Do I Buy or Build my new home? Or hide my money in the mattress?………for the few fortunate enough to have the where-with-all to entertain this question a dilemma quickly presents itself…. Do I sink my life savings into my new home or listen to the news portending disaster and so hang tight and rent?
As property values have risen appreciably in the past, Canadians see their home as a store of wealth that continues to be the only asset that’s increase in value enjoys tax exempt status. Boomers retiring in recent years have realised the windfall that results from years of sitting on the nest-egg we call home. To many it appears a prudent move to invest in a larger home with sights set on the future yield that will hopefully be a fund for retirement. However, Robert Schiller the Nobel laureat joined the red flags and warnings with a “bubbly “ characterization of the Toronto and Vancouver markets in Oct 2017 pointing to a potential housing market correction. Regardless, the juggernaut that is Canada’s real estate market appears, for now at least, to be continuing ahead. With dire and foreboding warnings from the press in spring of 2017, the market seemed to defy the grim predictions and made something of a “soft landing” by the summer. A landing engineered by Government measures introduced to quell burgeoning house prices, fueled by speculative investors. This phenomenon is pronounced particularly in Toronto and Vancouver where housing appears to be out of reach for millenials budding to mount the real estate ladder.
So where does the market go from here? Are these Jeremiahs of doom accurate in their apocalyptic predictions of a “severe market crash’ as recently noised abroad by the broadsheets and TV news outlets . In June 2017 CTV reported …. “The Toronto and Vancouver housing markets are on the brink of a “severe downturn” that could hurt the country’s GDP and drag home prices down by up to 40 per cent, a Capital Economics economist says. …. “I see a correction between 20-40 per cent in the Canadian housing market in five years,” David Madani, senior Canadian economist at Capital Economics, told Business News Network on Monday. He suggests there will be a slight dip in Toronto housing prices before the end of the year, but that’s all it will take to scare many homeowners into cashing out of the market.
The September 2017 Economic report issued by RBC shows signs of a market moderation but no precipitous drops are signalled. The 2016 housing market set a record pace, a pace surely difficult to match. The 2017 resales numbers are predicted to come in similar to 2015 and 2018 same as 2014. Although the 2018 forecast for housing price uptick, nationwide is set at 1.2%. Countering this comparatively sluggish housing statistic, in the same report, is a strong GDP growth expected to clip along at a healthy 3.5%.
The 1,2,3 of “THE RIGHT BUILD” …. A word to the wise from my college Economics professor “Don’t confuse macro and micro economics” ………. with this in mind we turned to Brad Miller of The Goodale Miller Team, Real Estate agents in Oakville Ontario.( https://www.goodalemillerteam.com/en-ca/team/brad-miller ) Brad provided reflections based on his wide experience in the local market. He has been involved in transacting many of the higher value properties so provides a unique insight and understanding into his clients’ wants and needs in the luxury segment, according to Brad.”….whether its cars or houses people put a premium on NEW.
Once a house reaches 8 or 9 years old, for most clients, some key components will need updating……. we see this typically in track homes, people may buy a new home but then personalize it with their own upgrades. Similarly, in the high-end market people want that personalization. Perhaps they would like a backyard oasis where they don’t need to go to the cottage to relax. For some with a growing family a big mudroom may be important. Buying a lot and building new for many clients brings those personal touches where creating and decorating becomes an enjoyable endeavour and when done right the results are not only gratifying but financially rewarding, increasing their equity. Many of my clients tell me after doing a build they would definitely do it again.”
When asked what he saw as the key ingredients to a successful build Brad rejoined. “You have to have the right team. Don’t skimp on the professionals. ……Three things…… First up is an AMAZING Architect, obviously the façade is crucial but then the interiors including trim, doors, floors, even down to the colour selections have to “flow” …… secondly a great builder who can manage the project “the right way” ……. I’ve seen people pinch pennies on hiring the right team and they pay big time afterwards with a project NOT done right which will miss out on commanding the best- selling price when the time comes. Thirdly find the right lot on the right street, even which side of the street is important…… and the equation of lot size vs house square footage needs to be correlated with the likely end value / selling price, this is important to consider.
“we are seeing, in Oakville and out into the GTA that the market is increasingly driven by Global forces. Canada is a much sought-after country. Toronto enjoys world class prominence with its multiculturalism; its financial stature as a trusted banking centre and its peaceful, tolerant culture…… notably University of Toronto is included among the first 25 on the list of the world’s Top 100 with 4 Canadian universities following within the Top 100!”
Brad continues by pointing out that Toronto is hemmed in to the North by the greenbelt, so space is limited. In his neck of the woods, the west end, older 1950’s homes are being replaced by new builds shrinking the available inventory. So what does that mean?….Brad concludes… “All I see is Oakville and the GTA getting smaller. Lots are being bought up which reduces what’s available to build on. Simple supply and demand would tell us that prices will continue to rise with this shrinking supply…. in fact, I am more bullish on the Real Estate market now than I have ever been in the past.”
We turned to Fil Capuano at Chatsworth Fine Homes,( http://www.chatsworthfinehomes.com/ ) Luxury home builders in Oakville, Burlington and Mississauga to offer some input…… “In the new custom home space where we live”, says Fil…” it’s a very niche market. I think clients have specific needs and wants and don’t see anything available in the resale market that fits the bill……they then opt for a new build and almost invariably in an established area, where they have the mature tree canopy and established neighbourhoods……. it’s quite a challenge for clients to get the exact lot to fulfil their requirements so a good knowledgeable realtor is a must. We have clients whose successful careers have given them the ability to move up from the large track built houses into a true custom home. From where I’m standing I don’t see anything to stem that tide…. …..and at least in the GTA it seems there will always be a demand for this limited supply of lots……….”