It’s all over the news! As we say goodbye to 2011 and enter a new year, we once again hear the debates about the Canadian real estate market. The news is speculating that 2012, with too many building constructions going on within the GTA and putting the buyer in the driver seat, the market will go soft; stating that there are too many condos and not enough people buying (CTV news- CEOs sound alarmed over Toronto, Vancouver condo markets ). Other sources such as CMHC, predict stable market conditions with the national average of a house hovering around the $368,900 benchmark.
Despite all this, as I stated in my previous article, there is no shortage of buyers for Square One condos. Properties are disappearing fast from the market and are being sold to distant buyers. Just last week alone, two of my buyers were both in a multiple offer situation and both were forced to pay over the asking price for the unit they wanted. I discussed this phenomenon with my colleagues and they shared similar encounters. Seeing multiple offers in the first 2 months of the year is uncommon, as it’s generally seen as the slow real estate season.
Mississauga’s condo market is still a baby compared to other places like Toronto and Vancouver. Over the next 15 years, there will be over 20 new condominiums constructed. The question that is often raised is whether or not there will be an oversupply of condos in the market which can, in turn, perpetuate a real estate crash.
Is this a real estate bubble waiting to burst or a great investment opportunity?
My prediction, and of course this is only my personal opinion, leads me to believe that there will be no real estate crash in Mississauga anytime soon. My reasoning is based on the following key points.
1. Interest Rates are Low – For the past few years, interest rates have been at historical lows. Many condo owners took advantage of this by selecting extremely low variable interest rates. Also, a few weeks back BMO and a few other banks introduced an all-time low 5 year fixed rate at 2.99%. By no means am I a mortgage broker or interest rate expert, but for me, this signifies that interest rates will probably continue to stay low for the next little while. Having low-interest rates means the cost of borrowing is cheap; hence people can afford to buy real estate.
2. Tight Lending Practices – Unlike our US counterpart, the Canadian banking system is a lot more strict and conservative. In order to qualify for a mortgage, a person has to prove his income in various ways by providing T4’s and bank statements.
3. Most Real Estate Predictions are US Based – Most speculations of any type of real estate crash are US based. As stated above, Canada has much tighter lending practices in place, which would prevent a real estate collapse like the one that occurred in 2008 in the United States.
4. Rent in Mississauga is Not Cheap – Rent prices for a newer one bedroom condo in downtown Mississauga starts at about $1,300 per month. The demand for vacant condo units is high and anything that is rented slightly below market value disappears off the market the same day!
5. Real Estate is Local – Just because Vancouver condo prices might dip does that automatically mean the Mississauga real estate market will follow? Of course not. Mississauga has been seen as one of the fastest growing cities in Canada over the past few years; providing a lot of jobs, a stable economy and steady growth.
6. People Love this City! There are more people who move to Mississauga than move out of Mississauga. People from different parts of Ontario (and other parts of the world) are amazed at the well planned out infrastructure and architectural design of Mississauga. I am having prospected clients from distant places contact me with inquiries into purchasing a condo unit for investment purposes.
This is not to say a real estate crash is completely out of the question. As other real estate professionals, such as Andrew La Fleur pointed out; the only way a possible Mississauga real estate crash might occur is if we see:
1. A rapid rise in interest rates – Interest rates would have to almost double in 1-2 years.
2. A major economic catastrophe – An example on a global scale would be the US going into a very deep depression
In conclusion, indicators suggest that the chances of a Mississauga real estate market crash happening anytime soon are rather slim. Low-interest rates, tight lending practices, and other key factors all contribute to a steady 4-7% per annum real estate growth as seen in the last decade.
Questions or comments? Please contact me.
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