Real Estate in the GTA: Is the balloon about to burst or will the balloon keep rising?

By: Lindsay Smith

Real Estate in the GTA: Is the balloon about to burst or will the balloon keep rising?

Tags:

real estate, buy sell love durham, oshawa real estate, durham region, market trends, whitby real estate, durham, real estate bubble, GTA, oshawa, whitby, ajax, clarington

 

Here are the leading headlines about our Real Estate market:

“With average prices up another 14% Swiss bank UBS warns of housing bubble..”
“Toronto has the second riskiest housing bubble in the world.”
“Canada leads in most unsustainable housing bubble.”

When I read headlines like the above one’s I smile knowing that much of what we see in media is crafted to cause a reaction. Fear sells. Another thought is the image of the “Fearless Girl,” I think you know the statue of the young girl staring down the bull on Wall St. in NYC, with a defiant look that makes you aware, she is not afraid. I relate more to the girl than the fear being pandered by the Swiss bank.
Let’s look at what the Swiss Bank UBS is sharing, comparing the Real Estate market locally to other cities in the world.

The UBS creates what they call the “Global Real Estate Bubble Index.” This index is defined as an annual report that puts the Real Estate housing market into long-term perspective and tracks the risk of property price bubbles in global cities. That is a mouthful. In simple terms, they attempt to predict the chances of values collapsing in towns.

The new report lists the top cities most at risk for values to collapse. Here are the top cities, in their opinion at risk. 1) Frankfurt. 2) Toronto 3) Hong Kong. This is what makes media companies salivate, however, if we dig a bit deeper and look at the history of the UBS report we will find that they haven’t been all that accurate. In fact, you would have a better chance at winning a Saturday eve poker game than their past predictions coming true. I thought it would be fun to list their predictions for the Toronto area alongside the average sales prices to show how inaccurate a Bank and its predictions can be.

Average sales prices for all homes in the Greater Toronto area.

UBS World Ranking of a chance of collapse                   Average sales prices.
2018.         Toronto #3                                                       $787,300
2019.         Toronto #2                                                       $819,400
2020         Toronto #3                                                       $930,000
Aug/2021  Toronto #2                                                       $1,070,000
 
Ok let’s agree that the track record of predicting a collapse is zero. I have to wonder what the conversations around the water cooler are like at UBS, “Well Howard, we missed the mark again this year, let’s get it right next fall.” All joking aside, these stories cause some damage in our Real Estate marketplace. What they do is sew the seeds of uncertainty, and in any financial market, uncertainty causes people to hold off and sit back waiting to see if the predictions of doom will materialize.
And then there are those who make their decisions to invest, be it in the stock market, or in Real Estate based on a belief that their objectives are long-term. I have worked through two market downturns since I began my career 36 years ago, one in 1990 and one more recently in the spring of 2017. Let’s focus on the 2017 downturn. Imagine a Buyer who bought at the peak of the market, (May 2017.)  How did their investment turn out?

A Buyer buying in May 2017 would have paid on average, in Durham Region $653,000 for a property. Then prices dropped and by July that same home was selling for $570,000! That is a decrease of about 13% or $83,000. Sounds bad if you had to sell 3 months after you purchased your property. However, as mentioned above, investing is a long-term goal, and as of the end of last month, that home would sell for $918,000. That is a gain of $265,000.

I am not dismissing all predictions, heck I have been known to make some, it is just when we see dire, doom and gloom forecasts, just take them with a grain of salt. Headlines exist to wind the readers up.
I will sign off with a prediction of my own. Well, it really is a repeat of what my Uncle Floyd shared when I was a kid, “the best time to buy Real Estate was 20 years ago, the next best time is now.” I think 5 years from today anyone who is a property owner will look back and be happy they bought when they did.
Uncle Floyd was never wrong.
 
If you have questions on the above information, or if you are planning on buying or selling a property I can be reached at lindsay@buyselllove.ca or www.buyselllove.ca

Connect with us on Facebook, Instagram and LinkedIn