Trump threatens the Toronto condo market?

TRANSCRIPT:

Hi, Andrew here and I want to talk to you about what’s happening the condo market this week. First, I just got back from handing the keys off to the new tenant who’s moving into one of my units. Quick tip for you and that is when a new tenant moves in, just include a small little gift card, or a bottle of wine, or something small just to set the tone for the new tenants who are moving in. They really appreciate that and it just really sets a good tone for your relationship moving forward, so it’s something I like to do. Now, let’s talk about the news. The first article I have here is from The Globe and Mail and it’s, “Trump risk hangs over the Canadian real estate market.” Basically, they’re talking about what is the Trump risk to Canada’s economy in the lofty real estate markets in many big Canadian cities? Trying to figure out how the Donald Trump presidency and his policies might effect the real estate market.

They talked to an economist from the Canadian CIBC Bank and basically getting his opinion. Reading the article, basically nobody knows. People have ideas, and thoughts, and opinions on what might happen, but nobody really knows what Trump is going to do. He’s Trump, he does things differently. We’re trying to figure this out as we go along and economists are doing the same thing. Basically, this economist believes that it’s going to be a strong US dollar, a weak Canadian dollar, continued low interest rates. He doesn’t see any interest rates rising in Toronto. The other big thing he mentions is that the … He’s not worried about the Toronto real estate market, because the economy in the GTA in Ontario is very strong and you have a lot of people coming into the GTA, especially from Alberta and other parts of the country. That’s the article there.

The next article is from the National Post and the headline is, “Toronto condo sales push to records as buyers get squeezed out of the low-rise market.” Talking about the latest stats from Urbanation and obviously continues the theme that we’ve been talking a lot about lately in these videos and in my emails, and in my podcasts for the past several months if you’ve been hopefully paying attention to those. That is basically that the low-rise market is just so expensive, people can’t afford it, so you have all these new buyers coming into the condo market and that’s really driving things there. What’s interesting, the most interesting thing that I found from it was that Urbanation’s actually predicting they’ll be less condo sales this year than last year.

When you see that you might think, “Hmm? Does that mean there’s something wrong with the market?” No, quite the contrary. It just means that the market is so hot things are selling so well that there’s no inventory. There’s usually a large amount of condos that are just sitting there ready to buy that were launched six months a year, two, three years ago, but that existing sitting inventory pool is dried up. There’s nothing to buy essentially. Inventory’s at all time lows and so there’s going to be actually less sales this year than there were last year, because of that. Of course, that means prices are going to rise dramatically, because of that.

All right. The next article I want to highlight is from the Star, “Foreign buyers behind only 5% of Toronto home purchases in 2016.” This is talking about some research that the Toronto Real Estate Board put out and basically again, continuing the theme that foreign buyer component is very, very small in our market. Obviously, TREB is doing a little bit of PR here and hoping that there’s not going to be a new foreign buyer tax brought into the GTA, like there is in Vancouver. Nobody would like to see that. Again, they’re stats, just highlight that, less than 5% of real estate transactions involved a foreign purchaser, and even a lot of the foreign people who are buying, they’re buying it for family members who live here to live in, or else they’re buying it to rent. Again, it’s a very small and relatively insignificant piece of the market. That’s the article there.

Finally, the last article I want to touch on is also from the Star, it’s an opinion piece and it’s talking about keeping Toronto affordable will cost us all. Property taxes may have been kept low, but fees and costs for city services are quickly rising. This debate that we keep having in the city of Toronto about, should property taxes be raised? Are they too low? There’s really no debate, everyone knows the taxes in the city of Toronto are really low. They’re the lowest of anything in the GTA by far. The article’s basically saying that the taxes are low, but all these other fees are going up, so that’s how the city’s doing it. I just want to point out one thing and that is, whenever there’s new taxes put on real estate, we as investors, we bear the burden of that. It sucks, like we don’t want to pay these new taxes, but all these new taxes on real estate are inflationary pressures that will rise the value of … That will increase the value of rents and it will increase the value of our properties. These are all inflationary pressures.

Then that’s exactly what’s happening, when your property taxes go up, what are you going to do? You’re going to increase the rent, so that you can still afford to pay for the property and make a profit. If your closing costs go up because development charges increase, what are you going to do? Well you’re just going to sell your property for more. If it doesn’t sell for more to recover those costs, you’re not going to sell, right? These are inflationary pressures, not something to worry about. Although, they do hurt us and we don’t want to pay them, but these are not things that we need to be worried about as investors, because ultimately they’re part of the reason why we’re investing, because the assets will appreciate and the rental prices will appreciate. Okay, there you have it. That’s the news for this week. I hope you enjoyed this video and if you did, you can go ahead and share this with somebody that you know or somebody who’s interested in investing in condos. Until next time, I hope you have a great week.