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Is Real Estate in Toronto a Good Investment?

Toronto has seen crazy high housing prices over the past few years. Everyone has said, “what goes up must come down,” with many experts awaiting the moment the bubble bursts.

This is a skeptical view taken by those unwilling to take risks. However, for those real estate investors who are confident enough to ignore spooky headlines, there are many who have done very well with their Toronto real estate investment property.

Despite some nervousness in early 2019, Toronto is regaining momentum thanks to detached home sales. So, in answer to the question, “Is real estate in Toronto a good investment?” we say, “yes.”  Real estate investing is all about timing, price, and well-chosen locations.

Equity Gains

Toronto condos have been rising in price since 2015, seeing a 52% gain to date, according to RE/MAX’s Pierre Carapetian Group. At those numbers, you would make $50,000 per year if your purchase price for a condo was $400,000 in 2015. That’s $200,000 in five years!

As well, Pierre Carapetian Group has seen investors earn between 10% to 25% already on their 2018 investments. In the condo market, you have a choice between preconstruction or resale Toronto condos when investing in Toronto real estate.

Opportunity for condo investment is out there, from Libertyville to North York to Scarborough.

Demand for Rentals

Looking at rental property opportunities is another example of a good Toronto real estate investing strategy. As Toronto’s population continues to grow, so does the demand for rental units.

A combination of immigration and a growing tech industry has brought a large number of new Toronto residents to the city anxiously seeking rental homes. That includes tech companies such as Uber, Microsoft, and Pinterest, to name a few.

According to the Huffington Post, Toronto is the fastest-growing metropolis in North America. Between July 2017 and July 2018 the city had 77,435 new residents.

For a one-bedroom apartment in Toronto, the average rent is $2,259 per month. That is more than enough to help you pay down your mortgage when you invest in a rental unit. Much to the horror of affordable housing advocates, the Ford government has also scrapped rent control for new units across Ontario. Although this does not bode well for renters, landlords have something to celebrate.

A Good Investment Choice

The real estate market in Toronto should be looked at as a long-term investment. It provides a tangible asset, compared to something such as stocks. When the real estate market takes a few dips here and there, it’s just a matter of time before it begins to climb again.

As long as you have good advice from a real estate agent on where to buy properties in Toronto with the best potential for earnings and fair market value, real estate offers a low-risk, high-return option. As well, should you choose to rent your property, you generate cash flow when someone else pays your mortgage.

Real estate investments are also the only investment you don’t have to pay in full upfront. You can put down a reasonable down payment and still build equity. This can lead to investment in further properties as you can leverage your equity and borrow up to 80% of your property’s current value. These loans come at a low interest rate and can be accessed via a Home Equity Line of Credit.

What Toronto Property Makes the Best Investment?

Toronto condos are still seeing the best gains, according to Pierre Carapetian Group. Prices have averaged a 13% increase each year since 2015. If we continue to see similar historical growth, which ranged from 5% to 10% over the past decade, you can still make some good money when investing in Toronto condos. Twenty-nineteen brings opportunities, while growth is still possible.

You can also consider properties that are:

  • Priced lower than comparable properties in the area
  • In neighbourhoods going through gentrification while prices are still low
  • Involved in future projects such as transit lines that will increase property value

As with any investment, it is all about buying low and selling high.

Simcoe County: Looking Further Out

According to MoneySense, you also have to understand where to look. The GTA is massive, with many little-known areas offering pockets of real estate investment opportunities. For example, in Simcoe County, Angus made it to the top of MoneySense’s “Where to Buy Real Estate 2019” report for the GTA.

Other areas included Barrie, which had the highest price appreciation in the province at a 17% increase between 2015 and 2016. This type of growth has found more Toronto buyers considering life in a bedroom community.

In Angus, which sits 15 minutes southwest of Barrie, the average house price is just below $500,000. This is close to 50% cheaper than the average GTA house price. It also has a young population, making it ideal for families with just 8% of residents over 65 years of age.

When comparing somewhere like Angus to Toronto, last year’s buyers will already see an increase in their home price by about 13%. Meanwhile, only 11 of 133 Metro Toronto communities experienced such an increase. In the past five years, the average single-family home in Angus has increased by 88%.

Bowmanville and Uptown Core Areas

While Barrie might seem like too much of a hike, MoneySense also says you can look either east or west for the number two and three spots for growth in the GTA.

To the east, Bowmanville sits at number two, offering an average single-family home at 39% lower than the GTA. To the west, sitting at number three is the Uptown Core in Oakville, which is 17% cheaper than the GTA.

Over the past five years, Bowmanville’s overall housing momentum saw an average appreciation of 84%. If you think that’s good, Oakville’s Uptown Core more than tripled that with 270% average price growth. The reason Uptown Core was only number three on the report is due to value. In Oakville, housing prices were $801,567 in 2018, while in Angus they were $486,560 and $586,756 in Bowmanville.

If it seems like a gamble to invest in these areas, don’t worry. Remember, that value plus easy access to transportation plus a small-town feel equals eager families who will be looking to buy in the future.

Confirmed Correction

The question still remains if the housing gains in the GTA markets from 2015 to 2017 are considered a correction. MoneySense says this year’s Where to Buy Real Estate analysis of the GTA single-family home market does, in fact, confirm a correction did occur.

A little over 43% of the GTA’s neighbourhoods reported a negative one-year growth rate. As well, sales activity in active urban housing markets, including Toronto, is stabilizing.

Keeping in mind any investment is a risk, being in the right place at the right time can bring in exceptional gains from real estate investment property. That includes homes in Toronto.

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