- Joined
- Mar 29, 2008
- Messages
- 365
Will Investors ‘Walk
Away’?
There is no complete data to suggest
the level of investor activity in the
GTA condominium apartment market.
Industry insiders suggest that
about one third of the market is
investor held. The potential impact
on the market by short term investor
selling (those individuals who purchase
at the pre-construction stage of
development with the intention of
selling it upon completion and registration)
is the issue. As completions
trend upwards, an increase in the
level of listings has also taken place –
suggesting that there is some investor
selling. With so many condominium
apartment completions due over the
next couple of years, there is a risk
that more of these investor-held units
will arrive on the market, pushing the
average price of condominiums
downward.
If price declines are significant
enough to cause buyers’ equity to
diminish, there is a risk that some
investors who bought at the preconstruction
stage will ‘walk away’
from their deposits - reminiscent of
what happened in the mid-1990s.
This outcome remains improbable,
as average prices are forecast to
decline mildly and not fall by
amounts large enough to force
investors out of the market. Unlike
in the 1990s, buyers are now required
to put down on average 15-
20 per cent as a deposit. This
amounts to large sums of money
that buyers are unlikely to forego in
favour of ‘getting out of the market’.
Furthermore, with mortgage interest
costs at historic lows and tight rental
markets producing low vacancy
rates, investors will be more likely to
hold their units.
from Canada Mortgage and Housing Corporation
H o u s i n g M a r k e t I n f o r m a t i o n
Housing mARKET oUTLOOK
Greater Toronto Area
Spring 2009
Away’?
There is no complete data to suggest
the level of investor activity in the
GTA condominium apartment market.
Industry insiders suggest that
about one third of the market is
investor held. The potential impact
on the market by short term investor
selling (those individuals who purchase
at the pre-construction stage of
development with the intention of
selling it upon completion and registration)
is the issue. As completions
trend upwards, an increase in the
level of listings has also taken place –
suggesting that there is some investor
selling. With so many condominium
apartment completions due over the
next couple of years, there is a risk
that more of these investor-held units
will arrive on the market, pushing the
average price of condominiums
downward.
If price declines are significant
enough to cause buyers’ equity to
diminish, there is a risk that some
investors who bought at the preconstruction
stage will ‘walk away’
from their deposits - reminiscent of
what happened in the mid-1990s.
This outcome remains improbable,
as average prices are forecast to
decline mildly and not fall by
amounts large enough to force
investors out of the market. Unlike
in the 1990s, buyers are now required
to put down on average 15-
20 per cent as a deposit. This
amounts to large sums of money
that buyers are unlikely to forego in
favour of ‘getting out of the market’.
Furthermore, with mortgage interest
costs at historic lows and tight rental
markets producing low vacancy
rates, investors will be more likely to
hold their units.
from Canada Mortgage and Housing Corporation
H o u s i n g M a r k e t I n f o r m a t i o n
Housing mARKET oUTLOOK
Greater Toronto Area
Spring 2009