Toronto Real Estate Market

How to Avoid Becoming Poorer in 5 Years

We did it again!  We’re now looking forward to getting out of our second lockdown.

So it’s time for me to update you on how the Toronto real estate market did during this second lockdown.

And I’m going to do this in 2 parts.

For the first part, I will share the official January market watch report from the Toronto real estate board.

For the second part, I will share my day to day experience on the current market, what people are thinking and why they are buying right now.

Make sure you stay till the very end because I’m going to share something very profound.

Before we get started, subscribe and hit the bell so you always stay on top of the market.

Alright, let’s do it!

In January 2020, there was no Covid and Toronto was gearing up for a very strong year in real estate.

In January 2021, we were in the second lockdown.

Let’s compare the sales activities and prices in these 2 months.  What differences do you think you would see?

Up?  Down?

We know that the low rise market has been very strong as people look for more space.

Low rise sales activities across the GTA were up 37% in January 2021.

Average prices in 2021 were up 31.2% for detached houses, 26.6% for semi-detached and 15.9% for townhouses.

These numbers are amazingly strong, but I wouldn’t say they came as a surprise because we were pretty much expecting that after seeing so many strong reports in the past 6 months.

It would be much more interesting to see the condo numbers, especially downtown condos.

The condo market was climbing to the peak at the beginning of 2020.

Then we all knew 2020 was a bad year for downtown condos.

No immigrants, no international students, rents dropped big time, investors wanted to sell, market flooded with listings.  

Many people think that’s the end of downtown Toronto.

Well, remember what I told you back in early December?

Smart investors were out in the market again hunting for deals because winners see opportunities in a crisis.

Let’s do a poll.

What is the percentage increase in condo sales volume in the City of Toronto, January 2020, vs January 2021?

Now, we’re talking about the City of Toronto, so that’s mainly downtown because that’s where the majority of the condos are.

Here are the 3 choices.

Up 25% in 2021.

Up 50%.

Up 85%.

What do you say?

59% of our YouTube community says up 25%.  

20% says up 50%.

And 21% says up 85%.

The official answer?

It’s up 85.5%!  1,703 condo sales in January 2021 compared to 918 sales in January 2020.

This was very shocking to me.  I knew the market was starting to come back, but I didn’t expect 85.5% more activities.

There are definitely many smart people out there.

What about price?

Average prices dropped 8%.

Speaking of price, I want to study a very interesting case with you.

We’re going to look at 2 sales, in a 1 year old building, at 50 Wellesley Street East.

That’s central downtown, just east of Yonge and Wellesley, 2 minute walk to the subway entrance.

The 2 units are both corner 2 bedroom 2 bathroom units with the exact same layout, both come with standard finishes and a parking spot.

Now, let’s do a side by side comparison of the differences.

The first unit is on the 16th floor and the second one is on the 19th floor.

The living room on the 16th floor has an old building in the view.

Let’s go up to the 19th floor, it’s still not enough to get over the old building.  So I would say overall the 2 units have pretty much the same view.

Both units were vacant, but the one on the 19th floor was nicely staged with furniture.

The 19th floor one also came with a locker.

Other than that, the 2 units are essentially the same.

The 16th floor unit was sold in the first week of January after being on the market for 13 days.

Then the 19th floor unit was sold in the first week of February after being on the market for only 7 days.

The 16th floor unit was sold for $891,000.

Guess how much the 19th floor unit got sold for?

How big could the price difference be in just 1 month’s time?

It was sold at $1.03 Million Dollars.

A shocking $139,000 more.

Triple checked everything, really couldn’t see any major differences in the 2 units.

Are we back to the pre-Covid prices already?

Possibly.  While it is too soon to draw any conclusions, I think we can see that things are trending up and not down.

What about pre-construction condos?

Last week, I told you about 8 Wellesley, a brand new pre-construction condo at Yonge & Wellesley.

It’s relatively expensive.

But one of my clients got so mad because she was too slow to grab the unit she liked.

“With this price, in this Covid market, why are people still buying crazy?”  She complained.

Why?  Do you know why?

What is the #1 reason that drives people to buy 8 Wellesley?

Prime location? 

Reputable developer? 

Quality tenants?

All these are very good reasons.  But no, they are not the #1 reason.

The #1 reason is the time value of money.  

Let me explain.

Say in today’s market, I can have a very nice dinner with $100.

We know that with all the worldwide money printing, money is going to get cheaper and cheaper.

5 years later, with the same $100 I have today, I won’t be able to buy that same nice dinner anymore because it is going to cost $150.

You see, with the same amount of cash, I actually get poorer because I can’t afford the same things anymore.

Things just get more and more expensive.

So what I need to do is to put that $100 cash I have today into a thing.  

And that thing is going to grow with the economy, so 5 years later, that thing is going to be worth $150.

Now I can exchange the thing back for $150 cash so I can afford that same nice dinner again.

You see, even though the thing grew in value, I didn’t get any richer because everything got more expensive.  But I avoided becoming poorer, so I could at least maintain the same living standard.

Let’s suppose there’s a thing that only requires you to pay 20% of its price today, but 100% of the thing is going to grow with the economy for the next 5 years.  

Then 5 years later, you pay the remaining 80% of today’s price.

Don’t you want a thing like that?

That’s 8 Wellesley.  Put down 20% deposit today, wait 5 years for it to get built.

That’s the #1 reason why people are investing into 8 Wellesley.

It’s because of the time value of money.

You see, we’re not trying to get rich quick here, that’s not the goal.

The goal here is to put cash into something so we don’t get poorer 5 years down the road.

It doesn’t have to be 8 Wellesley.

Find a thing that you are confident that it would at least track inflation for the next 5 years and put your cash there today.

If you want to know why I think 8 Wellesley is the best thing available on the market right now to avoid getting poorer 5 years down the road, you can schedule a call with me at the link below.

And if you haven’t watched my 8 Wellesley video, make sure you watch it here:

Schedule a Call with Dan

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