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Time to cash out of Toronto real estate?

Toronto homeowners opting to lease after cashing out

Toronto homeowners cashed out to capitalize on high prices – and many aren’t about to dive back in

It's Time for Buffalo to Secede, and Join Canada

The region does have its fast lanes and its slow lanes, though. Here’s my rendition of a chart from the report:

How celebrity house prices stack up against Toronto real estate

What GTA homes Leonardo DiCaprio or Jared Leto could have traded their hot hangouts for.


Speaker 1: Today is Monday, May the 1st and this is what’s happening in the condo market this week. Thanks for checking out this video. The first article I want to share with you is from the Globe and Mail and the title is “Toronto Homeowners Opting to Lease After Cashing out”. Sub-headline, “Toronto Homeowners Cashed Out to Capitalize on High Prices and Many Aren’t About to Dive Back In”. This is another classic article we see every few years or so whenever the market has reached a new high. It’s usually in the springtime, towards the end of the spring market we see this. Somebody comes out and says, “This is it. This is the peak, can’t go no more. It’s going to go down. Net prices will never be higher than this, it’s time to cash out, so I’m selling and I’m going to rent instead.” Maybe you know somebody who’s made this decision sometime over the past 22 years or so, since the housing market in the GTA has been going up every year for 22 years. Anybody who’s tried to do this obviously in the last 22 years has been proven wrong and is … Many people are now stuck forever renting because they can never afford to get back into the market.

The reality is trying to time the market, as I’ve said many times, is a fool’s game. You can’t predict the market. You don’t know when it’s at a high and you don’t know when it’s at a low until it’s already passed and you’re looking back in hindsight. Trying to predict it is a fool’s game. People who are trying to do this are trying to get lucky or throwing the dice, roulette, whatever. It’s a gambler’s game. They’re hoping to get lucky. I’ve said many times, if you want to get lucky in real estate then the longer that you’re in the real estate market, the longer that you’re a player in the game, the longer that you’ve got real estate assets in your name and the more that you accumulate over time, the luckier that you’re going to get. The longer you’re in the market the luckier that you get. The market will reward those people who are in the market for the longest period of time.

Those people who are trying to time the market, looking for the highs and for the lows, coming in and out like it’s some kind of stock on the stock market or something … 95%, 98% of the time those people are going to lose, so that’s just a reality there. Not surprised to see articles like this, we’re going to see more articles along these lines in the months ahead as we’re facing a historically high market of course.

Next article, I want to jump into some talk about why being in this market contrasting to what I just said, being in this market for the long term makes sense. Taking a long term strategic approach as opposed to a short term flippers approach, in-and-out, in-and-out … The long term strategic approach makes sense and it’s going to make you the most wealth in the long term. It’s all centered around Toronto and why Toronto’s a great place to invest. Toronto is a growing city and population … in economics, and money, and wealth. It is a growing wealthy center, one of the best centers in the world and certainly probably the best center in North America.

Here’s an article from Bloomberg along these lines. The headline is a bit facetious-I can’t say it-facetious, but “It’s Time for Buffalo to Secede-” another tough one “-and Join Canada”. Basically the article, you can check it out in the link below, the article is comparing great lakes regions, Ontario, Minnesota, Quebec, Indiana, Wisconsin, Ohio, Michigan, and so on, New York. It’s comparing what’s happening south of the border in the US and the great lakes region versus what’s happening in Ontario. It’s glaringly obvious the Ontario and the cities within Ontario- not just Toronto but all these smaller cities in Ontario: Oshawa, Kitchener, Waterloo, Hamilton, London, Windsor, St. Catherine’s. All these regions, all these smaller cities are growing in population versus the smaller and medium-sized cities south of the border in the US. Detroit, Rochester, Buffalo, Toledo Ohio, Syracuse, Cleveland Ohio, Erie Pennsylvania. Similar-sized areas the population is shrinking. Ontario population growing and those areas shrinking.

The real estate boom that we’re experiencing is not just a Toronto phenomenon. The entire population, the entire region of Ontario is booming, is growing. The economy is strong, this is a great time and a great region to invest in. Just take a quick look at what’s happening south of the border and you see. Again, something I talk about a lot, is what we’re experiencing is unique. It’s hard to realize that because we live here, a lot of us spend most of our lives here and so we don’t understand the uniqueness. We can’t appreciate always the uniqueness that Toronto and the GTA and Southern Ontario is compared to the rest of the world, even our close neighbors right across the border, a few hours drive away. This is a great city to invest in.

Let’s take a look at … Next I want to show you this amazing chart which if there’s only one chart that you ever want to look at to understand why you should invest in Toronto real estate, let it be this chart. It’s very simple, it’s very easy. It’s the population growth, this is from Igor Dragovitch. Again, a friend of the show and a great guy to follow on Twitter. He’s got a great blog that he updates occasionally with some great content. He’s got this great blog post, check out this chart I’m going to put on the screen here showing the Toronto population growth 1821 to 2016. Again, this is really all you need to know if there’s only one thing you need to know about why you’re investing in Toronto real estate, in Toronto condos, it’s this.

Look at that population growth. Look at is accelerating as time’s going back. When you take a look strategically and you look at the bigger picture of what’s happening here, Toronto is a fantastic place to invest. It’s growing in population. The reason why it’s growing in population is because it’s growing in wealth. Wealth attracts people, money attracts people, and where the money goes that’s where the real estate values are ultimately going to go up in the long term.

Now, here’s another chart which is not Igor’s chart but he pointed out on Twitter as well, and I want to put it on the screen as well. This is from Stats Can [inaudible 07:18] area, Toronto census, metropolitan area and census, metropolitan area. It shows the population and how the GTA has grown over time over the decades. If you look, the first thing I notice when I look at this chart is the entire city of Toronto, the entire city of Toronto and most of the Mississauga … most of the whole GTA was considered a built up area by 1971. Let’s just talk about Toronto and forget about the other cities which were also built up. Just the city of Toronto, basically the whole city of Toronto was built out, built up. Mostly all the land … 95% of the land was all developed by 1971.

Okay, now you go back and you juxtapose, transpose … what’s the word, you layer on top the CMA population 1821 to 2016 and you point out where’s 1971. Hopefully I can get this on the screen for you, but you look at where it is right there, 1971. In 1971 the GTA population was about 2.5 million. It took 150 years to get to 2.5 million and at that point, basically the whole city of Toronto as we know it was built out, was developed, that’s it. It’s been 45 … in the 45, 46 years since 1971, the population’s gone from 2.5 million … it took 150 years to get to 2.5 million, it took only another 46 years to more than double that. Now we’re at 6 million.

Population is soaring, the city of Toronto is completely built out. There’s nowhere left to go but up. There’s no land, there’s no more houses being added to Toronto since 1971, for all intents and purposes. The condo market is the future again. The city is going to continue to grow up, condos are not going anywhere. If anything, we’re going to have a continued shortage of condos into the future and Toronto, again, is a great place to invest. It’s a growing population.

Finally, as we’re running low on time here, I wanted to bring to you one last article from the Toronto Star, “How Celebrity House Prices Stack Up Against Toronto Real Estate”. “What GTA homes Leonardo DiCaprio, or Jared Leto could have traded their hot hangouts for”, so comparing recent celebrity property sales in LA and New York with what you can get in Toronto. The point of the article is kind of saying … it’s kind of alluding to Toronto prices are insane. Look, you could live like a celebrity for the same price. Look, you could have this amazing celebrity lifestyle and this sweet pool in your backyard for the same price.

My point with this is beware these types of articles. This is again, if you don’t understand how real estate works and how land is valued and how property is valued, this kind of article can be very deceiving and can lead people to think that Toronto is massively overvalued because you can get something somewhere else for less that’s better. Again, real estate is local. You can have vastly different values from one side of a street to another side of a street. You can have completely different values from one city to another city. There’s no point in comparing them as such to say that one thing is overvalued or undervalued. It’s completely irrelevant, it’s a meaningless exercise to sort of compare individual properties like this in different areas with different characteristics and different supply and demand curves and everything else.

Just always be on the lookout, and again, that’s one of the things I want to help you, the listener, the watcher, my clients especially with understanding how to be a smart real estate investor is to not fall for nonsense like this that could potentially affect how you look at Toronto, how you look at the value of Toronto real estate.

Okay, I hope you enjoyed today’s episode and you found something useful here. If you did, go ahead and share this video with somebody that you know, I’d really appreciate it. Until next time, have a great week.