New Year New Outlook

2020… It will be known as the year of the pandemic. It will also be known as a year of a record-setting real estate market. We saw records for volume of sales and new high prices in many cities across Canada. To say there was a lot going on is an understatement. I have to admit I was happy to close my office and give everyone the week off between Christmas and New Year’s.

Although I don’t think we’re ever going to forget 2020 and perhaps 2021, life is always changing. 10 years from now you’re going to reach into a drawer, or an old coat, or old pair of jeans perhaps and pull out some sort of blue mask. It’s going to remind you of what we went through this past year. 

A NEW YEAR A NEW OUTLOOK

This year and for the last number of years, I have had this crazy tradition for January 1st. Some people do the polar bear swim. I’m not that brave (or crazy like my friends Len and Patrick). No matter how much snow there is or how cold it is I pull out my mountain bike and I go for a bike ride around town. I try to ride at least 20 kilometres. It’s my way of clearing my head and welcoming the new year. I feel alive and ready to go.  

This year it seemed there were many others that were ready to go, to hit the ground or year running.   Usually, the first 2 weeks of January are slower as people are just returning home from holidays or they are just getting back into the swing of things at work. Well what a surprise Monday January 4th was. Almost immediately the emails and phone calls began right at 9 a.m. It seems like with nowhere to go, people are anxious to do something. And so this trend of consumers buying and selling real estate, moving further away from Urban centres, buying Cottages to escape, renovating their homes to make them more comfortable during the summer has continued.

Prices climbed between 10% and 30% in some markets. 

Let’s face it, interest rates below 2% is the equivalent of money being free to borrow. If you are able to qualify for some sort of mortgage, secure line of credit, or any type of equity loan, I strongly recommend getting a review to see how and where you can take advantage of this once-in-a-lifetime situation.

There have been a lot of Articles coming out lately about the gap between the wealthy and the poor widening. Let me tell you something that too few people are talking about. Not everyone with wealth inherited it, many started off just like you, but they were able to make financial choices that allowed them to grow their wealth over time. You can be like the people that complain but don’t look at how to improve things or you can take some action. 

I see this everyday and have for over 30 years. I have a lot of clients I have dealt with over that time, many of whom have increased their wealth significantly and fall into the wealthy category. That said, I also have a lot of clients that are first-time home buyers. Frankly, I love speaking with prospective home buyers. The right choices now can have such a huge impact on your financial future.  If you are looking to get ahead and buy your first, second, third or fourth property etc. don’t get put off by people telling you prices are too high, or it’s not a good time to buy, or the market is too hot. I’m telling you what I am seeing. I’m telling you what I have seen with my 30 years of experience. 

When it comes to leveraging and borrowing money you borrow when interest rates are low. This is what the wealthy do. This is what they are doing. 

I’m sharing my opinions mixed in with my experiences. You have to take some chances and take action. Sometimes you have to extend yourself and step outside your comfort zone. To be clear… I’m not telling anybody to overextend themselves. There’s a big difference.  A prudent and planned course of action is what’s required. 

I often wonder and ask myself where are all those pessimistic reporters, bloggers and other so-called experts that have been telling us to rent vs buy and invest in the stock market  because it’s more costly to buy real estate and own your home than it is to rent? I would love to have a conversation with any one of those individuals and tell them how wrong they have been.

Real estate in most of Canada has increased consistently over the last 20-plus years. Real estate has consistently increased over the last 100 years.  Real estate is and always has been a good long-term investment. This is why I am getting numerous inquiries from experienced Real Estate Investors and Wealthy individuals to get pre-qualified so they can go out and acquire more real estate now. 

I look at how much the average rent is for a one-bedroom apartment, or two-bedroom apartment, or your average three-bedroom townhouse anywhere in the GTA, or Vancouver, Montreal, and when we see these rent starting at well over $2,000 a month and going up to $4,000 a month, I have to shake my head and say where are those pessimistic reporters that told everybody that it was a good idea to rent and not on your own property.

So let’s look at what the future has in store. 

We know that the real estate market in the GTA has been fuelled by new immigration over the last 5 years, averaging over 300,000 people annually. We also know that new immigrants buy a home on average within three years of arriving in Canada. Immigration halted in 2020 due to covid but the number of approved applications has not not halted, it’s just been delayed. Remember this… we will see a huge influx of new immigrants coming to Canada when covid pressures ease and they will ease. 

We know that interest rates have been low for over 10 years. Ever since the 2008 US subprime mortgage crisis. This is fuelling the housing market like never before. I’m not saying I want house prices to increase by 20 and 30% annually like they did in 2020. This is unsustainable however with fewer rental units available, and rent control laws that discourage builders and developers from building purpose-built rental units, we have a shortage of residential rental properties in the market. It’s a simple function of supply and demand.  Too little supply of rental units plus high demand equals ridiculously high rental rates. And when rents get too high, it pushes people into considering buying and owning their own homes. 

By the way this last part is not a bad result. It’s good to own your own home. It creates pride of ownership. We know this. I don’t understand why this is not encouraged. In a country that is geographically the second largest country in the world, with such a small population of only 40 million people, we should encourage home ownership. It’s a good thing not a bad thing.

Ready to take your next financial step? Let’s start with a conversation… you’ll be glad that you did!

Your best interest is my only interest.   I reply to all questions and I welcome your comments.  Like this article?  Share with a friend.

Steve Garganis 416 224 0114 steve@mortgagenow.ca