Hey, I am not in the prediction business but I am in the observation business
Simple facts: downtown Toronto rents are falling steadily and if they continue to fall prices will errode
That's facts and math not prediction
And rents will fall
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This is simple stuff all Covid related
1) No foreign students, turns out this was big, rarely talked about and looks like they're gone till Fall 2021 2) No Airbnb, not just no tourists, no sporting events, weddings, proms huge list, Fall 2021 for return but slow even then
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3) Too many renters in Hospitality lost their jobs and moved back with parents or doubled with friends: Fall 2021 or never 4) For people with ongoing jobs, downtown offices empty, WFH but HATED cooped up experience, bought Towns or Detached likely NEVER back
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5) Plain old immigration to Toronto (not students but workers) stalled till Fall 2021 soonest
Basically: RENTAL APOCALYPSE, this is frigging bad
Now the simplest economic principles take over, keep dropping rents till someone signs lease
Concept simple but problematic
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Because some investment condos were cash flow negative with top rents already, reduced rents are a disaster
Why is the S**t just hitting the fan now?
3 words: Mortgage Deferral Ended....... Nuff said
As @mortgagejake correctly point out a growing issue is:
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People who bought houses can't sell their condos at a price that allows the down payment to work on the new purchase, this is a emerging issue but will dissipate quickly, Realtors will make adjustments
Important to remember that these investment properties are a matrix
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We may think all are doomed but no: we are closing a North Etobicoke 1 BDR condo this week bought pre-sale in early 2015: $244K appraised at $470K today and with low mortgage rates only needs $1185 rent to breakeven
As always location and product but now vintage is key
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If bought 10 years ago and never refinanced PERFECT, bought pre-2015 likely fine, bought resale 2017 and up for investment 80% mortgage: likely No Bueno
And when more and more need to sell: we all know what will happen
Not prediction, not theory: MATH
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I have been Blocking folks lately over a general opposition to simple Covid measures
Anti Maskers, sorry, its the most minor inconvenience, you all put clothes on when you leave the house but the law in Ontario is that only shorts mandatory so?
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Really just Social Niceties and the mask is so easy, please just give anti masking a rest
If fun is made of the insanity of Trump holding huge rallies with unmasked participants who needs 25 replies about outside is fine and look at the BLM marches
Sweet Jaysus,
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Can't we just agree a political rally is not the same as desperately trying to put an end to senseless murder?
Or Strip Bars must stay open?
Or booze must be served till 2:00 AM or rights are being violated?
So much about the last 4 months in Canadian finance has been weird
In previous economic disasters those in trouble did a couple of things, some people sought insolvency protection and those with houses often refinanced to pay debt
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And in mortgage world refinance for folks with debt problems has effectively vanished
It is best observed among the companies who specialize in sub prime mortgage lending
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The federally licensed B lenders, the large and small residential Mortgage Investment Corps, right down to individuals who do private mortgages: all profoundly not busy
Stealing the title of a charming 1980 movie about a Coke bottle falling from the sky, I am giving some thought to nearly 3 months of a really odd real estate market in Ontario
Some of what's happening is really easy to understand
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Pent up demand is obvious
Lock people up for nearly 2.5 months and they need to buy stuff they couldn't
A bank exec told me July was an all time record for their car financing division
Couldn't buy cars for 2 months need to catch up
Guess same can be said for houses
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What else drives this RE market?
Crazy low mortgage rates
Desire to have more space
Work from home forever
Can't travel = need cottage
Combine these factors with the RE supply issue in parts of Ontario and prices go up