Random Opinions:
Full disclosure: I don’t invest in condos (due to the lack of control over the whole asset) and I don’t typically recommend them for most investors; I believe there are better strategies with more upside and more control, however…
During the conversation with Andrew (linked above), we discussed emotional buying and selling. We spoke about it in the context of the folks selling in T.O to move to smaller communities and in the context of Toronto’s slumping condo market.
For both points, I mentioned that I’m interested to see what the situation looks like in 18-36 months (I think we are still way too early in the downside trend to make meaningful use of the sales data.)
So, how many of these reactions in the market are being driven simply by emotion? Will they be viewed as as an overreaction in the not so distant future? Are many condo owners bailing too soon to avoid a temporary pain point? (see Quentin D’Souza’s very Canadian infographic that echos this sentiment.)
As always, say it with me: TIME IN THE MARKET, not TIMING THE MARKET. If these sellers were able to weather the storm (and any investor should be prepared to weather storms), panic selling or media-think can be a killers. For investors, emotions can be dangerous friends. We need analytics, caution, heaps of information + critical thinking; however emotions need to always be kept firmly in check.
The CV19 chaos has increasingly highlighted that housing is an essential part of life. It is also a privilege to own property and yet another to be able to work from home (or move wherever one wishes.) Most Canadians do not have these privileges. They go in to work each day, they rent/live in major cities/towns, they don’t move regularly, and they definitely don’t have the ability to move to a seaside retreat.
On top of all of that, we are ALREADY in a colossal housing shortage, where the city currently needs to create at least 42,000 livable units EACH YEAR…for the next 15 years straight! Hint: this rate of build has never been done before and there is no plan to do so now. This data has been noted by everyone from the major financial institutions, the construction industry, all the way to social workers (and one day maybe even the government too!)
There is also the newly-released, record-level projection for Canada’s immigration numbers over the next 3 years,: 1.2 million new Canadians; 40% of who will settle in the GTA (and everyone needs a place to live…) Combine these elements together and we can really begin to see how unlikely it is that housing will stall in Toronto for longer than a beat.
With this unbelievable demand and such utterly short supply, how do you suspect this will affect housing prices? If history is any indication, they will keep rising steeply.
In stocks we talk about “buying the dip” meaning when prices temporarily fall you buy and get the future gains. I predict that this current situation is a buy the dip moment in Toronto condos (now and for the next few months.) I suspect that those who buy in this period will look back in 3 years and be happy with their decision. Those that panicked and emotionally sold Toronto property however may feel a little differently.
What a wonderful world!
