Real Estate Market Forecast Speech

The is an excerpt from my Manager (and President of the Canadian Real Estate Association), Ann Bosley’s Speech at the Women’s Post Panel, March 5th, 2009. This is a very good take on the current real estate market in Toronto and Canada. The real estate forecast is stronger than much of the media has made it out to be. In fact amongst the top realtors in Toronto it is believed that this is a great market to be buying in Toronto.

Question: IS REAL ESTATE A GOOD INVESTMENT?

GOOD EVENING LADIES AND GENTS AND THANK YOU, SARAH, FOR INVITING ME TO PARTICIPATE TONIGHT.

THE QUESTION BEFORE US IS – IS REAL ESTATE A GOOD INVESTMENT? WELL, REALLY – HOW DO YOU EXPECT ME TO ANSWER THAT???

IF I WERE WITH MERRILL LYNCH – I WOULD SAY ‘NO’ BUT THEN AGAIN, THINK OF WHERE THEY WOULD RATHER HAVE YOU PUT YOUR MONEY!

IF YOU WERE CONSIDERING BUYING A HOME TO FLIP WITHIN THE NEXT YEAR – I WOULD SAY ‘NO’. THIS MARKET AND INDEED THE 2007/8 MARKETS ARE NOT THE TYPE OF MARKETS WHICH REWARDED SPECULATORS.

BUT ALAS – I AM A BOSLEY, WITH AN 80 YEAR OLD FAMILY COMPANY BEHIND ME, WHICH JUST HAPPENS TO DEAL IN REAL ESTATE – OF COURSE I AM GOING TO SAY ‘YES’!

CONSIDER THESE FIGURES: IF YOU BOUGHT A HOUSE IN TORONTO IN 2000, THE AVERAGE PRICE WAS $243,000. THE AVERAGE PRICE IN 2008 WAS $379,000 – up 56% – BUT THAT’S NOTHING BECAUSE TORONTO MLS STATS ENCOMPASE SUCH A HUGE AREA FROM OAKVILLE TO BARRIE TO OSHAWA. THEREFORE, THEY ARE NOT ENTIRELY REFLECTIVE OF THE TORONTO MARKET.

BUT – IF YOU BOUGHT IN CABBAGETOWN IN 2000 AND SOLD NOW – THE AVERAGE PRICE HAS INCREASED 71%!
IF YOU BOUGHT IN ROSEDALE IN 2000 AND SOLD NOW – THE INCREASE IS 83%!
AND THEN THERE’S LEASIDE WITH AN INCREASE IN 8 YEARS OF 121%



SO YOU CAN SEE – WHEN WE COMPARE TORONTO’S REAL ESTATE PERFORMANCE OVER TIME, WE ARE DOING JUST FINE. HOW MANY OF YOU CAN SAY THE SAME THING ABOUT YOUR STOCK PORTFOLIOS? THE BEST PART IS THAT TODAY, MARCH 4, 2009, WE CAN STILL LIVE IN AND TOUCH OUR REAL ESTATE INVESTMENT. WE STILL HAVE EQUITY BECAUSE CANADIANS, UNLIKE OUR SOUTHERN NEIGHBOURS, PAY OFF THEIR MORTGAGES INSTEAD OF WRITING OFF THEIR INTEREST PAYMENTS.

WHEN WAS THE LAST TIME YOU HAD A GREAT DINNER ON YOUR RIM SHARES? OR WATCHED YOUR FAMILY PLAY ON YOUR GM STOCK? WHEN WE THINK OF INVESTMENT, WE SHOULD ALSO CONSIDER INVESTMENT IN OUR OWN LIFESTYLE. PEOPLE TEND TO LOSE SIGHT OF THE FACT, IN AN AGGRESSIVE MARKET, THAT THEIR HOME IS NOT ONLY A FINANCIAL INVESTMENT, BUT IS TRULY AN INVESTMENT IN THEIR FUTURE HAPPINESS. SO AGAIN, IN ANSWER TO THE QUESTION, I WOULD SAY THAT HOME OWNERSHIP IS A GREAT INVESTMENT!

GRANTED, WE ARE NOT SEEING THE KIND OF ‘INSTANT’ GROWTH THAT WE EXPERIENCED IN 2007/8, BUT THOSE TWO YEARS WERE HISTORICALLY EXCEPTIONAL AND NOT A REALISTIC REFERENCE TO THE ACTIVITY THAT CREATES A BALANCED MARKET.

THE BOTTOM LINE IS – FOR BUYERS WITH GOOD CREDIT, A DOWNPAYMENT AND A SECURE JOB; THE NEXT SIX MONTHS COULD PRESENT A UNIQUE WINDOW OF OPPORTUNITY. WITH THE CONVERGENCE OF REDUCED PRICES, UNBELIEVABLY LOW INTEREST RATES AND THE NUMBER OF PROPERTIES AVAILABLE, RIGHT NOW IS PROBABLY THE BEST TIME TO BUY THAT BUYERS HAVE HAD FOR GENERATIONS. I EQUATE THIS WITH A BUNCH OF SWIMMERS IN THE OCEAN, RACING FOR THE SHORE – THE FIRST ONE TO PUT HIS FEET ON THE BOTTOM WINS – AND THE REST GET WASHED AWAY BY A WAVE. DON’T LET THE WAVE GET YOU!

THE WINDOW MAY BE RELATIVELY SHORT LIVED BECAUSE THE BANK OF CANADA CAN’T KEEP INTEREST RATES THIS LOW FOREVER. ONCE PEOPLE REALIZE THAT IT IS SUCH A GOOD TIME TO BUY, THEY WILL START BUYING AND THEREFORE PUT UPWARD PRESSURE ON INTEREST RATES AND PRICES.

LAST YEAR, YOU WOULD HAVE POTENTIALLY SOLD YOUR HOUSE FOR MORE, BUT YOU ALSO WOULD HAVE PAID MORE FOR YOUR NEXT HOUSE. TODAY, YOU MIGHT SELL FOR LESS, BUT YOU WILL ALSO PAY LESS – ADD THE LOWER PURCHASE PRICE TO THE ADVANTAGE OF THE LOWER INTEREST RATES, AND THE CHANCES ARE YOU WILL BE CARRYING A CONSIDERABLY BETTER HOUSE FOR LESS.

YOU WOULD AT LEAST GAIN THE VALUE OF THE EQUITY YOU HAVE ACCUMULATED BY PAYING DOWN YOUR MORTGAGE. IF YOU ADD THAT TO THE FISCAL ADVANTAGE OF SELLING YOUR PRINCIPAL RESIDENCE, WITHOUT PAYING CAPITAL GAINS, YOUR ROI – RETURN ON INVESTMENT – CAN NOT BE NEGATIVE.

DO YOU KNOW ANY STOCKBROKER THAT CAN GUARANTEE YOU THAT YOUR ROI WON’T BE AND CAN’T BE NEGATIVE?

WHAT DO I SEE IN THE FUTURE? WELL, THAT SEEMS TO BE THE TRILLION DOLLAR QUESTION THAT EVERYONE IS ASKING. FOR REASONS WHICH I WILL ELABORATE FURTHER DURING THE QUESTION PERIOD, I CERTAINLY DO NOT SEE THE CANADIAN REAL ESTATE MARKET FOLLOWING THE PATH OF THE U.S. OF COURSE, WE WILL CONTINUE TO BE EFFECTED BY THE GLOBAL FINANCIAL CRISIS, AS IS EVERY OTHER BUSINESS IN THE WORLD. BUT IT IS IMPORTANT TO REMEMBER THAT UNLIKE OUR SOUTHERN FRIENDS, THE CANADIAN ECONOMIC DOWNTURN WAS NOT PRECIPITATED BY THE LITERAL DEVASTION OF THE REAL ESTATE MARKET, BUT RATHER THE CANADIAN REAL ESTATE MARKET IS REACTING TO A WORLDWIDE ECONOMIC CRISIS.

THE CANADIAN REAL ESTATE ASSOCIATION FORECASTS AN OVERALL NATIONAL DECREASE IN PRICES 0F 8% DURING 2009, FOLLOWED BY A RECOVERY BEGINNING IN THE LAST QUARTER AND MOVING INTO 2010. THE SPEED OF THE RECOVERY WILL BE DEPENDENT ON THE LEVEL OF CONSUMER CONFIDENCE IN 2010. THE PERVASIVE SENSE OF FEAR THAT HAS BEEN DOMINATING THE MEDIA, NOT TO MENTION THE CONSTANT INCORRECT INFORMATION AND COMPARISONS TO THE U.S. DOES NOTHING TO INCREASE OUR LEVEL OF COMFORT.

THE ISSUE OF LOST CONFIDENCE AND HOW TO REVIVE IT IS PLAYING A PIVOTAL ROLE IN THIS ECONOMY. THE REASON FOR TODAYS PROBLEMS IS CENTERED ON THE VERY INSTITUTIONS AND INDUSTRIES THAT WE HAVE TRUSTED ALL OUR LIVES. NO MATTER HOW MUCH BAILOUT MONEY IS THROWN AT THE ECONOMY – RESTORED ‘TRUST’ IS THE KEY TO ANY RECOVERY OF CONSUMER CONFIDENCE.

THE MORAL OF THE STORY IS THIS: DON’T LET ALL THE DIRE NEWS OF WALL ST. OR BAY ST. DETER YOU FROM BUYING REAL ESTATE. IN FACT, DON’T FORGET THAT IN GOOD TIMES AND IN BAD, REAL ESTATE IS THE ONE THING THAT NEVER LOSES ITS INTRINSIC VALUE.


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