09/14/2020
Let's talk about the upcoming mortgage deferral programs ending and the Toronto market...
We know the economy is unpredictable, but we also all have an understanding of basic supply and demand, right? Toronto is seeing two very different markets operating at the same time. On one hand, the sale and leasing of detached homes, especially further from downtown, is increasing rapidly. Buyers and renters alike want out of the city, more value for their dollar, and factors such as commute are no longer a large draw to the core.
Because of this, we are seeing a large amount of inventory within the city for both homes for rent and for sale, driving prices down, with less bidding wars (if any) compared to this time last year. So much can change in a year.
But another topic on the table that I am hearing a lot about these days, is investors waiting for properties to hit the market that are Power of Sale (aka foreclosure) deals, due to so many people on the mortgage deferral programs. While that speculation has some value, statistics show that less than 1% of Canadians have ever missed a mortgage payment, and paying your mortgage is more important to Canadians than even keeping food on the table.
That being said, if you were about to lose your home to the bank, don’t you think you would try to sell it before it got to that point? This is the more realistic outcome towards the end of 2020 as we see people’s deferral plans end, and drastic moves be made.
What that means is the market will experience a flood of inventory for sale, driving prices lower. But there won’t be many crazy “deals” of foreclosures for hundreds of thousands below market value. Keep that in mind as that seems to be everyone’s assumption. And of all of these people selling their homes - what do you think their next place to live will be? That’s right, they will probably rent. Demand for rentals will then increase, driving prices back up.
This is just an example of what can move the market and how unpredictable it could be. One might advise an investor “don’t buy a rental property in Toronto right now, you wont find a tenant to rent it out”, however, one also might say “Time the purchase of a rental property carefully so that you can get a great price and find a tenant to live in it”.
To bust the myth, no, I don’t think we are turning towards a huge drop in the market, however, Toronto will definitely experience mini buyer’s market swings, while the whole of the market over the next 12-24 months will simply balance out to normal levels, where inventory and demand are relatively equal and sustainable.
At least that's what I think is in the works!
What about you?
