Toronto Now a Top-10 Global Financial Centre. What Does It Mean for Condo Investors?

Welcome to the True Condos Podcast with Andrew la Fleur. The place to get the truth on the Toronto condo market and condo investing in Toronto.

Andrew: Hi and welcome back to the show. On today’s show, I want to talk about a new report that just came out this week. It’s called the Global Financial Centers Index. This report comes out every six months or so and it ranks the top world’s financial centers, the top Cs in the world. For the first time, Toronto has ranked in the top 10 of the world’s great global financial centers. Obviously, the typical cities that you would expect at the top of the list are there.

This year, London is ranked … This report, London is ranked as the number one financial center in the world, New York City number two, Hong Kong number three. Other cities, as you go down the list, Singapore, Tokyo, Seoul, Zurich and then you have Toronto sitting number eight. San Francisco and Washington DC rounding out the top 10. I want to talk about this report today and what the implications are for the Toronto condo investor. You yourself are looking at investing in the market or maybe you already are in the market. What does it mean for Toronto to be ranked like this and what should we do about it as condo investors? Let’s talk about that.

The first thing to note is that Toronto is the biggest climber this year in the top 10 and moved up three spots. It actually was never in the top 10 before. The last report it was at number 11 and now it’s at number 8. It’s the biggest jumper in the group. The other thing of note is that it’s the … In terms of North American cities, the only other city above Toronto now is New York City.

Think about that. Toronto is ahead of Chicago. Toronto is ahead of Boston. Toronto is ahead of Los Angeles, San Francisco, Washington. All these cities, Toronto has now surpassed in terms of a global financial center according to this report. It’s worth noting as well what this report is actually, the measurements that it’s using and the criteria they look at they say is business environment, number one. Financial sector development, number two. Infrastructure, three. Human capital, four. The fifth factor is reputational and general factors.

Those are the factors they are looking at as they do these reports. Toronto is, again, number eight. It’s the biggest climber. It’s the number two city in North America only second to NYC. This is very good news for the city. It definitely speaks to the strength of the financial sector in Toronto. It’s a good reminder as investors like if you’re looking, you know, sort of globally speaking.

If you’re looking at investing in different cities, it’s always good to invest in a financial center. That is where the money is. That is where the money is invested. That’s where the banks are. That is the most important city financially in that particular country. Obviously, Toronto is that for Canada and has been for quite sometime. Of course, maybe it wasn’t always that way. Once upon a time, not too long ago, Montreal was really the financial center of Canada, but now just a few decades later, Toronto is definitely supplemented Montreal for many years now and is growing in importance. The decades to come are looking very good for the City of Toronto as well.

What are some of the key things that I’m taking from this report? Let’s talk about that. The first thing is that Toronto is incredibly cheap by any standard. Toronto is very cheap. If you look at the prices of real estate in any of these cities in the top 10, certainly any of these cities above Toronto in this list are exponentially more expensive than Toronto.

I just did some basic research on Google as I’m preparing for this podcast. Look at the top cities, New York, London, Hong Kong. Average prices there is just … Again, I mean, you can’t even compare. It’s night and day. New York City, the average apartment price, recent statistics, is about 2.5 million dollars Canadian. That’s just an average price. That’s for Manhattan.

Central London prices are even crazier as you can imagine, about 3 million dollars Canadian is the average price in London. You start talking about Hong Kong, Singapore, Tokyo, it’s actually even worse. The price per square foot is $6,000 a square foot is normal in a lot of these cities. The average prices are just absolutely off the charts. In comparison to Toronto where, again, you had to think about how unique Toronto is on the world stage where we are a major world global financial center, yet the average person can still afford to buy real estate within a 5 to 10 minute walk of the core of the financial district in one of the world’s great financial centers.

When you think about that, you can buy a condo downtown Toronto still for as low as $200,000 Canadian which is absolute chump change which is less than 10% of the average price in some of these other global financial centers. You can still buy real estate and own it. It’s yours for less than 10% of the average price in some of these other world cities.

Not to say obviously that Toronto is going to overtake New York, London. Toronto is in the same league as New York and London that our trajectory is to become the next New York or London. I don’t think that’s going to happen in the immediate 20 to 30 years sort of time horizon. It might happen one day in our lifetimes, but it’s not in the sort of immediate timeline horizon, 10, 20, 30 years out.

Toronto is increasing in importance and it is gaining importance. The gap is narrowing between these upper tier cities and Toronto in terms of being a global financial center in terms of getting money in investment from around the world in terms of all these international banks and financiers opening subsidiaries and locations and having jobs and offices and spending time, money, investment in our city. It’s definitely important to understand this and to take note of this as a real estate investor.

That’s the first thing I want to point out is Toronto is very cheap and it’s certainly a relevant point to consider. The second thing is that Toronto is rising. Again, I just alluded to this. The fact that we are, more than anyone else on this list, Toronto is rising quickly. We’ve risen three spots on this for the only city in the top 10 that has done that.

There’s a very great quote from the report itself. I looked more into the report itself and there’s a quote from an investment banker in New York City and he says, “Toronto seems to get stronger and stronger. A number of our rivals have opened up subsidiaries there.” It’s just a great sort of summation quote from somebody outside of Toronto that sort of indicate that Toronto is a rising star in the world scene in terms of finance.

The third point I want to talk about is that the whole world is now really looking at Toronto and is looking at Toronto real estate. As local investors here, we need to take note of this. We need to understand the opportunity that’s in front of us and we need to know that the days of cheap real estate in Toronto perhaps are numbered and you might as well participate in this market now because the whole world, again, is looking at Toronto.

I just came back from a meeting. Personal story here. I just came back from a coaching program that I’m involved with. Some mastermind sort of program. I was in a great meeting all day yesterday. Just people who come from all over the world, business people and entrepreneurs. Business owners and entrepreneurs from all over the world come to this particular program that I’m part of.

Any time I mention in the conversations to people from around the world that I’m in real estate, that I sell condos, everybody has the same reaction. “Oh, I’m hearing the condo market is very strong, it’s booming and I love the fact that the Canadian dollar is low right now. I’m sort of thinking about getting some real estate in Toronto.” This is the reaction that everyone seems to be giving me when I’m talking to people from outside of Toronto.

Not only that, just anecdotally recently in the past couple of months, I have noticed a big increase in inquiries from people, Canadians or people who had ties to Canada who are earning US dollars or other currencies. Their renewed interest in Canadian real estate. Anybody, whether you’re Canadian or whether you’re American, or whether you’re anything else and you’re earning dollars in a currency other than Canadian, you suddenly have so much more buying power because the Canadian dollar has gotten so low in recent months. The news just this morning is that the Canadian dollar is now at an 11 year low.

It just seems to be every week now it just is lower and lower. It’s a 6 year low. It’s a 7 year low, 10 year low. Now, today’s news, it’s an 11 year low. The lowest point it has been in 11 years. Certainly, the opportunity is there and a lot of people are taking advantage of it. Now, anyone who’s earning in a currency other than the Canadian dollar whether they are Canadians, expats working in New York City or London or other places, they’re looking to invest in Canada. They see the opportunity is now or whether they just a lot of …

I’m getting a lot more calls just from Americans in general who … A lot of American real estate markets have rebounded. They don’t see as much room for growth there and they see an incredible opportunity to purchase Canadian real estate now that the dollar has dropped so much in recent months. Again, just to recap the point so far. Toronto is very cheap by international standards, number one. Toronto is a rising star, number two. Number three, we talked about that the world now is really looking at Toronto.

Number four, the segue now would be that after these points is that the opportunity to invest in Toronto is now. I mean, really I truly believe there’s never been a better opportunity to invest in Toronto than right now. The growth that the city I think will experience over the years to come is going to be phenomenal. The days of cheap real estate, I’ve talked about this so often on this podcast. The days of cheap real estate in Toronto I believe are numbered and I believe in the future you’re going to look back at these days and say, “Man, I can’t believe we used to be able to buy condos in downtown Toronto and other places, in similar places for so cheap.” For $200,000, $300,000, $400,000.

People are just going to look back in the future and just shake their heads in disbelief if they didn’t purchase at this time and those who are purchasing now I think will look back and say, “Wow, what a great, wise decision that I made. That’s one of the best decisions I’ve ever made was to purchase in Toronto.” As the common phrase with many of my clients, you’re looking back years down the road and it’s always, “I wish I had bought more.”

The final point I just want to talk about on today’s episode is somewhat related to another news article. I’ll include a link to this in the show notes for this episode. As well as the show notes for … As well as the link to the global financial centers piece also include a link to this article which is just in the paper today, Globe and Mail.

Basically, a BMO study has come out and they’ve shown that condos are better investment than the TSX. Think about that. A bank, an investment branch of the bank actually, Nesbitt Burns, has come out and admitted essentially that condos are a better investment over the last 15 years. They looked at 2000 to 2015. If you had just purchased condos, you would have basically done better than putting your money in the TSX or in the stock market in general.

Wow. If ever there was a, I guess, you could say damning statement against the stock market, it would be by the stock market industry itself. Coming out and basically admitting, “Yeah, you know what? These condos are actually a pretty good investment.” The numbers are even better really than what their simplistic studies show. Basically, they’re just looking at average price over time. They don’t count for the fact that the average size of condos has gotten much smaller. The rates of return are actually inflated, even beyond what the basic simplistic look at the numbers have said.

There you have it. Right from the horse’s mouth itself. If you don’t believe that for me when I say the condos are good investments, then maybe you’ll believe one of the investment banks as basically saying that selling stock market … They’re basically admitting that condos are better than the stock market. Wow. Bombshell. Really interesting to see that and I think it’s definitely a wake up call. Again, for anyone who’s counting on the stock market to take them to retirement, to make them wealthy, unless you’re an insider, unless you have some specialized knowledge, unless you have some specialized connections, good luck with that. It’s a very difficult game to play.

Condos, investing in real estate like that is maybe not as sexy, maybe not as fun and interesting. It’s maybe a little bit slow and steady, but for me, that’s perfect. That’s the way to grow wealth. It’s the best way to grow wealth. The most proven way over time to grow wealth is through cash flowing real estate. Okay, that’s enough from me for this week. I hope you enjoyed this episode.

Again, for all the show notes, links to the things I’ve talked about on this episode, just head on over to truecondos.com/podcast and you can find the show notes for this episode as well as all the other episodes in our illustrious podcast series that we’ve been doing for over a year now. Okay, hope you have a great week and we’ll talk to you next time.

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