Lockdowns, travel restrictions, economic uncertainty and a raging pandemic…is now really the time to buy and sell real estate?
Wins Lai, an award-winning Toronto real estate agent and broker with Living Realty, has the answers.
How has the pandemic changed Toronto’s housing market?
COVID-19 has created seismic shifts in Toronto’s housing sector. In the early stages of the pandemic, it became a tale of two markets: Condos and detached homes.
One of the biggest changes to the condo market was the shift from a seller’s market into a buyer’s market — reversing an almost decade-long trend. Before the pandemic, condo sales were strong, prices were rising and competition was healthy.
But after COVID hit, prices dropped, inventory shot up and competition was scarce. Of course, this sent investors into a panic. Many of these investors were highly leveraged and lacked the capital to weather the sudden downturn in the market, such as falling rents and surging vacancies.
That brings us to one of the pandemic’s most important lessons: Always have an emergency fund to account for vacancies and other unpredictable events.
Did the pandemic have any positive impacts on the housing market?
Yes. While the pandemic has been hard for sellers, it has created buying opportunities. This is especially true for first-time buyers who are fortunate enough to still be employed. In fact, the average condo now costs $50,000 to 60,000 less compared to just a few months ago.
Condos in the $500,000-range, especially those near subway lines, are seeing tremendous activity, with properties attracting multiple offers. So market volatility isn’t without its advantages.
But with vaccinations underway, this may soon change.
How has the pandemic affected the freehold market?
As I previously mentioned, COVID had the opposite effect on houses, pushing them into a seller’s market. With remote work being the new norm, many are choosing to swap the city for the suburbs and condos for houses.
As a result, the freehold market saw massive double-digit gains in both sales and prices. If trends hold, I predict the downtown freehold market will break the $2 million barrier this year. That will push more buyers (especially new ones) back to condos due to their affordability.
According to the latest figures, the average price of a detached home in downtown Toronto is $1,475,758. Compare that to condos, which cost $625,828. That means you can buy two condos for the price of one detached home — and still have money left over! Of course, it all depends on your budget and needs.
What advice do you have for renters?
Renters currently have the opportunity to put their savings to work by buying a condo, then renting it out to others. The most difficult task is saving up for a down payment. Fortunately, the government offers a range of programs and rebates to make homeownership easier.
Going from renter to investor has some big benefits. Toronto’s historically low vacancy rates mean you’ll always be able to find tenants (as long as you remain flexible with pricing). And as vaccines eliminate travel restrictions on tourism and immigration, rental demand will soar.
I’m looking to upgrade from a one-bedroom condo to something bigger. Should I buy first or sell first?
It’s a great time to up-size — especially since so many of us are working from home because of the pandemic. Although the one-bedroom market has picked up, you should always sell before you buy. This way, you know how much money you have to work with.
One of the first steps in your home buying journey is to speak with a mortgage broker. They can advise you on all aspects of home buying, such as taxes, deposits, mortgage payments and anything else you need to know.
Being able to waive financing on a property with multiple offers will also give you a better chance of landing it. That means knowing your mortgage pre-approval rate and having the funds on hand, unless you’re buying a pre-construction home that’s three to four years out.
Are condos still a good investment?
Condos are a great investment for several reasons. First, they provide an affordable entry point into the market for investors and first-time home buyers. Second, because of the pandemic, they are more abundant than they have been in years.
That translates to less competition and lower prices — but this will change once more people get vaccinated. While condo prices fell 4.7 percent in December, sales actually rose 75.9 percent, indicating that prices will increase in the near future.
Plus, thanks to government support, people have built up record savings in 2020. Many Canadians will be looking to invest their money in real estate. And because detached homes cost twice as much as condos, they’ll be investing in the latter.
In fact, with low interest rates, falling prices, massive inventory and lack of competition, there’s never been a better time to buy a condo.
Is buying a condo worth it in the end?
Let me put it this way…I bought my first condo (a pre-construction property) back in 2014 for $275,000. Today, that same condo is worth $575,000. That’s a $300,000 increase in value in just 7 years (or $42,000 a year)! So yes, condos are definitely worth it — if you have the patience to wait for them to appreciate in value.
For more information about Toronto real estate, please call Wins at 416 903 7032 or email her at firstname.lastname@example.org.
For listings, please visit www.winslai.com.