Word on the Street in Toronto…

Word on the Street … What Realtors are thinking and what some are saying.

 It Can’t Happen Here, Ever — Right?

 

A lot of small investors and some who have become bigger players in real estate will tell you – to put your money into real estate. It’s your best investment period.

You don’t even need to worry about it, just buy and hold and keep for a long time.

And after many years – miracles happen, the value goes up and Wow you’re rich.

Don’t think about it too much, don’t read the papers or listen to the news it will only confuse and confound you – and you will be paralyzed to do anything.

 

Action equals results, so think only about the ability to carry the property, that is cover your costs of ownership of the asset. And oh yes – don’t forget to borrow as much as they (the banks) will lend you – take ever last dime they give you and put it all into your real estate investment. This will insure you are on the fast track to wealth, quick or quicker riches while we are young.

 

So leverage to the max young man (or woman) and invest. This is the biggest secret to getting rich – using the magic of opium ; rather OPM (other people’s money – and make it all on the spread between your cost of capital and what you can earn from the opportunity. The greater the spread the richer you will be…

The Wall Street Journal reported recently that the U.S. and Canadian border services are stopping a lot of Chinese carrying undeclared cash into the country…(would you rather have the government print the money? – just a side question) this can’t help the economy because it can’t be spent buying things here right?  True there maybe legal and ethical considerations that are being addressed here. But that money will simply go elsewhere.

 

Money they say flows towards the least point of resistance. Why are we putting up a resistance? Some other country or region of the world will get it or like the supply of drugs into North America it will enter using increasingly creative methods.

The word on the street in Toronto real estate is that since the introduction of the federal anti-money laundering legislation (FINTRAC) a lot of Eastern European, Russian and South American money that use to flow here and into real estate has stopped. “And these people use to buy and buy a lot of real estate here” say a few central Toronto realtors.

 

We lost the Americans a few years ago when our Canadian dollar started to soar because of our great supply of petroleum and our productive economy. The American dollar would be able to purchase about $1.45 Canada and as of today

the American dollar would get less than $0.99 (below par) (less exchange rate fees). This is huge. So the American investor is less likely to bring dollars here and buy real estate.

 

A similar but more dramatic currency problem is the currency crisis of Iran – their monetary crisis and horrific devaluation has negatively impacted both the buying and building active of a lot of investors in Toronto real estate. As it has temporarily taken out another player in the market – who use to fund their purchases and projects with their resources and assets in Iran.

 

These are just some highlights of the various purchasing, investing and developing group that have been helping fuel the growth and robustness of the Toronto real estate market place.

 

There isn’t any hard data regarding the volume and dollar value these investors have been bring into Toronto,Canada some real estate professionals have suggested they represent approximately a third of the market place however a significant catalyst for the market place flooding it with liquidity, driving prices and the competition up for the rest of us. We may have escape the last potential recession because of it – thankfully.

So it could hurt and hurt a lot when the currency flow is no longer there.

 

The Federal guidelines with respect to borrowing money for real estate have also tightened over the last 18 months with shorter amortization periods (25 years), more equity requirements (20% min) which will drive up the monthly cost of carrying a residential purchase. With GDS and TDS ratios of 39% and 44% respectively will be applied to application for mortgages along with a ban on mortgage insurance for properties over one million dollars. You are going to need a mortgage adviser to help you understand what money may be available for a loan to you and your family for your real estate purchase. And don’t assume you will get the needed money – make your offer conditional upon appropriate and satisfactory financing or you could get into trouble.

Hard times ahead for first time  buyers and move up buyers of Toronto real estate ahead.

Hick up ? Or the new normal? We will have to wait and see…

 

These moves say real estate practitioners affects mostly first time purchasers who would enter the pipeline and push everyone else forward and up, through it to the top. It just slows things down. All this being done without increasing interest rates at this time – because the economy could not handle that – a soft landing for housing being engineered by the Federal government? Trying to keep real estate affordable in the country for everyone?

 

Others from the local economy will have to step up and step in, into the void and a possible re-evaluation may take place of the real estate assets that come to market, get appraised or refinanced. However things are projected to remain steady in the short-term say the Banks’ economic forecast for the Canadian real estate market. Do you get the feeling there is less money and investors/buyers on the streets these days? Is that why some developers and developments have slowed down or put some of their projects on hold?

 

Those that are here and deep into projects/investments with no turning back may soon run short of funds and may get desperate for liquidity and so may have to get creative…watch out – say business people and financiers – interesting things could happen.

 

Toronto is still shining like a diamond with the steady inflow of immigration and job creation – Canada reported 40,000 new jobs last month. And these people need a place to live and work. They also bring money and ideas with them to help the economy’s momentum forward. Supply and demand seem to be holding steady at this time with no great inventory. Things are working well at this time in Toronto and things appear healthy. With the right measure of concern and care the government appears to be trying to keep a steady hand on the overall economic health of the country. However the worry by some is whether the best efforts will breed unintended consequences –which may be painful in the short-term as we try to achieve a good and healthy re-set for the longer term.

There are reasons why some believe housing wouldn’t crash in 2013 I hope they are right…

Steady as she goes…

We would love to talk to you about your real estate investment(s). We can also assist with asset/property management of your property in the Greater Toronto Area. Let’s connect over a coffee to discuss needs and strategies – call us when its most convenient and we will make ourselves available for you.

Envoy Capitol Realty Inc., Brokerage      Toronto , Canada

Twitter : EnvoyCapRealty

Blog : http://www.capitalmoves.blogspot.com

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