Why prices will continue to keep rising

TRANSCRIPT

Andrew la Fleur: Today is Monday, May the 15th and this what’s making news in the condo market this week. Thanks for checking out this video. The first article I want to highlight to you is titled, experts worry about condo supply shortage, it’s from the Post Media Network and the article is quoting Ben Myers and Shaun Hildebrand. Both regular guests on the True Condos podcast. And basically, talking about again, the story continues that the condo market is dramatically under-supplied. We don’t have enough units. This is why prices are rising so quickly. Despite the fact that in 2016, the article points out, a record number of new condos were added to the market and launched into the market in 2016.

And yet, here we are with record low number, months of supply in the market right now, so prices are rising very rapidly and they will continue to rise. Even if there is a massive surge of new product into the market this year in 2017, which we are expecting a healthy number to be launched this year. Prices will still continue to rise basically the, Ben Myers and Shaun Hildebrand are saying and I agree, you’d have to see a doubling of supply in the market for prices to slow down, for price increases to slow down and for prices to actually decline, you’d have to see something even more than doubling of supply.

Massive new supply was added in 2016, all of that has been gobbled up. All the inventory is gone. We’re sitting on record low levels of inventory, all the standing projects that were launched in 2014, 2015, everything is sold out. Everything is sold out everywhere. New projects are selling out overnight. And so, we have a major supply problem. Until we address that supply problem, prices will continue to rise, so expect the current situation to continue as it’s been happening.

Next article I want to point out to you, is from The Globe and Mail, Canadian universities see surge of international students. This ones been making the rounds over the past week or so. A number of universities reporting a massive increase in international students and international applications and international enrollments. Universities and university enrollment of course is one of the key pillars of condo investments, especially condo investment in major city like Toronto, U of T, Ryerson, York and all the colleges are a major pillar as to why condo investing makes sense. They are huge driver of the rental economy, students are, the rental market in Toronto.

Whenever we see headlines like this it’s good news. International students of course coming in, bringing a lot of money. Follow the money with real estate investing. International students are paying much, much higher rates of course, for tuition then local resident students. Why are these international applications up so much? Well, they’re talking, the article says, “We have a rising tide of isolationalism and exclusion in Europe and the United States and people are looking to Canada.” Of course there’s references to Trump and perhaps the Trump effect has led to a major increase, particularly at U of T. U of T reported a major increase in American students who are looking at coming North of the border here.

Again, a great positive trend that we’re seeing for condo investment in the future. And again, one of the pillars that you always want to look at and understand when you’re investing in condos in a major city like Toronto, is how the university populations are doing. As long as those populations are continuing to grow, that’s a very good thing. Whether you’re investing in condos that are specifically targeted for students or not, the whole rental market is benefited from the rise of international students.

Okay, the next article is actually not an article, it’s a video from The Globe and Mail as well. It’s an opinion piece and the opinion is from this reporter, or not sure who it is giving the opinion. But, the opinion is why Millennials shouldn’t buy a house now or maybe ever. So, basically talking about how home ownership is very expensive. You should look at renting instead if you’re a Millennial, is what this person in the video is saying. Again, I’ve talked about this before, any time I see a pro-renting piece, an anti-buying, anti-ownership piece, I love to see it. As condo investors, we want to see the home ownership rate drop. We want to see the number of people renting increase over time.

I believe that home ownership rate in Canada but specifically in Toronto is way too high and it needs to come down and it will come down. It is coming down as more and more people are priced out of the market as more and more people just simply cannot afford to purchase a house, let alone a condo. Or sorry, I should say a condo, let alone a house. More and more people are priced out of the market, we’re going to see more and more people turning to renting and that’s a very good thing. The more that this message gets out there, send this to your Millennial friends and so on, there’s nothing wrong with renting, which of course is true. There is nothing wrong with renting, we need more and more renters to continue to have great people to rent to, as condo investors.

I’ll leave that there and finally, the last piece that I want to share with you is also another video, this one is from CTV News, it’s an interview with Richard Florida. Richard Florida is an academic and a well-known author. He writes about cities and the development of cities and urbanism and these kind of themes. And, he’s got a new book out and he’s talking about Canada’s new urban crisis. We’re sort of a victim of our own success here in Toronto as we’re a rapidly growing city but specifically he’s talking about the interesting trend that, in the 1960’s, 50’s, 60’s, 70’s, there was a big trend of people moving out of cities across North America. The downtown cores were emptied out, the Great White Flight, as it was called at one point.

People moving out of the downtown cores and into the suburbs and the money and the wealth. The people with money would go to the suburbs. Now, we’re seeing the exact opposite thing happen where people with money and the wealth is coming back into the cores of cities, specifically Toronto, the downtown Toronto population is booming. Richard Florida’s talking about this and how basically this trend is going to continue.

As real estate investors, what do we take from this? Basically, again, investing in the downtown core is key but also not just in downtown core, wherever transit is accessible, wherever the transit hubs are. That is also a place where people with money are going to go. It’s going to be continuing increasing gap between the haves and the have-nots, economically speaking and so the haves and the rich will continue to get richer as I keep saying. Downtown cores, near the subway stations, near the subway, the transit nodes, that’s where you want to continue to invest over the long-term. That’s where you’re going to have the most success and that’s where the money is going to continue to go. Those areas are going to be disproportionately increasing compared to the areas that don’t have transit, the areas that are disconnected from the marketplace of the city, which is the downtown core and the other financial and commercial districts of the city, which are again, centered around transit hubs and transit areas. So, continue to focus your investments in those areas and you’re going to do well.

Okay, that’s all I had for you for this week’s episode, I hope you enjoyed this video. Once again, thanks for watching. If you found this useful go ahead and share this video with somebody that you know and if you’re looking for the latest condo investment opportunities, make sure you subscribe at truecondos.com. It’s amazing how many people contact me every week who are not receiving my weekly email updates on the condo market and all the great investment opportunities that are coming up and coming very soon. So, make sure you are receiving my weekly emails, go to truecondos.com, and subscribe, sign-up anywhere on True Condos and you will, starting to receive my weekly emails. Okay, thanks for watching. Until next time, have a great week.