2 bedroom condo ajax . The apartment market can be reversed in 5 years! Although there are still a large number of investors waiting to enter the condo market in Toronto, real estate experts warn that as apartment costs continue to rise and signs that tenants’ affordability for rent has reached its limit, rent cannot pay for maintenance, and the outlook for apartment investment will change in less than five years.
Shaun Hildebrand, president of apartment market research firm Urbanation, said that when the rent will not be able to cover the monthly maintenance costs, it will have a significant cash flow impact on real estate investors.
He said he was not sure whether investors who had recently been actively buying apartment uncompleted flats fully understood the current supply and demand in the apartment market and how it would affect their expectations of returns.
Rents in Toronto will grow by about 10% a year between 2016 and 2018, and are likely to grow at a moderate rate of 5% a year for the foreseeable future, Hildebrand said.
“in the next short period of time, we will feel that we have built enough rental units, because there will be a lot of investors to rent out units, but this will be temporary,” he said. For example, this year will rarely see the emergence of a large number of rental units. “
Apartments account for about 35% of the Toronto rental housing market. According to Hildebrand, 30, 000 apartments will be completed this year. By comparison, there were about 20,000 sets last year. In the first quarter of this year alone, as many as 10,000 new apartments were available. In addition, 3579 special rental units will be completed this year. Although the number is not large, it is more than in the past 20 years.
He added that when the current wave of completed units is delivered between 2023 and 2024, apartment investors will need about 4000 yuan a month to afford them at a down payment of 25 per cent and an interest rate of 3.5 per cent. However, he does not believe that tenants will pay 60 per cent more than the current average (about 2500 yuan), even if the new apartment has no rent control.
With rents barely rising between the second and third quarters of last year, rents may be nearing a tipping point, according to Urbanation research. The demand for micro-units and small studios is undergoing great changes, both of which are the only types in the market where the monthly rent is less than 2000 yuan.
We are beginning to see some market shift from downtown to the cheaper 905 area; renters are also more inclined to old-fashioned buildings.
According to the Toronto Real Estate Bureau, the average resale price of an apartment in November was 617658 yuan. The average selling price of newly built or pre-sold units was 866827 yuan in the same month, according to the Housing Builders Association.
Hildebrand believes that investors will not change their behavior until they see a deficit at the end of the month. But even so, it will not have a significant impact on the apartment market, because those new apartment investors are very optimistic about the future. Those who are still investing after prices have risen by 50% in three years are bound to be optimistic about the market outlook. Only if the economic situation changes will investors’ behaviour begin to change.
