While a slowdown in home sales and dip in property prices continue to make headlines, according to one of the country’s biggest banks, a slowing market isn’t all bad news.
"Cheaper home prices could bring winners as well as losers across the economy," said Avery Shenfeld, CIBC World Markets economist.
So how can investors wind up on that winning side? Investor and real estate agent Steve Arruda shares his insight on how a slow market is a “win-win” scenario for savvy investors.
Cheaper Property. Home prices across the country have continued to drop, which is great for investors using their own capital to finance purchases. Not so great for first-time homebuyers who rely on conventional financing, and can be spooked by a turn in the market.
“I find that in the media when they announce the market is softening, a lot of times, buyers will take that as a time to wait, which makes no sense to me,” says Arruda. “I find that when my clients hear about the market being up, they feel that that is the time to buy - they interpret that as it being a strong and healthy market. That’s what separates the buyers from the investors.”
Stronger Rental Market. The media racket about the market correction has encouraged many would-be buyers to rent a bit longer.“I find that buyers who are waiting until the market softens are going into the rental side of things,” says Arruda, who himself has seen a peak in demand when it comes to his own rental properties. “I’ll have as many as 20 people show up to see one viewing, and then I’m having bidding wars on my rental, which is unheard of. There’s definitely been a massive shift from buying to renting, and it’s causing a very heated rental market as a result.”
A Buyer’s market. Major urban markets such as Vancouver and Montreal have already seen the shift in paradigm, and investors such Arruda are currently enjoying a buyer’s market in Toronto now, too.
“I’ve been in bidding wars as recently as last week, and the winning bid was well below the asking price, which is really uncommon. We’re definitely more towards a buyer’s market then a seller’s market; I think sellers are getting a bit nervous and are accepting lower offers, so the people that are actually buying right now are getting great deals.”
Low Rates. As Canada continues to enjoy historically-low rates, so too can investors. When you combine this with the shortage of buyers that are actively looking for real estate, according to Arruda, it creates a “win-win” situation for investors.
“Investors are the ones that capitalize on the slow market,” he says. “The smart ones are definitely buying right now.”
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