Why Waiting For The Perfect Condo Investment Is A Horrible Strategy

Andrew la Fleur:
Are you waiting for the perfect opportunity to jump into the condo market? Well, find out why that’s a horrible strategy on 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:
Hi, welcome back to the show. Thanks again for tuning in, Andrew la Fleur here. You can always reach me, if you want to, directly at (416) 371-2333. Or you can email me, Andrew@TrueCondos.com, and I do respond to messages. Thank you for your support for this show over the years, and we’re approaching 250 episodes here, and more than five years of this podcast, and it’s going to continue, so thank you if you’re a longtime listener, long time subscriber. If you’ve never left a review, if you’d consider doing that for me on iTunes, that would be great. Really helps to get the word out about the show, and helps iTunes know that this is valuable content that other people might find useful, if you have too. So, thank you.

Andrew la Fleur:
As I said in the intro, I want to talk about this idea that if you’re waiting for the perfect opportunity to get into the market, you need to stop doing that, and you need to just get into the market. There is no such thing as a perfect opportunity, but the reality is that the market continues to grow, prices continue to go up. And the longer that you’re waiting to get into the market, waiting for that so-called perfect opportunity, the more that you’re missing out. The more time that you’re not in the market, especially if you’re a first timer, if you’re a repeat investor looking to invest again, the longer that you’re waiting, the further and further you’re being left behind. And I want to talk about the latest statistics that came out for September for the Toronto Real Estate Board as well, and why that’s backing up what I’m saying.

Andrew la Fleur:
Anecdotally, want to tell you a little story. One of my clients, repeat client looking to make their second purchase. So, relatively still new into the game, but looking to grow. Like a lot of my clients, not interested in just buying one property of course, but you want to… When you get that first one under your belt, which is always the hardest, okay, let’s get the second one. Let’s get the third one. Let’s grow this portfolio. Let’s keep moving forward.

Andrew la Fleur:
So, made his second purchase. Bought a great one bedroom unit in Toronto, in a pre-construction project that launched recently, was excited about it, but was crunching the numbers during the 10 day period and called me up and said, “Andrew, I think I got to let this one go. I’m just looking at my numbers, just not quite comfortable, feeling a little bit too stretched to make these numbers work, so I think I’m going to cancel it.” I said, “Okay, that’s unfortunate.” “But did you know that since you purchased,” I said to him, “That the price of your unit has gone up $30,000?” He said, “What? $30,000 how can they do that?” I said, “That’s how it works. If you get in the right opportunity, the right time, that’s exactly what happens. Supply and demand. If the builder has a lot of demand for what they’re selling, they raise prices. Sometimes a lot more than $30,000, not always, sometimes less. Sometimes they don’t raise it at all immediately. But prices continue to go.” So, I said, “If your plan is, as he said to me, he was going to cancel this one and wait for something else a little bit less money.”

Andrew la Fleur:
I said, “Well first of all, it’s going to be very hard to find anything for less money than this because you’ve got something in the core of the city for under $500,000, it was in this case. It’s very hard to find anything like that anywhere. And secondly, even if you do find that other thing, the price you’re going to pay for that next one is going to be $30,000 more minimum than what you just paid. In other words, the market continues to move. If you don’t buy this one and the price goes up $30,000, you’re not going to get the next one for the same price that you just paid. The next one, the bar has been reset. The new price is now $30,000 more minimum. If another month goes by, maybe it’s $35,000, $36,000, $37,500, whatever it is. The price continues to move up. The bar continues to be reset. We are in a market that is moving up. It’s moving up at the moment rather quickly. Sometimes it moves up slowly, but the point is the market continues to move up. Whether it’s a dollar, whether it’s $1,000, whether it’s $100,000. The longer that you delay that decision to get into the market, the more you’re going to pay and the further and further behind, so to speak, you will be.”

Andrew la Fleur:
Interestingly enough, when he was armed with that knowledge, he decided to keep the unit, which is great. I’m very happy for him. He made an amazing decision, in my opinion, to do that. And he’s resting happy now that he’s up an extra $30,000, which is amazing. Overnight, $30,000, anybody will take that on an investment. Yeah, he’s a little bit stretched, but he’s going to figure it out. He’s going to make it work. And when somebody tells you that you’re up $30,000, that often changes your thinking a little bit on what it means to be stretched, and what it means to be uncomfortable with the level of an investment. When you know that the investment has done so well, you figure it out, you adapt, you conform because you don’t want to lose that gain that you’ve got. And you don’t want to, as I said, reset yourself back and say, “Well, I’ll look for something else in the future.” Well, that thing in the future is going to cost you more than the thing you’ve already had. So, why give up something? A bird in the hand versus hoping for two in the bush, that in my experience never come.

Andrew la Fleur:
So, that’s a quick little story as a segue into, as I said, the September real estate stats from TREB. And the stats are out, the numbers are looking, once again, very, very favourable. The market is hot across the board as a summary statement. Condos, low-rise, 905, 416, pre-construction, resale. The market across the board is hot right now. Is it as hot as it was in 2017? Probably not. Spring, summer 2017, probably not, no. But it is still an extremely active, robust, hot market. Compared to anything that I’ve been a part of in the last 12 years, it’s right up there. 2017 aside, it’s right up there.

Andrew la Fleur:
So, what do the numbers say? Overall, again, I always look at the sales-to-listing ratio. The headlines from the major media, as you know, that overall prices and sales are up. Yes, but let’s dig down deeper and look at the sales-to-listing ratio, which is the number one stat that I always check. If you haven’t heard, if you haven’t been listening to this podcast, I’m always looking at the sales-to-listing ratio. That’s going to tell us the temperature of the market and it’s going to tell us the direction of the market, where are things likely to go moving forward?

Andrew la Fleur:
So, the overall market for all properties, the sales-to-listing ratio is 45% in September of this year. Compare that to last year, September was only 32%. So, 32% is sort of a balanced market last year. Not a buyer’s market, not a seller’s market. This year, 45%, we are definitely a seller’s market overall. Not a super hyper strong seller’s market, but definitely overall the whole market is a seller’s market. If you look at just condos specifically, the sales-to-listing ratio for all condos is 62%, quite a bit higher than the market, versus last year it was 47%. Again, the condo market is hotter now than it was a year ago overall.

Andrew la Fleur:
Drilling down specifically to the downtown condo market, interestingly, the downtown condo market is actually only 57%. Still a strong seller’s market, but not as hot as the overall condo market, so that tells you that the areas outside of the downtown core are actually hotter than inside the downtown core. And when you look at Peel Region, Mississauga in particular, that’s probably the hottest condo market anywhere right now. The sales-to-listing ratio in Peel is 94%, which is absolutely insane. If you own a condo in Peel right now, you’re thrilled. Prices of condos in Peel Region are definitely rising very quickly right now and will continue to do so. If that sales-to-listing ratio stays up in that range where it is right now, 94%, you can expect prices to rise by double digits if that continues. And that’s currently what’s happening. Peel Region, after a number of years of very slow growth, very low sales-to-listing ratio, has been hot over the last year, but it’s getting hotter and hotter.

Andrew la Fleur:
Looking at York Region, which was the hardest hit area north of the city, York Region, the hardest hit area by the Fair Housing Plan. A year ago, sales-to-listing ratio was only 24%. It was definitely a buyer’s market a year ago. Now today, that number is 43%, so also a big jump in York Region. So, the 905 condo market is doing very well. We’re seeing the same thing in pre-construction of course, where 905 projects are selling very, very well. And probably more condos are now being sold in the 905 areas than in the city, which is a major flip from what it was say three years ago.

Andrew la Fleur:
So, that’s a snapshot of what’s happening in the market. Overall, again, the market is much hotter than it was in 2018. What’s driving that? A couple of things, as I said, the 905 condo market, huge jump. But also the low-rise market, look at say detached homes in the 416 in particular. Detached homes, sales-to-listing ratio… Or sorry, just the number of sales of detached homes is up. The number of sales is up 38%. 38% increase in the number of detached homes sold in Toronto city. And then in the 905 areas, an increase of 26%. So, not as hot. If you live in the 905, and you’re looking at houses being sold around you, you’re probably feeling like, yeah, it’s definitely better than it was a year ago, but it’s not super major dramatic difference. Versus if you live in Toronto, you’re probably saying, “Wow, it’s quite a difference. Quite a big difference compared to a year ago.” Overall average prices are up about 6% when you look across the different housing types, condos, low-rise. Everything’s up sort of single digits, four, five, 6% range, versus last year average prices.

Andrew la Fleur:
So, let’s look forward. What are we expecting to come looking at these numbers? What does it tell us about where things are going as we head into the end of this year, and as we start thinking about what’s going to happen in 2020? Well two things I would say. One is expect low-rise prices to accelerate, so they’re going up, but expect them to go up even faster. With low-rise sales, the number of sales increasing by high double digits, 25 to 40%. That is a massive change in sales figures from a year to year. So, if those massive double digit increases in sales are continuing over the months ahead, prices will follow.

Andrew la Fleur:
So, we’re going to stop seeing these price increases of five, six percent, and we’re going to start to go back to the 10, double-digit, sort of 10, 11, 12% price increase range, I believe, in the months ahead. And as we get… If I’m making a prediction now, I would say the spring market of 2020 is going to be insane in the GTA for the low-rise market. Yeah, if you’re thinking about moving or selling a low-rise home, next… If you’re not quite ready to do it, you may be thinking 2020. The spring market, I think based on the direction that everything is going right now, is probably going to be a very hot market, a good time to sell compared to the last few years. A good time to sell a low-rise home anywhere in the GTA. So, I’m expecting low-rise prices to accelerate, to start appreciating at double digit rates.

Andrew la Fleur:
And the other thing is condo prices, I’m expecting to continue at the rate they’re at. Right now, they’re in the single digit price increases of sort of four, five, six, seven percent. I’m expecting that to continue, and I’m expecting the 905 condos to outperform the 416 condos. So, especially if you’re in Peel Region, expect prices there to rise by double digits, at a rate of 10, 12% kind of thing.

Andrew la Fleur:
Moving forward over the short term, if you’re in the 416, looking at your 416 condos, expect them to continue to rise in the low single digits range. So, it’s still a seller’s market, but it’s not a crazy seller’s market as it is, especially in Peel Region. Mississauga is on fire right now. Good for Mississauga. It’s had some slow years there.

Andrew la Fleur:
Okay, there you have it. That’s my update, synopsis on the market, and my advice again, if you’re thinking about getting into the market, don’t wait, stop waiting. Waiting is not a good strategy. The bar continues to be reset. Get into the market now. Don’t wait for that perfect opportunity. There’s no such thing as a perfect opportunity, perfect unit. There’s always going to be opportunities, but none of them will be perfect. That’s the nature of the beast. Get in, jump in, hold on, hold on for the ride, and stop waiting.

Andrew la Fleur:
Okay. I Hope you found this episode useful, and if you did, please share this with somebody that you know who could benefit from it. Look forward to chatting with you more and catching up with you on the next episode. Until next time, happy investing.

Speaker 2:
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