Greetings Friends,
We are stumbling towards year-end and it doesn’t seem to have the same festive sparkle this year. There aren’t the usual travel plans to coordinate or the maze of holiday parties to navigate (or avoid.)
The lockdown, here in Toronto, has created a sense of grey, a holiday haze, along with a potential crippling for most small businesses during this important time of year. Support local is the refrain which I’ll echo here, since so many likely won’t make it through the snowy season. However sad and difficult, life will go on.
Since our last Revival we have written 3 accepted offers (and a handful that lost out too;), we closed on a new JV rental property that is a cash-cow, then we purchased a Duplex with a joint-venture partner, and we are negotiating a larger, multi-family purchase currently; check out all the new articles on our website!
I mention regularly to our clients-partners that I prefer to take action while others freeze. The winter holiday season is often a great time for investors to make purchases because while others talk egg nog and watch TV, we are able to scoop up properties with less competition, and preferably at a discount. Most people selling at this time of year, need to.
Below I’ll outline the signals I am using to finish 2020 strong and to hit the ground running in the new year…
- TRREB STATS: In TO, we are not only seeing an incredible 13.3% increase in avg. sale price (YoY), but it is made even more impressive due to the fact that there were so many more listings this November than the same time last year (11,545 vs. 8,651) and houses are selling faster too! It’s wild to see, and not what the media would suggest, but not surprising when looking from the macro-perspective below.
- Canadians have just seen our first ever sub 1% interest rate. What effect do you think these lowered interest rates will mean to housing prices?
- PKAR have just released their stats for November (a nearly $60,000 increase YoY increase!) The Peterborough market has a much lower purchase price than TO, has a strong need for more rental units and is growing in step with Toronto (as price growth %.) Anecdotally, we have been involved in offers on a number of properties this past month, all of which sold in multiples and WELL over asking price. Congrats to all of our partners who are holding properties with us in this region: Good for you on taking action!
I mentioned last month that the condo market looked like an opportunity to buy the dip. I sense this is still true by looking at November’s condo sales stats and by the exodus from the market by the assignment (paper) speculators…but again, I don’t personally like or recommend condos as investments. I like freehold property; not in the sky but sitting on its own land.
“When people are free to do as they please, they usually imitate each other.”
― Eric Hoffer
Random Opinions:
A BOOM is coming, not a bust. Those that are waiting for a drop, will be sorry.
We aren’t going to hear a PEEP out of interest rates for a looooong while. They will stay historically low…or lower.
Home Builders will struggle next year and housing starts will lag. Lumber and material costs have gone through the roof (although they’ve come down slightly from their highs.) These combined with record immigration numbers, signals massive pressure on rental units, resale home prices and hopefully on the municipalities to lower their development fees.
I recently looked into Canada’s balance sheet. We currently have $521 billion in assets, but unfortunately we have $962 billion in liabilities. The country is insolvent and owes hundreds of billions. The unfortunate folks living in local parks each have $441 billion dollars more than our government; maybe that is why the government is not stepping up to help them.
Early in 2021, office buildings will re-open and entrepreneurs flood into the discounted Main-floor Commercial crater the lockdowns created.
Beyond my normal refrain that Toronto is a world-class city because of our country’s demographics + immigration policy, we were recently ranked #2 by Kearney.
I am also extremely bullish on our market due to the combo of: Canadian monetary policy, quantitative easing (QE) and record low interest rates. For those truly interested, I linked to a great (and long) overview here.
When money is devalued through QE and “stimulus”, each dollar will buy less: Savers will be exposed as suckers. When (not if) this happens, asset values will really skyrocket. Have we noticed this anywhere yet…hint: stocks prices, digital currency (non-fiat), real estate?
I definitely don’t want to add to the gloom, but more wish to shine light on the opportunity. Those that are able to buy cash-flowing, hard assets have the best chance to avoid some of the pain that will be felt. Next best would be simply to own ANY hard assets; like your home or precious metals. These assets will increase in value due to the course of action the world’s governments have set.
However, rental property investments are the best (IMHO) and they protect you in 3 ways:
- When purchased properly, they cashflow; cover their costs and pay you cash each month! Each one adds a stream of income for you when work is slow, you retire or your business is forced closed by the authorities.
- The mortgages are being reduced by way of monthly payments and proper management. In this low interest rate environment, more of each payment goes towards the principal too.
- For in demand markets with strong demographic fundamentals, like much of Southern Ontario, (or during massive QE) you may even get blessed with fantastic appreciation too.
That’s a wrap for The Revival in 2020.
We’ll see you all in January to talk trends, economics and Real Estate.
Sending you and your families love and laughs!
Oh, what a wonderful world!
Randall Reashore