Real estate investors face hard choices in Toronto market

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Anyone out there still thinking of investing in Toronto’s real estate market should consider this study before getting into debt. The CIBC/Urbanation study estimates that an investor who buys a typical condo today will need to see 17 per cent growth in rental rates to make money off that condo when they take possession in 2021. If mortgage rates rise by a single percentage point, they’ll need 28 per cent rental growth. Is it possible, yes, but there are many ifs and buts.

Everyone has heard of people who made a killing selling in last year’s red hot real estate market, this year there have been many losers, but you won’t hear those stories.

CIBC and real estate consultancy Urbanation, released one study last week which suggests many of Toronto’s condo investors are actually losing money.

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The study found that 48 per cent of condos bought in 2017 were cornered by investors. And of those, nearly half 44 per cent have “negative cash flow,” meaning rental income isn’t covering the costs of ownership, such as mortgage and condo fees. And more than a third of those losing money are losing more than $1,000 a month.

Home sales in the metro area down nearly 40 per cent over the past year, and prices down 14 per cent in that time frame.

Meanwhile it is possible builders will delay bringing on more projects in the market in the hope that prices and demand will climb again, but with NAFTA, another mortgage rate hike expected by the year’s end and the stress test by financial institutions, all bets are off for now. – CINEWS

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