Zan Molko’s Mews…
and Views.

When is the right time to make your next Real Estate move?

Although it is not quite the same as deciding when one should elect to have by-pass surgery, sometimes the emotional trauma of dealing in Real Estate can conjure up heart wrenching stress levels.

Recently there has been a lot of press on how “Hot “ the Toronto Real Estate market is. In a matter of a few short months the market has dramatically shifted from a Buyers’ market to a Sellers’ market. This is largely due to the fact that this past January we saw the lowest level of inventory in almost 17 years. In certain areas Multiple offers have contributed to the general fervor with homes being sold well above market value. However, only certain pockets of the city are enjoying this new found enthusiasm.

Real Estate in Toronto has historically shown stable and consistent upward growth. That was, until the mid eighties, when prices began to skyrocket reaching a peak in March of 1989. The “Crazy” eighties, driven by the effects of Reaganomics, increased immigration from Asia, and an artificially buoyant economy, witnessed a Real Estate fervor not previously experienced in Toronto. However, since the 1989 market peak, prices continued to decline steeply until December of 1996 (see attached graph).

While 1996 saw a recovery of the market in terms of units sold, a 42% increase over 1995, there was still a net decline in the average selling price (2.2%). It wasn’t until 1997, that we saw the first increase in prices in Toronto Real Estate in almost 8 years.

Where one should invest today is fast becoming the most complex and least understood question. Equities and Mutual funds have been on such a wild ride that even the most ardent of stock traders remain nervous about the near future. Recently the bond markets have come under pressure and even GIC’s have taken a second place to under the old mattress.

It should come as no surprise then, that Real Estate is once again viewed as a favorable investment vehicle. Let us not forget that some of the world’s greatest accumulations of wealth have been through the acquisition of Real Estate.

Despite the advice of your financial planner Real Estate should be part of everyone’s investment portfolio. The principle residence remains the last available tax free capital gain and for some paying a mortgage is like a forced savings plan. If you select your mortgage payment options carefully you can pay down that mortgage faster concurrently with building equity.

How you choose your Real Estate is ultimately a subjective matter. The pendulum swings back and forth between the family needs and what should be ostensibly a good long term investment. Regardless of how much weight you attribute to the Financial cost versus the emotional equity of the hearth and home, now is definitely a good time to make a Real Estate move.

Do you have questions or comments about the contents of this article? Zan would love to hear from you. Write to zan@zanmolko.com or call him directly at (416) 441-2888.