Why 2014 Will Be The Best Year Since 2009 To Buy A Condo In Toronto
In my last article there was that I wrote that seems to have made an impression because a couple people have mentioned it to me.
The line was, “you can buy a condo today in 2014 at 2011 pricing that will not be completed until 2018/2019.” In other words, buyers who are smart will recognize the unique opportunity in the condo market this year.
I’m going on record and saying that 2014 will be the best time to invest in a pre-construction condo in Toronto since the recession in 2009.
Here are 3 key reasons why I believe this.
1. Developer’s finally got the memo – the balance of power has shifted
We are in a buyer’s market right now. This has not been the case since 2008/2009 during the recession. Developers know that they have to work extra hard to get your attention as a buyer and so many are acting accordingly with amazing pricing and incentives that once again has made pre-construction condo investing hot.
In 2012 when the market started to slow down, developers were still living in the realities of the past, trying to force sales of overpriced condos. In early 2013 a few developers started launching new projects are 2011 prices. They performed really well. By late 2013 I would say just about every developer in town figured out that the market was just fine and sales were great – as long as you had great prices to offer your investors!
There are several projects in the pipeline for 2014 that will be priced much lower than resale. I’m hearing about a 2 bedroom coming out soon in one building that will be priced at $299K!
Ultimately I believe it’s about respect: respect for the condo investor and their role in building this great city and making all these condo towers a success for the developer and their stake holders. It’s in developer’s best interest to give the condo investor a strong and compelling reason to tie up their money for 4-5 years – and I’m happy to say that many great developers have got this and are going to rock in 2014 as a result.
2. Fewer Sales ==> Fewer Completions ==> Future Shortages
We need around 40,000 new homes in the GTA every year to keep up with population growth. In 2013 we only sold about 28,000. In 2014 and 2015 I’m projecting we will probably also sell around 28,000-30,000.
The current crop of new condos from the boom of 2010-2012 will all be completed over the next 3 years. Based on the low number of sales in 2012 onwards, we will be facing a shortage of new condos in Toronto in 2017.
Which makes 2014 a perfect time to buy a pre-construction condo. Condos bought this year will complete in 2017-2019 – after the current construction boom is over and demand for rentals and resales will once again outstrip supply.
3. Leverage of Time
Again, you can buy in 2014, at 2011 pricing, for a project that will not be completed until 2018/2019. So you are getting 7-8 years of potential price and rent appreciation in only 4-5 years of actual time. This is a huge reason to buy a condo in 2014.
Let’s run some basic math to show you an example.
Let’s say that the condo market averages a conservative 4% increase in average prices each year. In other words, the prices in 2019 will be 32% higher than the prices in 2011.
So if you buy a condo today for $300,000, in 2019 it would be worth 32% more or $96,000 in price appreciation.
Original deposits of $60,000 (20%) mean that you will have an appreciation on your investment of 160% or 32% per year.
Not…..too….bad.
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