Tuesday, March 31, 2015

Betting on Toronto Condos

With so many cranes visible on Toronto Skyline we might be a little concerned about who will buy these suites.

The book, ‘When the Bubble Bursts,’ written by financial analyst and author Hilliard Macbeth, warns Canadian homebuyers about Canada's “inevitable” housing crash and says the market is 50 per cent overvalued. http://www.canadianrealestatemagazine.ca/news/investors-counter-housing-crash-forecast-189530.aspx

Yet people continue to arrive in Toronto and driving the need for rental accommodation; This is being filled by large asset companies like Insurance companies and Pension Funds that want long term assets that provide cash flow.  SIMPLY PUT Tenants pay rent.  Rental prices are geared to market.

  ...a proposed 49-storey condo building near one of the city’s main intersections at Yonge and Bloor into a de facto rental when Cityzen Development Corp. received an offer.“Pension funds have always liked rental. Condominiums don’t fit. But rental does because they are trying to get long-term cash flow,” said Mr. Finkbeiner, adding the key is price with institutions acting opportunistically when condo prices come down. “You’ve got a lot of condo developers who may have two sites beside one another and as time goes on they say, ‘I don’t want to take all that risk.’ So they offer the land from one of them, and [the rights] to build it, to a pension fund.” http://business.financialpost.com/news/property-post/pension-funds-swoop-in-on-toronto-condo-towers-as-rental-market-heats-up/

Pension Funds and Investment Fund managers are canvassing builders and developers directly to purchase projects before they are off the ground because Toronto continues to be a sound investment. Vacancy Factors continue at near 2% levels. (Source CMHC) Condo Construction in Toronto now exceeds 53% of all new builds. http://business.financialpost.com/personal-finance/mortgages-real-estate/condos-make-up-more-than-half-of-housing-starts-in-canadas-biggest-cities-cmhc/

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