After a slow spring, the Toronto real estate market has come roaring back. The Canadian Real Estate Association (CREA) reported a record number of home sales in July. August’s numbers were equally impressive. But is this all speculation or part of a long-term trend?
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If you’re on the fence about buying real estate right now, here are three reasons why you should look at buying and three reasons why you might want to hold off.
Why you should
Record low mortgage rates
Because of COVID-19, mortgage rates are at a record low. It’s never been so cheap to borrow money. You can lock in to the safety and security of a five-year fixed rate mortgage for less than two percent. This was practically unheard of before the pandemic.
How long will these low interest rates last? It’s hard to say. If the economy bounces back faster than expected, we could see fixed mortgage rates heading upward towards three or four percent next year. Wouldn’t you rather lock in when rates are still low? I know I would.
Your financial situation is stable
Many Canadians have been affected by COVID-19 and not just health wise. Maybe you’ve lost a lot of your investments due to the tumble in the market. Maybe you’ve lost your job.
If you’re one of the lucky few who hasn’t been impacted by COVID-19 and your job situation is pretty stable, you might use this opportunity to get into the Toronto real estate market. You may look to get into the market in the fall when the current buying and selling activity slows down to hopefully avoid a bidding war.
We don’t know how long the “new normal” will last
Are you renting a shoebox condo? Does the thought of being stuck there for months or years cause you nightmare? Thanks to COVID-19 our homes have become so much more than where we sleep at night. It’s become our workplaces, gyms, entertainment and childcare bases.
Trying to do all that in a 500 square foot condo is tough. If you’re getting cabin fever, it might be time for a change. By moving to a more spacious house in the suburbs you’ll enjoy a lot more space and hopefully get your sanity back.
Why you shouldn’t
There’s a lot of speculative buying now
Usually the condo market is rife with speculation. However, during COVID-19 times that seems to have been extended to other types of homes. A spacious detached home in the suburbs and in satellite cities has become the Holy Grail. But will it last?
There is a lot of speculative buying now, which will burn off, leaving the fundamentals exposed, such as less immigration. It might be wiser to sit on the sidelines and see how everything shakes out before jumping into the market.
We don’t know how long the “new normal” will last
In terms of the Toronto real estate market, the fact we don’t know how long the “new normal” will last is also a reason you might hold off on buying. A lot depends on when an effective COVID-19 vaccine will be widely available. In a best case scenario it’s suggested that one could be available in the second quarter of 2021.
However, that’s assuming there aren’t any side effects. If the vaccine proves ineffective or side effects are discovered, this could push back the date of when it’s safe to go back to living like before.
We don’t know what the “new normal” will look like
What will the new normal look like? It’s anyone’s guess. The short-term trend seems to be working from home and moving out to the suburbs and satellite cities where it’s easier to social distance. But will that be the trend in five years when we can hopefully put COVID-19 behind us? It’s hard to say.
While I certainly think that employers will be a lot more lenient when it comes to working from home, there will be some employers who will want their employees to report into the office again. When you buy a home far away from your place of work, you run the risk of having to commute in once things get back to normal, or finding a new job. It may be wiser to wait a few more months before uprooting your family and seeing how this all plays out.
Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Finance Journalist, Money Coach and Speaker, his articles and blogs have been featured in publications such as the Toronto Star, Globe and Mail, Financial Post and MoneySense. Connect with Sean on LinkedIn, Twitter, Facebook and Instagram.
