 
GIVING YOU MY BUSINESS: BALLOON, BUBBLE OR AIRCRAFT?
The GTA has absorbed over 600,000 new jobs since 1996. It’s one of the biggest manufacturers of peripheral computer products. A continuing job growth rate of 2.4% is predicted and the dollar is reliably now at about 80 cents which helps the import of parts for Canadian manufacturers even as U.S. demand for efficiency is a higher indicator than money.
But my clients and others like them still worry that this strong real estate market has been a bubble that is about to burst.
During the 1980’s we saw prices double in approximately a 3 year period. There was a frenzy of activity during that time as many potential buyers felt a sense of urgency to enter the marketplace as though as a last opportunity.
Between 1989-1990 the market became unglued and prices descended year over year. The recession hit Toronto hard and the job market was compromised. It wasn’t until 1996-97 that market prices showed increases that recovered the loss.
Interest rates in the late 1980’s hit double digits. Today we are still fortunate to experience incredibly low interest rates.
During this present cycle, prices have appreciated between 4-10%
per annum. When adjusting for inflation, we are in many instances (such as Hamilton) not even at the same expense levels of the late 80’s. Oakville and Burlington however have broken all precedents.
In the 1980’s, many investors (80-90% of new unit sales) never contemplated the worst-case scenario and bought numerous properties hoping to “assign” some prior to closing with profit. When the market crashed, many weren’t in a position to close the sale. This tremendous sudden supply of inventory contributed to the decline in prices.
Today, investors are mindful of the need to evaluate the worst-case scenario and builders will no longer allow the assignment of properties. Consequently when you purchase a brand new property you must close the transaction. This change has helped ensure that the 80’s situation won’t resurface.
All of these factors lead us to believe that even though this market has been “bullish” for many years, reasonable prices and affordability are still very present. So if you want to make some good money – why not make it in the comfort of your own home?
MAKE MONEY: INVEST IN YOURSELF!
Clients often ask me, “When will this bubble burst?” Professional opinion is that this is not a bubble, so it won’t burst. Population patterns are the prime indicators determining residential prices and there’s no end in sight to migration rates that are bursting Toronto’s seams and radiating outward. Toronto continues to gain the lion’s share of newcomers from other cities, provinces and countries. It averages about 13 people per existing thousand residents that arrive to stay, and it takes on average 4 years for those newcomers to convert from rental to ownership. That means Toronto will be consistently growing from the 100,000 new folks looking for a new place to live this year.
YOU CAN’T FIND A BETTER INVESTMENT THAN PROPERTY
*These are national averages and the return on GTA properties is MUCH higher than those shown here.
*graphs: Morley Ringstrom; Caveat Emptor
Mortgage News: It’s now legal to use your credit card to make the down payment on a property purchase. It’s also simple to get a 107% mortgage. At 6 ¼% interest charged, it’s still a huge buying incentive for those with reliable incomes but not much saved. But if you’ve got some money – why not go for 3.45%!
CHANGE YOUR MIND’s INPUT - TO CHANGE YOUR LIFE’S OUTPUT!
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