Since the beginning of 2016, we have seen a few new price records being broken in the Square One area. We have seen one bedroom plus den condos cross over $300k, while some two bedrooms are creeping above the $400k mark. While many condo owners are satisfied to see their homes go up in value, the rising prices do raise concerns over a “real estate market bubble“.
In this blog post, I will outline some of the key factors which continue to propel the market forward, and why I believe a real estate market crash is less likely to happen than many people tend to believe.
That said; the market can not rise at this pace forever. There will be a tipping point, at which I believe the prices will stabilize for some period of time.
In order for prices to stop going up, one of three things need to happen:
Scenario 1: Condo prices get too expensive and potential buyers cannot keep up with the mortgage payments.
My opinion: If prices get too expensive, those people wishing to buy; will have to rent. After all, people still need to live somewhere.
In Mississauga, about 40% of condos are owned by investors and rented out to tenants. Regardless what happens with the real estate market, tenants will continue to pay the monthly rent which in turn pays the landlord’s mortgage. The chance of mortgage payment default is slim.
Historically speaking rent prices have almost never gone down. This will ensure that condominium prices in Mississauga will hold, regardless if buyers can afford to purchase the condos or not.
Scenario 2: Interest rates go up and potential buyers cannot keep up with the mortgage payments.
My opinion: With interest rates at all-time record lows (currently around 2.6% for a 5 year fixed rate), some skeptics say that the rates will go up much higher in the near future.
Although they are correct to say that the interest rates will go up, no one knows for certain when this will happen. As it stands, the Bank of Canada has no intention of increasing the interest rates. The Canadian economy is still seen as fragile and all the instabilities around the world do not help.
Any rise in interest rates will be gradual and spread over a longer period of time.
Too many Condos
Scenario 3: Too many condos built and there will be an oversupply of condos.
My opinion: Over 200,000 people immigrate to Canada every single year and more than half settle in the Greater Toronto Area. Mississauga is still seen as “affordable” compared to other major cities.
To put into perspective, new condos in Mississauga sell for about $450 per square foot, whereas Toronto and North York condos go for over $650 per square foot (and they charge extra for parking).
In a typical market crash, the most expensive real estate suffers first and the most.
Mississauga Condo prices are not based on speculation, but rather on people who actually live and work in the area. Most new condos are sold out before they are even completed.
What should I buy?
With pre-construction condos and resale condos being priced almost the same, there has never been a better time to purchase a new condo in Mississauga.
By putting down a 10% deposit, you can secure a condo unit and will not have to pay anything until occupancy.
Over the past year, we have seen a sharp incline in the request from people in Europe and Asia who purchased units here in Mississauga.
If you are thinking of buying a new condo, I can help. Give me a call and we can chat.
Remember that there are no fees to me, as the builder is always responsible for paying realtor commissions. Looking to hear from you.
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