MY REAL ESTATE COVID THEORY

Alright, so, over the last few days I have been taking a look at numbers across the city, calling agents who recently sold property and agents who have bought a property, trying to get a grip on the situation.
The real estate market is coming back in a lot of ways. At the end of the day, good property, priced well, sells.

The real estate market in Riverdale, Leslieville, The Beach, all the way to Pickering is still “hot” (this can also be said about the west end neighbourhood). I can’t say that I am seeing housing prices decrease. TD Bank expects an increase in Toronto home prices by 7.8% this year (https://economics.td.com/ca-housing-update). I can absolutely see this in the freehold market, but not sure I am a believer that the condo market will see an increase of 7%+.

Condo’s are sitting on the market for a lot longer, than in previous spring markets, and appear to be taking a bit of a “haircut” on their final selling price. ***more caveats…good stuff goes quick***. This rule applies to both markets (condo and freehold). If you own property in a small, boutique-style building, where transactions are infrequent, and the product is more unique than a general downtown high-rise… you will have people lining up to take a stab at buying!

HOT THEORY
Syndicates (small group of investors), who own a large number of condo’s downtown are going to bleed out. They have been reaping the rewards for the last number of years by running majorly successful AirBnB’s. Now though, they are in trouble; tourism is obviously way down, and their condo’s sit vacant (2400+ one bedrooms/studios are for lease in the downtown core). Some of these syndicates have elected to leave their units empty, until this pandemic blows over, instead of accepting a one-year tenant. The reason behind this is simple…they don’t want to commit to a one-year tenant because A) the rental income won’t cover their costs. AKA cash flow negative and B) If they accept a tenant, they can only increase their rent by roughly 1.8% per year (CPI). They would rather wait until tourism and events come back to the city, to try to get back to “the glory days” of short-term rentals.

These investors will soon become over-leveraged and have to sell off pieces of their portfolio….a slow bleed. Which of course lends itself to major opportunity…As the President of The United States always
says, “never waste a good crisis”.

Predictions…I’m not going to give any…this pandemic is crazy. The financial markets showed some optimism, and the early stages of a vaccine looked promising, so who’s to say that this will go on for long
enough to really put a dent into the Toronto housing market? What I can say is this…the price point is the largest variable. If you’re thinking about getting into the market, as a first-timer, or investor, I don’t see a reason why not to go in now. The reason being is that the entry-level price point across the city will always be packed with buyers.

harrisbundy