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October 27, 2005
Should I buy or sell my investment property and cash out today?
I get asked this question often. There is no simple answer.
I know how you feel that it's tempting to cash out, prices are so high. This is a difficult question to answer precisely as really, nobody can predict what will happen in the future. Many are now thinking that the market may have peaked in the GTA, but only time will tell.
There have been a few articles written in the press lately about the over-abundance of condos currently on the market and more coming on stream in the next 2 to 3 years. This could potentially create a supply problem and prices could soften in the condo market. Regardless, if you have equity in your investment property, then I would understand that you may wish to take out the equity and move it to other investments that may give you a higher return over the next 5 years or so.
Over the past 3 to 5 years or so the rental market in Mississauga has been very soft and I have noticed the quality of tenants has dropped significantly. This is due to our extremely low interest rates and many people that would have otherwise rented, purchased instead. The vacancy rate in the GTA is very high and this has impacted investment properties.
I help clients with many of their rentals per year and I am finding it much more difficult to find good quality tenants over the past few years. You may read the latest TREB (Toronto Real Estate Board) rental property report in pdf format.
Even if we have a correction in our market, I don't think it will be too significant. We are not in a boom similar to the investor fuelled boom of the mid to late 80's so I think (and hope) that we will not ever see the bottom fall out of the market the way we did in '89 to '95.
So there you have it. I am sorry I cannot predict the market more accurately for you. When push comes to shove, you will have to make the final decision.
All the best, and if you want more information, please email me.
Mark
As of April 7th, 2005
The real estate market in Mississauga and the surrounding areas continues to be very active. Homes are selling well, average prices are down slightly, but most predict that the market should continue to keep this brisk pace for at least the next month or two.
An article in the Toronto Star boosts positive outlook:
Many in GTA are house hunting - cmhc-schl.gc.ca - More than 220,000 households in the Greater Toronto Area, or GTA, are thinking of buying a home this year, according to a survey by Canada Mortgage and Housing Corp., or CMHC CMHC's survey, conducted this past fall, indicates Toronto's housing market will remain hot this year. The survey found 13 per cent of the GTA's 1.7 million households plan to take the home-buying plunge this year. Toronto Star article
There is much optimism in the air about our local real estate market. This is grounded in the fact that our economy is doing well, interest rates are extremely low, the job market is strong and the weather is improving daily!
As of March 7th, 2005
The real estate market continues to be very active and homes have been selling well (see average price graph) for the past few months. Near historic lows for mortgage interest rates have helped.
The spring real estate market is nearly upon us and sales continue to be brisk. We anticipate the real estate market will continue to be strong over the next month or so, especially if interest rates stay low. It will be interesting to see if the market will sustain the momentum over the next few months and through the spring market.
The week of March Break and the week afterwards in the GTA is a very high listing period. It can also be a time where many sales occur as people take time off during the March Break to buy a home. This is an excellent listing period and a great opportunity that must not be overlooked. If you are thinking of selling this spring then this may be the best time of the entire year to put your property on the market.
I can provide you with a complimentary over the internet market evaluation.
I hope this finds you healthy and happy,
Mark
As of January 3rd, 2005
This is the opinion from RE/MAX Ontario of what is currently happening in the Mississauga and Ontario real estate marketplace.
For Ontario, balanced conditions have started to emerge for the first time in more than four years, said Michael Polzler, executive vice-president for ReMax Ontario-Atlantic Canada.
"With supply and demand on more even ground, housing values are expected to moderate somewhat in coming months -- unlike 2004, when average prices had strong upward momentum."
Mr. Polzler said the market began to wind down in the final months of 2004, earlier than expected.
Only older, established communities in Toronto and other major cities are bucking the trend.
Demand for properties in blue chip neighbourhoods generally outpaced supply, Mr. Polzler said, leading to bidding wars in the most popular areas.
When final figures are tallied for 2004, ReMax estimates 85,700 houses, condominiums and townhouses will have changed hands in the Greater Toronto Area, with the average price peaking at $318,000. That's an 8.5-per-cent jump in price over 2003 and marks a record for number of deals closed.
For 2005 in the GTA, ReMax is calling for a 3.5-per-cent rise in the average price to $329,000.
Gregory Klump, chief economist for the Canadian Real Estate Association, predicted the Bank of Canada will hold its trend-setting bank rate steady until at least the spring after the Canadian dollar spiked up against the U.S. currency and economic growth began to slow in this country.
Those relatively low interest rates will keep the housing market robust, Mr. Klump forecasted.
Toronto Housing Market Outlook for 2005 courtesy of CMHC - pdf document
It is interesting that many of the experts are predicting prices to rise for 2005, but not as much as in 2004. I would agree with this line of thinking. The last 3 months of 2004 showed signs of a more "normal" market. Currently, in early January, the market is very good, but not 'on fire' the way it was in early January of 2004.
As long as rates stay about where they are we should see a healthy real estate market for 2005 with modest price increases.
So, if you are thinking of selling and buying a homes this year, should you buy or sell first? I've had many clients purchase before they sell. I just want you to have all the information so you can make the best decision for yourself and your family. You may read more about buying or selling first here
Read about what happened in real estate last month.
Read real estate market predictions from a US perspective
I wish you much success, good health and happiness in 2005 and always!
If you would like to discuss issues like this or other questions you may have, please email me at anytime .
Mark
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