Don’t believe the headlines—investing in Toronto’s real estate market is not a perilous venture. On the contrary, it’s a market ripe with opportunity.
Canada’s moratorium on immigration is largely to blame for housing demand contracting seemingly overnight, but, rest assured, the floodgates will when a COVID-19 vaccine is created and scaled. In fact, not only will pent up demand from immigrants suffuse Toronto’s real estate market, international students will return to the city as well.
Scott McLellan, senior vice president of Plaza Corp., remembers a similarly calamitous event quashing condo demand in Toronto, only for it to return with a vengeance.
“As soon as there’s a vaccine to control this, the pent up demand that will be released is similar to what we saw coming out of the ’08 recession, with the condo market exploding in ’09,” McLellan told CREW. “People are making buying decisions now because money is so cheap; interest and mortgage rates are at historical lows and I don’t know how much longer they will stay like that. People are getting a lot more home for a lot less money.”
In the interim, the costs of building materials and labour, among other things, have commensurately plummeted with housing demand, effectively presenting savvy investors with an opportunity to buy futures. According to McLellan, preconstruction condominiums are essentially selling at discounted price points, considering that, once demand returns, there’s nowhere to go but up.
“Once mills and production lines open up again, there will be demand to service,” he said. “Any time there’s demand with residential condos in the downtown core, the demand on labour escalates, as do prices. Supply and demand has a ripple effect throughout the whole building industry.”
Buying futures in the preconstruction market isn’t the only way investors can capitalize on the market’s nadir. Overleveraged owner-landlords have been competing with each other to offload their units because they can’t carry them without rental income, and therein lies an opportunity for investors looking to scoop up units on the resale market for what are tantamount to discounted prices.
“There’s so much inventory in the rental segment—the last time I checked, it was well over 4,000 listings available in Toronto alone,” said Christopher Alexander, executive vice president and regional director of REMAX Integra’s Ontario-Atlantic region.
“If you can’t carry your unit without a tenant, you’re in for some challenging times, but there’s still a market for them and people are still buying them. Real estate is always a long-term play for investment and very rarely do you make a good return in a short amount of time, so you really have to take the long view in any kind of market because that’s when you see the greatest return. If I were an investor wanting to buy, now is a great time because there’s a lot of inventory and builders in preconstruction are willing to negotiate.”
