Here’s what we know for sure about timing the real estate market: it’s impossible. Anyone who tells you otherwise is lying to you.
The goal is always to buy low and to sell high. That will never change. So when prices are low (we’re looking at you, downtown condo market!) that should trigger an active buyer market, right?
Yet, against that logic, that’s not what we’re seeing. People who are waiting on the condo market to soften and then pounce are missing their window to buy low.
Anyone who’s chatted with Donny knows how he feels about the damaging effects of paralysis by over-analysis. Back when the US dollar was on par with the Canadian dollar in 2007 - which, everyone knew was always going to be a temporary blip - buying property in the US made a ton of sense. We all knew that, as well. Including Donny. And yet, he did not buy. That transaction would have made a fortune in currency rates alone! We talk about the 3 ways real estate makes an investor money, this would have been a strong 4th!
That missed obvious opportunity led to a lot of change over at Team Mangos. Never again were we going to let ourselves or our clients miss the chance to pounce when the market presented tremendous opportunities.
Since the dollar-parity situation, we’ve created absolutely incredible wealth by “buying low” when the real estate market created a temporary blip in supply and demand.
Want some examples?
2017 “collapse”
There was a time after the supercharged run up leading into the beginning of 2017, when Toronto (and even more so in the GTA) saw sales fall off a cliff. Governments intervened, put in a stress-test and made buying a lot more difficult.
That’s when serial-investor Donny scooped up an amazing property at an amazing price in Riverdale. In normal times, the house would have sold for at least $200,000 more. Yet, it didn’t. Donny bought, renovated and now lives in this home. A similar house on same street just sold for $1,600,000 more than Donny bought for. Of course, the renovation cost a pretty penny. It did not, however, cost $1.6m to renovate.
This opportunity was created due to an over-exaggerated reaction to market changes.
End of 2018 “calming”
The market, again, for whatever reason was going through a lull. Sales were down. Confidence was down. And opportunity was UP! We picked up a house for $575,000. The goal was to renovate, rent and refinance (see: Mangos Method). After a renovation to add a legal 2nd suite for about $75,000, the home is now worth $925,000 and is an amazing income property.
This opportunity was created due to an over-exaggerated reaction to market changes.
EARLY COVID-19
Between the two of us, we’ve secured three properties during COVID-19. Two semi-detached houses and a condo, all bought on over-reaction and opportunity. None of these need to be renovated, though all homes could. All three of these were great decisions that have - and will continue - to create huge wealth.
On a more personal note, and bringing up #lifegoals, Natalia was able to buy her own Downtown Toronto condo. She had her eyes set on this in her five year plan. She was able to do this in just over one year into that plan.
This opportunity was created due to an over-exaggerated reaction to market changes.
That’s what opportunity does, folks. It rewards the person that gives it attention.
Where are we now?
While the whole of the GTA’s prices have soared, downtown condos have reversed the trend. They’ve come down in pricing - a lot. In some cases, we’re seeing over 10% reduction in less than a year.
Rent supply is up, and demand is down. Therefore, Economics 101 teaches us that prices are down in the rental market as well.
We all read (and share) articles that “confirm” our thoughts of a mass-exodus from downtown and the “End of the Workplace” as we know it!
That’s it - it has been decided, nobody will ever work in an office again! To be asked to is blasphemy and ludicrous!
Hang on a sec. Are we leaving behind what we thought Toronto would be like in 2030? All the infrastructure projects, all the planning, all the investment… abandoned?
If it’s really the end of the workplace, then isn’t that the end of downtown Toronto? The end of sporting events. The end of theatre. The end of socialization. In fact, it’s the end of urbanization, isn’t it? The end of all cities!
Good-bye Toronto.
So long, New York City.
Nice knowing you, Paris.
We had such a good run!
This is all the general public can see right now. This is what panic does, friends. This is over-reaction. This is exactly what we’re talking about when we discuss opportunities with our clients and amongst ourselves.
Do we really think that downtown prices are going to fall much lower while non-downtown condos and all houses are continuing to increase in price? This disconnect cannot possibly be sustainable, because they are forever related.
When people are faced with the choice of paying a fortune for a property not downtown or making the sensible choice to own the cheaper and superior downtown Toronto condo, they will make the right decision and they will buy downtown.
We see this inevitable outcome. We’ve witnessed this type of behaviour in our industry.
When reaction is over-exaggerated, it creates opportunity.
As really active Realtors in the Toronto market, we certainly feel the direction of change in the market well before the stats report on it. That all comes from experience, and the instincts that experience have created.
We’ve read this book. We know how it ends.
What’s going to happen?
The likeliest scenario that we can project is that the condo market returns and reclaims its value. It may be a ROAR, it may be a whimper. Regardless, it will return and prices will increase.
Is it possible that prices slump even further? Absolutely. Though, we feel the worst slide is definitely behind us. This winter is probably going to be the absolute best time to be a buyer (sorry, sellers). Then the trend will reverse.
People will want to be back downtown. The Leafs and Raptors will play at Scotiabank Arena. Restaurant culture will return. Metrolinx is just finishing up on our new glorious indoor bus station, to bring all these people back.
What should you do?
Flat out: if you are a downtown condo owner thinking of selling, don’t. Just don’t.
If you are a first time homebuyer looking at downtown as an option, there has never been a better time to be you. Rates are low, prices are down, there is choice in the marketplace. And this chance will not last long.
Our eyes are always on the investor side of the market, and if you’re an investor WHAT ARE YOU WAITING FOR?
Think of it this way, we think it’s really simple and concise:
If you could go back in time and buy a condo in downtown Toronto - knowing what you know about how amazing this city is becoming - would you?
Well, you can. Prices are approaching where they were nearly two years ago. Buying today is basically going back in time and buying in the past.
If you’re a potential investor and you’re considering only cash-flow right now (comparing rents to carrying costs), the numbers for the next few months may not be great. Granted. Are you willing to lose a few months of rent for a potential 10% appreciation in a year?
*for a $500,000 condo, that’s $50,000 in potential appreciation in exchange for $5-10k in reduced rents? Not a bad trade at all.
A vaccine is on its way. Immigration in Canada is being loosened (1.2 million immigrants will become residents in Canada in the next 3 years - you can bet on half of them settling in the GTA). Most white-collar jobs haven’t been cancelled.
Every single one of us expects real estate prices to increase over the years. You’d be silly to dispute this. We know this, banks and lenders know this. Real estate is a sure thing.
This blip is short-lived, and we’re in it right now. It’s very clearly in front of us. Normally you need hindsight to spot the best buys! It’s not every day you spot the deal when it’s still live (excluding Black Friday, of course).
The question is, are you going to take advantage of this opportunity or are you going to think about this in a couple of years and tell yourself “you should have when you had the chance”?
Want to talk about this?
We’ve never ignored a request for help or advice. If you want to chat about any of this and how you can benefit and get ahead, email natalia@teammangos.com or donny@teammangos.com.