Bank of Canada keeps interest rates low. Ben: if things are too low, people might get into situations they can't afford.
How important is that interest rate to real estate?
Sean: you're getting a lot of multiple offers
Aeriol: triggers more people to want to buy
But it's a challenging market to get into
Aeriol: No, you can't build any more detached homes in Toronto's core.
Ben: There's no consensus even with what a 'bubble' is. I certainly don't think we're in it
Sean: Prices are a lot higher than they used to be, but in younger age group, we want to be downtown. There's a lot of lifestyle things we're willing to pay for.
Aeriol: People are just accepting smaller spaces to live in.
Ben: This isn't surprising.
Aeriol: People in Canada have become non-savers and you do have to save to get into the market.
Sean: It's certainly a challenge given the prices. A big regrets buyers have is jumping in to the market too quickly.
Sean: You need to save every penny and really have a plan to get into the market.
Aeriol: In Toronto, buying is a long-term proposition, so if you're planning on leaving in 3-5 years, then maybe makes more sense to rent.
Ben: If you're in a stable job, look to buy. If you're transient, renting makes more sense perhaps for you.
Ben: A lot of seniors have a lot of equity built up, so they may want to cash out and travel etc.
Aeriol: If you're in a major city where prices have been quite high, might make sense to sell that home and buy a less expensive home in a smaller city.
Sean: Sell your assets and rent while you travel - it might make sense for people who have owned for a long time.
Shifting gears to the booming condo market...
Sean: A lot of people are moving from the suburbs and buying downtown, walking distance to theatres etc.
What effect does that have on the rest of the market?
Ben: We're not seeing a lot of that in the Toronto market, but you're seeing it more in markets like Winnipeg, larger condos available.
Aeriol: A lot of older clients are trying to find ways to stay in their homes, e.g. creating a rental unit in their house. It really depends on what you have in RRSP and TFSAs.
Sean: Look at other projects the developer has created. How long does it stay on the market. Go into other buildings and chat with people who live there.
Sean: condos are very different if you're used to living in a house.
Ben: Reputation is huge, location is huge.
Ben: compare prices on per square foot basis. How much does parking cost, condo fees etc.
Benefits of buying old vs new?
Sean: biggest benefit is size.
Sean: You're typically getting larger units.
Aeriol: One of the complaints with older buildings is that the maintenance fees are much higher.
Aeriol: But with some new developments, those low maintenance fees can double by year two or three. So you really have to do your research.
Ben: Yes, fees generally go up in year 3 or 4, hopefully not double.
A question from Jen: With all the options available in our current economy what would be the ideal route on purchasing rental properties?
Sean: if you can afford to do it, it's a great way to create equity in the home - but it comes with a lot of risk - it's not for everybody
Ben: I recommend getting a good property manager, worrying about contracts and following up with tenants, so you don't have to worry about those things.
Are the banks being too generous?