Economic Outlook For The Real Estate Industry In 2021 And Beyond
COVID-19 has created several challenges for economies across the country. However, 2021 is predicted to be more hopeful as different industries get back on track despite the current distress. The real estate industry is particularly expected to see a significant recovery as other businesses reopen.
At Guardian Mortgages, we’ve been studying the real estate market and the factors currently impacting it. Based on our observations, we’ve developed three very possible predictions for the future of this market. Keep reading to see the likely economic outlook for the real estate industry in 2021 and beyond.
1. Continued increase in single-family household value
This prediction arises due to a migration of condo owners to single-family residential spaces. On account of it there is an oversupply of condo units, and it has become more of a buyer’s market. Condo owners and tenants do not want to be stuck in a 400sq.ft. space during a pandemic when everything is locked down. They would rather move in with their parents or move to the suburbs that have more space.
This means that many of our clients who have single-family homes are at an advantage, whereas condo owners are at risk. This is because Condo owners will see a decrease in the value of their homes due to the current market shift. Older condos will be hit a bit harder with higher maintenance fees. If possible, now is the best time to take a look at your mortgage situation and change up your living situation.
From an industrial perspective, we will see a huge repositioning in the industry. Toronto retailers will want to get out of large leases as malls and plazas have been in a lull for a couple of years, and recently, retailers have taken a massive hit. For example, small businesses have had to close down. Despite these negative trends, we will see a correction in mixed-use buildings. These businesses and buildings have seen a range of valuations and properties themselves have gone up in value as they offer multi-uses like in the case of Cannabis stores. They have been doing great in this pandemic and will continue in the future.
On the other end, many stores are not holding up. When we compare brick and mortar vs. online shops, a great number of brick and mortar stores have been forced to close down. Office spaces are closing as well with employees now working from home. Even though many small businesses are closing, building values are surprisingly going up. That said, businesses that can adapt and change their business model to fit with how the pandemic is affecting the market will thrive.
When we assess the trends created by the pandemic, another trend we see that it is essentially a repeat of the 2008 market crash but at a different scale. Debt loads are going to be huge and we will need to see how this is going to affect the stock market. We expect headlines to show recession or depression. But on our end, we see it is a transfer of wealth. In Toronto, the market conditions of 2006 to 2008 didn’t affect our housing industry too much due to strict policies. As a result, we will not see rates moving much. We will continue to have low lending rates for a couple of years, where it is very “cheap to purchase.” This will help drive property values higher where investors will want to take advantage of these rates. In 2015, people were talking about a housing bubble and no one could imagine a $1 Million home in Toronto. But in 2017, that is exactly what happened, and since then, home prices haven’t really dropped much. On our investor side, it has been very busy. Real estate investors right now want to buy and take advantage of the low rates and the slumped market. Moreover, if our clients buy low and sell high, they can make a lot of money from their property.
If all the predictions made so far are true, we at Guardian Mortgages will see an increase in cash flow, as we will be helping more clients. As your mortgage broker, we want to ensure your home is well taken care of from an overall financial planning standpoint. We want to reduce your debt and convert your house into an asset (in your family and as an investment). Unlike traditional investments, we consider your home investment as a “home stewardship.” Home stewardship is the idea of taking care of the property you live on and making it better. By this we want to maximize your abundance and minimize your expenditures so your property value increases, and you’re likely to earn a lot of money should you sell the place.
2. Interest rates will continue to be at an all-time low within the next couple of years
By this, we mean money will be cheap to purchase, which makes now the best time to leverage your money or pay down your debt. This will help increase your purchasing power and create an inflationary effect on housing prices.
Businesses will also have access to lower rates. They can leverage their income to access more equity out of their property. For businesses in a good position right now, they can pay down their debts faster and leverage their money more.
From a real estate standpoint, it’s going to be Christmas all year round. As Warren Buffet said: “When everyone is fearful, be greedy. When everyone is greedy, be fearful.” These words are going to come into effect in the coming months and years. If you are armed with the right knowledge and tools, you can create a lot of wealth from this trend. So make sure that you pay attention to what’s going on in the markets surrounding your real estate investments.
3. Toronto will enter the Top Ten list of cities in the world to live in
This trend will continue to drive up housing prices, and the drop in condo prices will be temporary. As more people migrate to Toronto, homes, and living spaces will start filling up, and vacancy rates will stabilize. Cities that can be used to benchmark real estate prices are New York, Japan, and Sydney. We are getting very close to these cities as we continue to create more opportunities and boast a higher standard of living.
If Toronto does get into the top ten cities to live in, it will be begin to buzz with several more opportunities. At present, there are many development programs and opportunities for businesses. Technology and employment are also increasing. If businesses can learn to pivot and acclimate to the changes of this pandemic, they can do very well given the positive factors emerging in Toronto.
The real estate industry has always been the backbone of Canada’s GDP. (Toronto, Ontario). This will continue in the near future for the long term. This metric will be more solidified in the coming months and years. Moreover, real estate will be the backbone of personal wealth and business wealth. What this means is that industries directly tied to the real estate industry will flourish. That includes initiatives in trades, finance, transportation, development, etc.
As Toronto flourishes from both a personal and a business level, try as much as you can to build partnerships with the right people, and learn about your communities’ opportunities. Work with like-minded individuals, set goals, and explore different ventures.
Despite the tensions created by the pandemic, there has never been a more exciting time than now to invest in the real estate market and reap benefits. Right now, people have the choice to work together and do things for the community at large or do things for themselves. This can be done from an economic standpoint or a home, family, or community standpoint. Just make sure that the most up to date information about the market is considered and the right professional guidance is obtained for profitable investments.
For funds to finance your real estate investments, reach out to Guardian Mortgages. We provide you with the best mortgage broker in Toronto, ON, to guide you through your options and the mortgage process. Our expert offers a unique bespoke service by actively managing every aspect of the mortgage process on your behalf, from coordinating with other professionals you may already be working with to managing your paperwork. Our broker will also ensure that each step, from qualifying to funding, is managed correctly to minimize delays and unnecessary fees.