Often when talking to friends and acquaintances I’m asked, “what do you think about the real estate market and when will it pop?” My quick answer usually goes something like this, “if I had that answer I wouldn’t be talking to you, rather, I would be on a private island living out my dreams”. In this blog I would like to discuss three important factors in trying to unravel the secrets of the market: subjectivity, sustainability and speculation.
To be honest there are no secrets, it comes down to being well informed and having the type of representation that has your best interest at heart. Depending on individual needs the time to enter the market is whenever you are ready. As the old adage goes, “don’t put off for tomorrow what you can do today”. Buyers and sellers should be more concerned with what suits their lifestyle and where will they find happiness. If you are making a lateral move and staying in the same area with relatively the same housing needs, buying and selling are co-dependent. If staying in the same area your buying and selling prices are going to be comparable unless you plan to down/upsize. Trying to sell high and buy low in the same market is fruitless when trying to purchase similar properties. For example, if I wanted to sell my fully decked out custom home and buy something similar, I should expect to sell high and buy high. If I’m willing to purchase a “fixer upper” in the same scenario there will be gains to be made. If I’m a senior and looking to downsize in the same market I should expect to gain far less than if I downsized to a rural area. Clients can spend their lives speculating on the best time to buy and sell while precious time passes looking after a property that no longer suits their needs.
It may surprise many, but 2020 was a much better year for real estate than 2019. If you recall 2019’s market was impacted by new mortgage rules that took time to settle in with consumers nationally. The Toronto market continued to be impacted by the municipal land transfer tax while the Vancouver market suffered from the taxes placed on foreign purchasers. Both these scenarios fuelled the real estate market in Montreal as investment money ran from the added costs in the other two markets. In 2020 the market was deeply impacted by the Covid crisis in the early going. As the year passed and interests rates dropped, all three of the major real estate markets soared. As we look optimistically toward the end of Covid, speculation must be tempered with the slow rollout of vaccines and sky-high infection numbers through at least the first quarter. Recovery on the stock markets has been swift, bolstered by the prospect of a new government in the United States among other factors.
Recently the December market numbers have been released. In my last blog, I discussed the role working from home and the need for more space have had on the market. House sales in the Toronto market were up 8% in 2020 over the previous year, while Vancouver saw a spike of 22%. In both cases the combination of cheap money and limited supply has returned us to bidding wars for many listings.
This eventuality brings the question of consumer sustainability. While many are looking for bigger properties, while interest rates are low, will consumers be able to sustain mortgage payments and desired lifestyles if rates creep 2 or 3 points higher?
The real estate market will always remain subjective and speculative. Trying to pinpoint when to sell for the highest price and then buy at a low price is a fool’s game. A better strategy would be to enter the market with the knowledge that you would like to move based on your personal, financial and lifestyle needs avoiding transaction remorse.