Thursday, August 15, 2013

This and That August

"Who in their right mind would invest in something that loses money every month? The answer just might be future Toronto condominium buyers.

Toronto is the largest condominium market in North American with 18,000 suites selling annually over the past five years, according to research firm Urbanation Inc. The problem is rent for those units is not climbing much, stuck at $2.09 per square foot in the first quarter of 2011 versus $2.09 per square foot a year earlier."

Buy for cashflow. Yes, check.
3% appreciation forecast. Yes, check. 
Buy a T.O. condo? No. X  

You are someone with foreign money looking to park it in Canada. That is one of the factors driving niche condo markets in Vancouver and Toronto. 

Quite often overseas buyers who 'invest' a set amount of capital, for example $400k as a business investor aren't buying the condo in hopes to flip it. They are buying it as part of claiming Canadian residency. 

Motivations and nationalities differ; there are many English and German people who buy Canadian property for vacation use, touting quality of lifestyle and nature as the biggest assets. 

You'll also find a segment of Asian, Middle Eastern and European buyers that invest in property, stocks and business ventures in Canada due to the strength and stability of the nation, plus a steady 5% return beats .015% yield in their bank.

 More on CMHC’s MBS Ceiling
"When news broke last week about CMHC limiting securitization guarantees, it was commonly viewed as a new attempt by Ottawa to clamp down on mortgages.  In fact, it was an old attempt.

The $85-billion MBS guarantee limit (the one that made headlines on Tuesday) was actually established earlier this year by CMHC and the Department of Finance. CMHC says it chose that number ($85B) based on “past issuance activity and projected funding needs of issuers (i.e., lenders).”


As we commented last week on this 'news', yes, it will affect how you build your portfolio and it may well affect your next rental purchase. 

Will it last forever? No. Are there other ways to buy? Yes. Should you pay attention to what CMHC says and adjust your buying strategy? Yes - and possibly.

 Listen to CMHC and evaluate how you can best build your purchases. Long term investing and wealth creation is like playing a game of chess; it needs to be well thought out and rich with strategy. 

No comments: