With mortgage rates at an all-time low and a promising immigrant-driven population boom on the horizon, 2021 could be the year that many aspiring pre-construction real estate investors make the leap into the market.
As resale condo buying in Toronto’s downtown neighbourhoods continues to ramp in the early months of 2021, there are encouraging signs that investors believe the market has turned a corner. In the new construction market, buyer inquiries sent to new condo projects in Toronto have now outpaced their pre-pandemic levels, according to data recently published by Livabl and BuzzBuzzHome.
The strong demand for pre-construction properties in the Greater Toronto Area has also been seen in the detached home segment. In January, new single-family sales shattered a 15-year record with 1,506 homes sold that month, according to the most recent report from the Building Industry and Land Development Association (BILD).
Even as the new construction market marches forward, to a novice investor, it may still seem tricky to gauge when exactly the right time to buy is, or where the market is headed in the near future. A downturn in immigration and tenants moving out of cities continues to impact Toronto condo investors, many of whom offloaded their units during the second half of 2020, boosting resale condo supply and leading to both resale and rent price declines as a result.
Simon S. Mass, CEO of The Condo Store (TCS), explains that even if you’re buying a pre-construction property today, an investor should look years into the future regardless of present market challenges.
“Buying a pre-construction condo today means that you should be considering the rental market in approximately five to six years from now when the project is ultimately finished and handed over to the purchaser and when you’ll need to have financing in place,” he said.
“I find trying to ‘time the market’ will most likely be a failed project as there is no go-to science for an investor to guide them as to when they should jump in with open arms,” Mass added.
As the spring market warms up, Toronto developers will be preparing to launch new projects over the coming weeks. For first-time investors, this is an opportunity to investigate new condo developments that are best suited to their needs. When working with clients, Mass says that TCS typically advises them to purchase in the middle of a project’s price range to allow for the largest pool of potential renters and future buyers. Other factors like proximity to university campuses, public transit and the reputation of the builder would also influence where and what you buy, Mass explains.
“We only deal with the leading developers in the country — based on reputation, history and past work — and this is to ensure that our clients get into projects that are guaranteed to be built,” said Mass.
Unlike some international cities, Mass explains that Toronto hasn’t hit its physical capacity for development yet, meaning there is plenty of room for growth in locations around the city. TCS is currently analyzing up-and-coming development areas in the Junction, the Queensway and Danforth Village, where Toronto investors could potentially build wealth.
“Location is always an important factor but if you choose the best, most established areas of Toronto to invest in, you will pay the price as those areas have settled in and are fully developed,” said Mass. “But finding areas that have room to grow will allow you to grow your wealth alongside the neighbourhood, as there is room to see gains with time.”
Buyer tastes during the course of the pandemic have shifted. Stronger preferences for private outdoor space, home offices and larger layouts played a role in the urban exodus throughout 2020. Although resale buyers may have tweaked their purchasing preferences, Mass believes that investors won’t stray far from their preferences by much — investors and end-users who liked skyscrapers or boutique buildings before are unlikely to change their personal preferences, he said.
With many companies now crossing the one-year anniversary of full-time remote work, it’s likely that some employers will choose to keep their workers at home, even if it’s on a semi-regular basis. Although Mass is expecting the work-from-home situation to remain post-pandemic, the draw to live and work in cities will endure and have a positive effect on the real estate market.
“Humans have a need to connect – we’ve heard it for a year now as we’ve not been able to connect,” said Mass. “So, the draw of the city will always be there and if people work from home a day or two per week more than they did, it shouldn’t change the long-term outlook for the city, and by extension, the rental market.”
