Real Estate in Downtown Toronto - To Buy or Not to Buy

To Buy or not to buy

You can always find a better investment tool other than real estate because it’s difficult to estimate your property value in a short-run.

However, you already know that in a long-run, property value will rise significantly and ROI hence will be higher than many investment tools out there. Since you always need a place to live for the rest of your life, why not see this as a lifetime investment decision, rather than focusing on return in short run only?

“Experts” have been predicting a bubble in pricing for the last few years, and yet, that’s not the case in downtown Toronto. Also, you should take into account that most these predictions are on a national/provincial level. A micro-level supply-demand analysis, such as downtown TO is difficult to estimate. Different neighborhoods, with different characteristics and development stage, would react to demand/supply/interest rate shocks differently in 5 years.

This is not to say that property tax, maintenance costs, inflation should not be part of the overall calculation. However, return value of the property and the cost of interest are two main factors to determine the quality of a particular real estate investment. The time you plan to hold onto your property and interest rate will have a significant impact on the outcome of these two factors.

Just for your reference only, these two websites contain historical housing price trend in Toronto and Canadian mortgage rate based on TREB’s number.

http://www.torontohomes-for-sale.com/4a_custpage_2578.html

http://www.mississauga4sale.com/rates.htm#1and5

It’s interesting to see that housing price in Toronto has not reached back to its all-time high in 1989 (after adjusted for inflation), assuming this graphic is correct!