3 Ways How the BREXIT Could Affect the Toronto Real Estate Market

Andrew la Fleur:
Last week Britain shocked the world when they voted to leave the European Union. Find out three ways how the Brexit could influence and affect us here in the Toronto real estate market in today’s episode.

Speaker 2:
Welcome to the True Condos podcast with Andrew la Fleur. The place to get the truth on the Toronto condo market and condo investing in Toronto.

Andrew la Fleur:
Welcome back to the show and thank you once again for listening. Well, as I said in the intro, Britain has shocked the world big news this week globally is the Brexit as it is known and Britain has voted in a referendum to leave the European Union. Just as recently as a few days before the vote, no one was really predicting that this would be the outcome and then what’s starting to get clearer is we’re going to be closer than people thought and it turned out that the leave side versus the remain side actually won by a narrow but a significant margin and so there’s massive economic turmoil happening in that country and in some ways rippling across the rest of the globe.

I wanted to talk on today’s episode about how this might affect the Toronto’s real estate market. I want to look at three ways that the Brexit could have a influence and affect on the Toronto real estate market and of course how we as condo investors in particular and real estate investors should think about these things and how we can set ourselves up to respond to these kind of global events like this. Of course it’s important to pay attention to the local market here in Toronto and what’s happening locally here but we also need to as investors have a global perspective and always be paying attention to the bigger picture of what’s happening all around the globe and how it can affect our markets here because we are all connected truly more than ever.

Three ways that the Brexit could influence the Toronto real estate market, number one, I believe that what’s being said loud and clear and what I’m seeing is that cities will continue to out perform non cities from a real estate perspective. What I mean by that is if you dive in to the results of this referendum in Britain, it’s a major trend, something we talk about a lot in this podcast is just the urbanization of this world and the fact that cities are growing all around the world. It’s not just the Toronto phenomenon that we’re seeing.

The world is becoming increasingly urbanized and I think the biggest thing we’ve seen if you look at the vote breakdown, the overwhelmingly people living in cities voted to stay in the European Union and people living outside of cities overwhelmingly voted to leave the European Union. We saw a similar thing here in Toronto even with the recent election when Rob Ford came to power a few years back. You look at the voting breakdown, it was like the entire suburban Toronto areas voted for Rob Ford and the entire urban areas voted for his opponent at the time.

What this trend is that we’re seeing and that’s very important to take note of as investors is that the world is now increasingly divided into urban and non urban areas and urban and non urban people. I’m not going to get into the social ramifications of such a thing but it is just a fact that is true and we need to understand that as investors and know how we can respond to it. This is one of the reasons why I’m always preaching that with a few exceptions you always want to invest in … You’re always better to invest or the best place to invest is going to be in the downtown core of Toronto.

Biggest city in Canada, the most important city in Canada. The economic engine of Canada. The place where more immigrants come to than any other region in Canada every single year by far. The place I believe with the brightest future of anywhere in Canada and perhaps anywhere in the world when you look at cities around the world, it’s Toronto. The opportunity is still here now in 2016 to purchase and to invest at reasonable prices in the downtown core of this amazing city. If you can do that, if you can afford to invest downtown you should and you should definitely have your portfolio heavily weighted towards downtown properties overall.

That is point number one. It’s just that cities are going to continue to out perform non cities in the world as it is increasingly divided along those lines. We’re seeing this time and time again of the haves and the have nots. It really is a story of the haves and the have nots and those who are urbanized and those who are educated, those who are … Richard [Florida 00:05:29] talks about the creative class. These kinds of thinking, this is all happening in cities and the money is going into cities. There’s a great amount of resistance to that by those who are not participating in that movement of money and we’ve seen that loud and clear here with the Brexit vote.

A lot of people are resisting that and they’re feeling left behind by the new realities of the economic systems globally and they’re standing up and they’re saying, “We don’t want this. We want things to go back to how they were.” It’s my belief that things could never go back to the way they were. The world is changed. The world is new and you’re either in or you’re really out. You’re left behind. You will be left behind and unfortunate it looks like Britain economically is already facing serious economic consequences and the whole country to some extent could be left behind if they do go ahead and follow through with this vote to actually exit the European Union.

Hopefully they come to their senses and they figure out a way to make it work and not leave but it looks like that is the direction they are going. They are voted to go, so that’s the first point is cities are going to continue to out perform non cities and it’s a great, great time to invest in a city like Toronto. You want to get your money where the money is going and where the growth and the future is and that is in the city, it’s in the downtown core specifically, number one.

Number two, the second way that the Brexit could influence the Toronto real estate market obviously is that we might see a lot more people from Britain coming to Toronto. We might see more demand for Toronto real estate from a global perspective once again. More foreign money is looking like it’s going to be coming to Toronto and if you think about it, if you’re over in Britain and if you’re looking around, if you don’t like the direction of your country, if you’re educated, if you have money and you’re not liking where things are heading in that country, sadly especially if you are not a White British person.

Unfortunately that is a lot of what we’re hearing is that a lot of this is driven by xenophobia and racism. If you are that, you’re looking around the world and thinking, “Where is a better place for me to raise a family, to follow my dreams and to build a future,” I think Toronto is going to be right at the top of that list. I just looked at the Canadian dollar and the British pound trading today, you look at Canada versus US, you come to Canada, you bring your British pound, you’re going to get one point seven three dollars Canadian for every British pound.

You go to the US, you’re only going to get a dollar thirty two, so a dollar seventy three Canadian versus only a dollar thirty two US, if you’re coming over to Canada makes it a very attractive proposition. Obviously we’re a former British colony, there’s a lot of similarities there. Our government systems are very similar. It’s easy to fit into Canada as a person from Britain and it’s an interesting analogy if you look at it’s kind of turned its head but if you look at the Hong Kong handover in 1997 when Hong Kong switched hands from Britain, the colonials [overloads 00:09:09] to China in 1997.

Obviously in the `90s we saw a huge influx of money coming from Hong Kong and immigration coming from Hong Kong before that, 1997, coming into Canada and now it’s almost like 2017, 20 years later, it’s like the UK handover or the hand-back. I don’t know how you describe it but the UK is interestingly literally going to become an economic island from Europe and I do see that there will be a lot of people looking to get out of the UK. Obviously not everybody and most people will obviously stay but there will be a huge influx of people looking to move, people with means and people with education and people with resources, the kind of people that can be successful anywhere on earth.

They’re going to be looking for places to go and I think Toronto is going to be one of the major spots that they will end up given those factors that we talked about. Again, as a real estate investor, as a condo investor, what are you going to do about it? The question is before you know is the world is becoming increasingly less stable and as Canad is sticking out as a sore thumb in a good way more and more and more on the global scene as a great, great place to live and a great place to pursue your dreams and goals, what are you doing to take advantage of that as a real estate investor?

Are you seeing the future of Toronto? Do you understand where the city is going? Are you taking advantage of the opportunity that is before you right now to invest in the city while prices are still extremely low by global standards? Certainly let’s compare Toronto and London and they’re not even in the same ballpark as far as prices go. That’s the second point. First point, cities are going to continue to out perform non cities. Second point, more foreign money is going to be coming into Toronto and particularly from Britain and more immigration and money coming in from Britain and we always want to follow the money.

The third point, this may be seen as a bit of a long shot but who knows? I think I might be proven right in fifteen or twenty years but here goes. Ready for this? I believe that Toronto has a chance, has a shot, has a legitimate shot at becoming the new London. Now let that sink in for a minute. You might think I’m crazy but I do believe that Toronto now has a legitimate shot of rising up the ranks as a global financial city as London is probably the number one global financial city right now or it was up until a few days ago. Toronto now I believe is well positioned to perhaps become like a new London in the next fifteen, twenty years or so.

Now why do I think that? Well, look at what London has, look at what Toronto has. London is a major global city, Toronto is a major global city. London obviously Britain, Toronto is obviously has a long history of being a British colony and we’re set up similarly from a government and taxation and just sort of mindset perspective, there’s a lot of similarities there. Let’s face it, Toronto is already a top ten global financial center and a center on the rise as it is.

A major shake up like this, there’s all this money that’s sitting there in London and concentrated in London and all these banks and bankers and financiers are set up there and many of them are going to be looking to get out and looking to be in other markets because of the Brexit and because of the implications it will have on them in their bottomline. Well, where is the next logical place for a British banker to flee to if they’re looking to get out of a bad situation? I think Toronto is going to be right on the top of that list, right up there with New York, perhaps Frankfurt, Hong Kong.

I think Toronto does have a chance, does have a shot or certainly a much better chance of becoming the next London or becoming the next major global financial center. Today this week then it did certainly before this vote was cast in Britain. That will be an interesting development to watch and interesting to see how in particular our financial center Bay Street as we know it will be impacted and will be benefited by this unfortunate vote in Britain that has just taken place.

Okay, there you have it. That is a bit of a short episode but I hope you enjoyed that, three ways that the Brexit could influence the Toronto real estate market. Once again, thank you for listening. If you want to leave a review for the show, I’d appreciate it. Just go to iTunes and leave me a review. It really helps to get the word out about the show and helps other people to find it. Okay great, thanks very much and until next time, I hope you have a great week and happy investing.

Speaker 2:
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