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Toronto Condos vs. the TSX: Which Is a Better Investment?

Podcast Featured Image 63

BMO Nesbitt Burns just came out with a report that showed that over the last 15 years (2000-2015) the Toronto condo market has outpaced the TSX for growth and investment returns. In this episode of the True Condos Podcast, Andrew la Fleur talks about why this is amazing news for condo investors and also, why it really doesn’t matter at all.

Click Here for Episode Transcript

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. [singing 00:00:15]

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: Hi welcome back to the show. Once again, go Jays go. We’re in the middle of a playoff run. The jays are still alive at time of recording this podcast and hopefully when you’re listening to this they are either still alive, they’re still going on, or they’re world series champions. We can always hope. Go Jays go. Lets keep this train rolling. The city is really alive with Jays fever and it’s a lot of fun to be in the city right now.

I wanted to talk today about a article that came out about a month ago now. A lot of people have been talking about it around the condominium world, but I haven’t had a chance to dive into it on the podcast or on the blog so I wanted to get into that today. The article is about how the fact that Toronto condo investors have done better over the last 15 years than the TSX. If you have been investing in condos over the last 15 years they took a look at since 2000 til today, 2015. The condo market returns in Toronto were better than the TSX.

Very interesting findings and I wanted to talk to you about a couple things about this. First, it’s a really short article so I’ll just read it to you now. It’s from the Globe and Mail. “Toronto condo owners outpacing TSX investors. Given Toronto’s renown for condominium development, here’s an interesting finding from BMO Nesbitt Burns: Investors would have done better with condos than TSX listed stocks over the past 15 years. Since the start of the millennium, Toronto condo prices have marched steadily higher outside of a brief dip during the recession. Averaging yearly gains of 4.6% and besting the more volatile TSX said BMO senior economist Sal Guatieri.”

I’ll just interject here. Averaging yearly gains of 4.6% besting the TSX. Again, 4.6% is nothing crazy, it’s nothing overly sexy. It’s nothing to get too excited about but when you’re averaging 4.6% over the long-term and you’re investing in real estate leveraged with usually 20% of your own money and 80% of someone else’s money, your mortgage IE the bank, that 4.6% yearly growth in prices translates into much, much higher yearly returns for your bottom line as the investor.

Lets keep reading here. “Mr. Guatieri’s findings illustrated above don’t include total returns on either investments but he believes condo investors would still have come out ahead given relatively higher capitalization rates in the former compared to the dividend returns for the latter. Condo investors have out preformed shareholders for the past 15 years while experiencing less volatility Mr Guatieri said. Perhaps few sleepless nights, but on the other hand shareholders don’t get called in the middle of the night to fix a broken water heater”, he said.

I’ll just interject again here. Condo investors are not getting called in the middle of the night to fix a broken water heater. This is sort of one of the misconceptions about condo investing. But again it is the reason why we are investing in condos in the first place. As busy Torontonians with busy lives, and jobs, and businesses, and families, and friends and other things to do we don’t have time to be a landlord. We don’t want to be landlords, and that’s what condos, especially brand new condos allow us to do. It’s not like owning a house, it’s not like owning an apartment building. It’s not like owning a triplex, or duplex, or something like that where you do get these calls in the middle of the night, where you do have all kinds of maintenance issues on these properties to worry about.

When you’re buying brand new condos, as we always advise you do to, there’s nothing to do. Again, I have so many stories I could tell you but just going back to my own personal portfolio I have condos, many condos, which I have owned for years and I have set foot in them personally once or twice over a course of many years. The whole point of condos, and the beauty of condos as an investment class as a type of property is the hands free, maintenance free aspect of them and the fact that there’s really nothing for you do to. There’s nothing that’s breaking on these properties unless you get a lemon or unless you’re getting an absolutely horrible tenant who’s animal housing your property and just burning the place down or whatever. You don’t have any of these concerns.

I’ll continue with the article here. “Annual resale price gains in the Toronto condo market, by the way, were measured at 6.8% in the second quarter.” I believe he is referring to resale properties here in the second quarter of 2015. “Hitting an average of 453 per square foot according to Urbanation which tracks the sector. Pricing increases for new units were much more tame at 2% while gains on the rental side were 4.6%, an average of $2.48 per square foot. Notably the number of leases surged 22% from the same period last year while the sales climbed 21% there were more than 17,700 units unsold at various phases of development.” I’m not sure why they toss that statistic in at the end about unsold units. Almost making it sound like without any context you might be tempted to think that is a bad thing. If you have the context and understand what is happening in the market which is what we try to educate you on here at True Condos, you know that the percentage of unsold units as a percentage of the overall condo market is at all time lows right now.

The condo market even though you have a lot of units unsold, the condo market is bigger than it ever has been before so obviously that number is a larger number than we have ever seen before but as a percentage of the overall condo market, the number of unsold units is at all time lows. That’s the article there, a couple things I want to talk about. One, why this is amazing, why this article is really amazing for condo investors. Two, I want to say why it really doesn’t matter at all. You might be confused on that, but lets dive into it and what I mean by that.

Why is this amazing, first of all? It’s obviously amazing because most importantly where it’s coming from, who it’s coming from. The source of this information is BMO Nesbitt Burns. A company that makes money and exists to help people invest in the stock market is basically coming out and saying you’re better off investing in condos than the stock market. Very interesting, obviously it adds more validity to the reality that this is true. You hear a condo salesperson say you should buy a condo, take it with a grain of salt. You hear it coming somebody who sells stocks, telling you that condos are better over the long term than stocks, that’s really food for thought. You really need to think about that and think about where you are putting your money.

The second reason why this is amazing is it really shows that there’s long term steady growth in the condo market once again. It’s a great reminder as investors that we need to be long term investors, we need to grow our wealth slowly over time. If we’re patient, and if we buy smart, and if we hold properties for long periods of time, and if we don’t get worried about little ups and little downs in the market and we rather we ride it out over the long term and we’re buying cash flow positive properties as we always talk about, then you’re going to make a very, very healthy return and you’re going to grow your wealth tremendously over the long term.

The third thing that why this is really amazing again is that it’s a reminder that ordinary people can do very, very well by investing in the condo market. You’re growing your wealth slowly, you’re able to retire earlier, and you’re able to enjoy more freedoms sooner if you’re investing in cash flowing real estate. Think about it in terms of the stock market on the other hand. Besides insiders, how many people do you know personally that have gotten rich by investing in the stock market? No? No one? No, me neither. I don’t know anybody who’s gotten rich investing in the stock market. I know many, many ordinary people with no special secret knowledge who have gotten wealthy and who have been able to retire early and have been able to have a great, great life financially with fewer worries because they’re investing in real estate and because they’re investing specifically in the condo market. That’s why it’s amazing.

The second point is why it really doesn’t matter at all. The reason why I say that it doesn’t matter at all is because we’ve seen these charts, we’ve seen these articles, we’ve seen these studies before and basically statistics, numbers like this can be manipulated in many different ways to show many different things. I always take these sorts of articles with a grain of salt. What I mean by that is you can take the stock market versus any other form of investment and you can take it over whatever period of time you wish to sort of prove the point that you’re trying to make. The truth does remain still that you look at the long term growth of the condo market and it is very slow, steady, and positive growth. Compared to the stock market which it is also slow, steady growing but it’s huge ups and huge downs. It’s a lot more stressful sort of a situation to be in something like that versus a slow and steady growth of the condo market by comparison.

That is today’s podcast I hope you enjoyed that and I hope you’ve found this useful to you as you’re thinking about your own portfolio and as you’re thinking about investing in the condo market. Continue to buy cash flowing real estate, buy properties whenever you can under market value, and always, always, always buy for the long term. Hold your properties and enjoy the appreciation, the cash flow for as long as you can. That’s the best way to grow your wealth. I will include a link to this article on the show notes. You can go to and you can find the show notes for this episode which is Episode 63 and all the other episodes of this podcast. I hope you enjoyed this. I hope you’re having a great week. Until next time, go Jays go. Hopefully, like I said, the next time we talk or the next time you hear from me the Jays will be world series champions. Okay, talk to you later. Bye.

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