MAXIM BAGINSKIY
REAL ESTATE BROKER / INVESTMENT ADVISOR
“PLATINUM“ PRE-CONSTRUCTION BROKER
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MAXIM BAGINSKIY - REAL ESTATE BROKER / INVESTMENT ADVISOR
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New projects are needed to enter with extreme caution, and only if the project is in a super location and the developer provides substantial discounts. Such projects exist but there are few of them. It’s necessary to examine the contract carefully and try to fix in some points of the contract the maximum price that the developer will be able to take form you on the closing.

The situation is rather favorable for the investors. I don’t mean those who rely on speculative selling on completion, it is now no longer relevant. It’s all good for those who consider variants of purchasing an apartment in order to obtain rental income from. The market is still quite a lot of apartments that bring more than 10% per annum on the money invested only from the rent. Besides that the segment of rise in prices will be added in future. Given that the rental rates will undoubtedly continue to grow, that is a fairly long-term investment. I would advise the following scenario: buying an apartment, renting, waiting when prices grow up, refinancing with the aim of completely take the invested money, sale in a few years. The whole cycle takes from 5 to 10 years, depending on the market situation. In this case you have a guaranteed rental income and can always bide your time and sell the apartment at the peak and for the maximum price.

Also not bad variants appear for the investors in new projects with the aim of purchasing in the construction phase with further leasing. But, as I have written above, you should be very careful in selecting an object and not a lot of these projects. Some of them have seen a rental yield of more than 15% per annum.

The only thing that can worsen a little the investment situation is rising of mortgage rates, but in my opinion this should not be afraid, as rents continue to rise too, in this I have no doubt.

Unequivocally positive is the fact that on this market as it is now, there is a possibility of buying really liquid object, with no hurrying and getting the best possible discount, that would bring a steady income many long years. Saying "Prepare sleighs in summer" like never suits to the current situation on the Toronto condo apartments market.

In the next issue of the journal I will focus on market analysis of detached houses and townhouses in the remote areas of GTA.

If you have any questions or you need help in buying or selling real estate, call and I will gladly help you.

MAXIM BAGINSKIY

Real Estate Broker.

 

Published in Money World & Success. February, 2014.

TORONTO CONDO MARKET ANALYSIS

In this article I would like to pay attention to market analysis of condo apartments in Toronto. This market is significantly differs from the market of detached houses and townhouses and currently plays by its own rules. So what happens to this market segment?

At first I would like to note that according to statistics over 25% of condo apartments located in Toronto are investment apartments. The growth rates of construction have been quite high last years. Until a few years ago almost all new projects sold out very quickly that pushed developers to lay more and more new projects. Considering that the dates of the construction of multistory condo are 4-5 years, now we have seen the release of a large number of apartments to the market. As a result, the market has dozens of completed condo projects that still have unsold apartments. To this we can add those apartments that were purchased for resale after construction and entered the resale market. This does not apply to all investment apartments, since most still intended to lease, but it is still a significant amount. All this, plus differed demand, as many put off purchases waiting for the fall in prices, has led to the fact that a surplus of apartments appeared in the market and it has moved from a seller's market to a buyer's market . Sellers like resellers and developers that start new projects are ready to go to substantial discounts in order to sell their objects. Accordingly prices for condo apartments last 2 years, almost standing still becoming more expensive only by the inflation percent.

What awaits condo apartment market in the near future?

Developers have their fingers on the pulse and don’t hurry to start new projects, having unsold units from the previous. That’s why we are now seeing a dramatic reduction of new projects in the market. It is not noticeable to the buyers, because a long process of preparation of appropriate permits for the construction, design and etc. passes before the new projects are released. However, this will significantly affect the apartment market in a few years. Besides, one should pay attention to the fact that this year the development charges were significantly raised for the developers, and naturally will be passed by the developer on the shoulders of buyers, and the full price of apartments in new projects will be more expensive. And it is usually the so-called hidden fee, which is not in the price of the apartment, but it surprises very unpleasantly on the closing.

Let's summarize the above. 1) A large number of vacant apartments in the market 2) Prices are practically on the spot 3) Many buyers have temporarily postponed the purchase. 4) Significantly decreased the number of new projects. 5) Rental rates are growing rapidly.

Having these initial data, and considering that the Canadian economy will not bring us any shocks in the next few years the accumulated inventory will be sold out. That is how quickly this will happen depends on many factors, such as interest rates on loans, unemployment and wages, etc. I think that in the near future the prices will remain the same. In the most liquid projects we will see insignificant rise in price, but in less popular prices will fall. 

In some time we will come to a situation where the built projects bought up, but there will be a lack of new, beside that they will be more expensive as the prime cost rises. That's when we will see a new, and quite a significant increase in prices. I would like to note that the opinion of analysts is rather different in how much time it will take for the market to digest already available inventory of condo apartments. My opinion is that the forecast of 2-3 years the most realistic.

What can be advised to those who are going to buy a condo apartment for themselves or for investment? Well, firstly if you want to buy an apartment in a demand project, you’d better hardly count on falling prices. If you buy now, pay attention to reassignment and secondary market. The market of reassignment has now many good proposals, because many during the boom bought several apartments, and in connection with the tightening of mortgage rules, after completion closing several deals has become problematic.