice i received when i was in the market fro my first condo back in 2001. Those who made those recommendations are STILL renting. Best to go with your gut.

 

[daveto]

Agreed.

Any investment advice which has ever been wrong is therefore, logically, likely to be wrong in the future.

Except for investing with your gut.

This is EXCELLENT advice. One should never allow reason or sound financial planning to interfere with a purchase of nearly a million dollars!

 

[BobBob]

Damn, there it goes! Another sarcasm detector fried.

 

[cdr108]

this is the same advice i received when i was in the market fro my first condo back in 2001. Those who made those recommendations are STILL renting. Best to go with your gut.

it really still surprises me that a majority of the population hasn't looked at the circumstances that resulted in the great increase in valuations since 1996 ...

loosening of CMHC insurance standards (ie. lower minimum down payments, longer amortizations, broadening of eligible mortgages, etc);
dramatic decrease in interest rates from high-10's% to as low as 0.25% ( BoC emergency measures ) and 3.5% ( for 5-year fixed term );
QE1, QE2, and various other variables.

most of the above, if not all, will be reversing or winding down ... what do you think will happen then ???
and no, we don't need interest rates to go back up to the high-10's% to kill the R/E bubble.

every full 1.0% (100 basis point) rise will result in 8-10% higher mortgage payments or lower property valuations if monthly payments are going to be kept relatively the same.

 

[redfirm]

this is the same advice i received when i was in the market fro my first condo back in 2001. Those who made those recommendations are STILL renting. Best to go with your gut.

I'm not a renter. I own my house and some rental properties. I purchased them in late 90s and early 2000s. I am conservative, risk averse person. I did my calculations at the time and it made sense.
Fast forward to April 2011. Fundametals are way out of whack. In general, I'd not buy any r/e in TO today. Definitelly not stand in the line at random Mattamy, Concord or (insert builder name) site and
just buy because everything will move another 5-10% a year from now until eternity. Sure, there are some hidden gems, one of type houses, etc. - but these would require in depth knowledge and
research.

This in-depth knowledge and analysis is what separates real smart r/e purchasers from the rest. Just because you borrowed 5 years ago, and your place went up 50% at the time when everything else
went up 50% doesn't make you smart investor. The same thing happened with all the financial guys and hedge fund managers at Wall St. Everything was moving up so they all looked like geniuses. But
then ... Warren Buffet commented on that ... you know, you see whose swimming naked when the tide ...

In conclusion: do not go with your gut feeling - be smart, try to talk to people you know who did well in the long run, see what they say about your specific situation. Include significant interest rate increase
in any calculation!

 

[CN Tower]

"a close friend of mine recommended that I wait for another 6-7 months"

this is the same advice i received when i was in the market fro my first condo back in 2001. Those who made those recommendations are STILL renting. Best to go with your gut.

What's wrong with renting?

Maybe the people who gave you advice in 2001 bought shares in Apple on margin with 80%-90% leverage and made 1000% return? Who the f**k knows?

At the very least your renter friends are probably saving $1000/month in comparable ownership costs. That's $10k+ per year x 10 years. Maybe they've saved up $100,000 by now while you are slaving away with a big mortgage payment, property taxes, maintenance etc.

Comments like yours instinctually bother me. I find them ignorant and judgmental of other people's personal choices.

There are many paths to financial wealth.

 

[Flux Capacitor]

well its been OVER a year, and was your friend right?

 

[kEiThZ]

well its been OVER a year, and was your friend right?

And if you're wrong in a year, what would you say then?

The Finance Minister himself is expressing concern that Toronto's condo market is overbuilt.

 

[rbt]

And if you're wrong in a year, what would you say then?

Specific timing was included in the OP. It was recommended that this person wait (in a rental presumably) for 6 or 7 months before buying so they would have been purchasing in Fall 2011.

Fall 2011 was not a better time to buy than Spring 2011.

 

[WanderLust]

If you want to spend 750k on a 2bdrm condo in downtown Toronto, then I'd have to ask why bother buying a condo if you can easily get a 2bdrm freehold townhouse for the same price ? Shift a few blocks outside of 'downtown' Toronto and you can buy semi or detached properties with more than 2 bedrooms for the same price. 750k for a 2bdrm condo, you think it's going to appreciate in value for you to realize any sort of capital gain in the future ? Probably not. Houses would retain their value more than a condo would in any downtown, and appreciate more, too, in any recovery. Remember, condos are becoming a dime a dozen, houses are becoming a rarity in the city.