Hello everyone, I’ll start this post with a disclaimer:
Read this post at own risk, the content posted here is intended for entertainment only, and not for providing information for transacting purposes. Investors, Buyers and Sellers should all consult a real-estate professional in person and discuss their wishes fully and thoroughly with him or her. Call me at 416.441.2888 x 678 to set up a free one-on-one consultation.
And now to the meat:
Since 1999 we’ve seen a growing number of new condos coming online, with numbers going up to approx 20,000 per year sold and constructed.
In terms of prices, during 1999 we’ve seen prices at around $200 PSF, or approx $140,000 for a 700-sq. ft. unit. Parking stalls would have sold for $15,000 or less. Buildings were a mix of new construction, conversions and additions (existing short building gets converted plus couple of floor put on roof).
Now imagine 10 years of nonstop selling and building of new condominium developments in the GTA – and these are real purchases, not sub-prime, and they are all sold-out.
How come? so many have asked and still, 10 years later are scratching their heads in disbelief: “The crash will come I know it and then I’ll buy my cheap palace!”. How many times have I been told that? too many to count. But there are reasons:
(1) Skilled immigration bring to the city 60,000 to +120,000 of new residents each year. If only 10% of these buy properties, you’re looking at possibly 15-30% of new properties being bought be new Canadians, who reside in their units.
(2) Investors – local, national and global investors send money to Canada as they deem it a safe place (politically stable, no revolution looking anytime soon) where they can convert their hard earn foreign currencies into long-term investments, and maintain a god value (look at the US Dollar vs. the Euro). International investors pay 35% percent down to enjoy a Canadian mortgage. Again, so subprime here, and even less risk then a traditional 80/20 Canadian mortgage. Lets say 15-25% investor units in stock.
(3) Renters are the other side of the investor equation: they cover or subsidize the carrying costs on the investors condos, moving in and out of buildings keep them “fresh” and not stale, and condo renters are usually younger and single, renting smaller units, which make for the most of investor units – a perfect fit for symbiosis.
(4) Empty Nesters: you’ll find them buying 2+bedrooms, larger units in higher-end building. These condos come with the latest of design and technology, feature the best amenities and 24/7 personal concierge. They come with a larger price tag, but remember these people just sold their large homes so they have the funds required.
(5) Internal Immigration – people moving to the GTA from the suburbs for work. These could be university-educated people, professionals, younger or older: the jobs are concentrated here and commuting is a punishment from hell. My estimate is that up to 50% of buyers belong to this group, and that also includes families putting up money for the younger generation to buy a property, while they can afford it.
(6) All other buyers will purchase because of a variety of reasons: divorces, moving around, upgrading, changing jobs, wanting a nicer building, etc. This group is a bit harder to define however it will include all those who purchased for other reasons then the above mentioned.
© All Rights Reserved Yossi Kaplan 2008.
As always, looking forward to your calls and emails,
Yossi Kaplan, MBA
Harvey Kalles Real Estate Brokerage LTD.
416.441.2888 x 678
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