Should I invest in the real estate market now? This might be a question asked by people. Some think investing now is a bad idea because the increasing rate of Covid cases lowers the demand of real estate, but is this actually true?
House supply and demand
Every year, over 120,000 new immigrants come to the GTA needing to find a place to live. To meet this demand, at least 45,000 new households need to be built. Last year marks a record of 22,500 new home completions. From here, it’s easy to see that there is a big gap between supply and demand when the number of homes can only provide the demand of half of the number of households.
Condo growth expected
Besides that, not only immigrants, but also international students, need to find a place to live. Every year, 642,000 international students come to Canada; half of them stay in Ontario, with the majority living in Toronto. Most of them prefer buying or renting a condo than a detached house, since detached houses are much more expensive than condos (with a price gap of $1,007,23 in February 2021). For this reason, we can expect that the demand for condos will grow even more in the future, which is why investing in pre-construction condos grants leverage.
Benefits of investing in pre-construction
Pre-construction allows you to invest without a mortgage. By the time you take out a mortgage, you have great price and appreciation. A pre-construction in GTA can increase its value by 13% on average for 5 years. In Downtown, the rate is 15% on average. Therefore, you can earn passive income. Why is investment in pre-construction so important? In 2020, the average Canadian salary was $54,640 and the average. condo price in the GTA is $624,886. 13% appreciation would add $81,235 annually to your net worth every year (not factoring compound interest).
For example, if a Canadian invests in a pre-construction condo with this price, that person can get back $81,235 every year to their net income (not including compound interest). However, if this person decides to invest in an existing condo with the same price, he can earn only $43,742 every year, which is half the amount compared to investing in pre-construction.
So now that you understand the advantages of investment in pre-construction, you might wonder which one you should go for. There are plenty of choices for you across the GTA, especially Toronto. However, it’s important to research the neighbourhood you’re interested in and prices there before making your decision. If you struggle with any problem, please feel free to ask me for help through my phone number, (416) 830-9039.