18 August 2020 ~ 0 Comments

Plummeting rental rates in Toronto

For those of us who own investment real estate, the recent news surrounding monthly rental rates falling (reported as high as 22% in the downtown core) can be quite alarming.

We went from what seemed like a frothy real estate market for all urban housing pre-covid, to one where only farmland, cottages and houses seem to be getting buyers attention.

The condo market has shifted to a more balanced market, away from just mere months earlier being a hot sellers market. Add in the rental condos that are piling up, and must this all be due to a mass exodus from our cities core caused by the pandemic currently going on?

That explanation would seem plausible, except, that the condo rental market was already showing signs of cooling off as early as the fall of 2019. And this wasn’t a bad thing. Affordability is the key to a healthy real estate market, and that lies at the centre of what an average investor wants.

The new rule changes throughout the city of Toronto regarding airbnb’s came into affect in the spring of 2020, adding thousands of condo units to both the long term rental pool and resale markets. May Warren from the Toronto Star wrote about it and you can find the article here

This impact is playing a much bigger part on rental prices and condo resales than is the theory that people are fleeing the city core due to the coronavirus, in my opinion.

“Working from home or, I can work from anywhere now” is playing little part in the higher than usual vacancies. Trust me, I’ve worked from home on and off for the past twenty years. It’s great when there is a snow storm outside, but that’s pretty much about it. The idea gets old pretty quickly.

What is adding to vacancies is that we have had massive layoffs, mostly as of now targeted at lower income levels and jobs, many of whom which live downtown and rent. CERB will pay the rent, but that’s about it.

Investing in real estate is a long term play. And it pays off very well in the long run. Yes you can find many naysayers who beg to differ, but ask anyone who has benefitted from it’s incredible returns, and you will see a completely different reality.

The opportunity to purchase the right condo as an investment hasn’t been as good as it is right now in a long time, for those looking long term and have the means to do so.

The vibrancy of the city of Toronto and the many huge benefits that come along with it, aren’t going anywhere. Toronto is consistently rated as one of the top 10 cities in the world. How many other world class cities can someone earning $50,000 year live downtown?

I’ve always said “not all condos are created equally” when it comes to what makes a good investment choice. But do your homework, purchase right, and over the next ten years I’m sure you will be thrilled that you did.

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