Are there still opportunities for first time buyers in 2020 or have you bought in to all the doom and gloom and believe it is too late?
Real estate follows the laws of basic economics -Supply and Demand. If only the Demand increases – there are more people looking to buy and prices go up. If only the Supply increases – there are more properties available and prices go down.
Of course, it is never that simple and both factors -Supply and Demand are at work. Currently – in Toronto – we have increased demand (D) and decreased Supply (S), a particularly tough situation for Buyers. The number of listings has decreased steadily. It is very complex and these are some of the factors that have lead to our current situation.
- There have been about 100,000 newcomers to the GTA in each of the past 10 years and this trend is expected to continue. (this gives an Increase in D) It is estimated that we need 50,000 dwelling units per year to keep up with this growth, yet we are only producing about 40,000. (this gives a Decrease in S)
- Buyers have had time to save more in order to ‘pass the Stress test’ implemented in 2018 and so there are more qualified, ready Buyers than at this time last year. (Incr. D)
- Low interest rates that aren’t expected to have a significant rate change allow more people in the Buyer pool ( Incr. D)
- Boomers are holding on to their houses longer. (Decr. S) Many are pulling equity out of their houses to help their Millennial children buy a property. (Incr. D)
- Historically, people bought 3 or 4+ houses over their lifetime – taking the equity out and trading up to a larger home/better neighbourhood. The double Land Transfer Tax in Toronto has made this tactic very expensive, so many are staying put and renovating and adding on to their entry level home rather than trading up. (Decr S of entry level housing)+
- Developers claim that the approval process and permitting is painfully slow and getting longer and longer and more and more expensive with each passing year. (Decr. S)
- Given global uncertainty – many investors are looking to add real estate investments to diversify their portfolio. (Incr D)
Looking at the positive side – we wouldn’t be seeing such an increase in Demand if Toronto wasn’t such a great place to live. Don’t give up! I am absolutely convinced that it is still possible for first-time buyers to get a property in the GTA in 2020, but it won’t happen by chance. It will take proper guidance, planning (financial and logistical), and an experienced real estate agent to manage the process, and you can be moving into your new Greater Toronto home in 2020.
What do you think? Still opportunities to buy or too late?