Today we’re going to tackle the answer to a question we get almost every day: Is now a good time to buy a Toronto condo or house?
And the answer is….wait for it…IT DEPENDS. Unfortunately, there isn’t a Yes or No answer to whether or not you should invest in real estate. It really depends on a few factors:
How Much The Alternative Costs
Interest rates are insanely low right now and a first-time buyer could carry the mortgage for a $324,000 condo for $1,233 a month. (20% down, with a 3% interest rate mortgage amortized over 25 years).
Renting in Toronto is expensive, and in many cases, it’s actually cheaper to own than to rent. Of course there are costs to consider other than your mortgage: in the above example, maintenance, taxes and utilities add $600 to the monthly expenses for a total cost of $1,800 a month. When you own, part of your mortgage payment is building equity in the condo that YOU own, so if you have a ready downpayment and are paying down your landlord’s mortgage, now might be a good time to buy.
Your Investment Options
In the past few years, we’ve noticed a trend: Buyers with big fat cash down payments in a bank account. They’d been burned by the stock market and depressed by the meagre interest rates being offered by the banks and turned to real estate as a place to park their cash. If you have cash sitting in a bank account earning 0% interest (before inflation), you might want to consider getting into the real estate market.
There’s a Lot of Inventory
As Toronto’s real estate market has moved into a more balanced market (where the number of Buyers no longer outweighs the number of Sellers), there is greater inventory, meaning you have more to choose from–especially when it comes to condos. Gone are the days where there were only a handful of properties for sale, forcing you to make offers the first day properties hit the market. Of course if you’re looking to buy a house in downtown Toronto, the choices are still slim and competition high. So if you’re a picky buyer or have unique needs, your dream condo may just be out there right now.
More Negotiating Power
While Toronto Sellers are proving to be more stubborn than expected, you likely have more power to negotiate the price of a condo or house today. While Sellers aren’t giving their properties away, the condo that used to sell in 6 days for above the asking price is now taking 25 days to sell and selling for a few thousand dollars under asking. So if you like to win a negotiation, the chances of that happening now are greater than they have been in a while.
How Much Risk You Can Handle
What would happen if you lost your job? Do you live paycheque to paycheque? Could you still afford that condo if interest rates went up? It’s important to know how much risk you can handle and how you would cope with changing circumstances. If the only way you can afford to buy a home is if absolutely nothing in your life changes, then now might not be the right time to buy. Things change. Having a slush fund of cash, transferable skills and being easily re-employable are all important factors to have in place before you commit to buying a condo.
How Much Uncertainty You Can Handle
Nobody can predict the future and we’ve seen in previous blogs, there is 100% disagreement from the “experts” as to what is going to happen to Toronto’s real estate market. Will you be able to sleep at night not knowing what the future will bring?
If you’d like to discuss if now is the right time for you to enter Toronto’s real estate market, give us a call or send us a note.