A Professional Chance Taker? - February 2023
Tags: Real Estate News
How can one characterize their career by, or even simply monetize consistently - “good guesses”? This is essentially the case made by professional gamblers around the globe - from a poker hand to sports match results, to the roll of the dice; how is it possible? Relevant indicators, confirmed statistics & probabilities and market predicability. These professionals take the time to understand the factors that influence outcomes and make educated decisions or “bets” about the future. Similarly - this is how stock market predictions are made from a technical perspective in some cases. These professionals dedicate their lives and careers to knowledge, understanding, and a continual commitment to better performance based on enhanced and deployed knowledge. The same is true in real estate and market choices when investing. Recently there has been a high degree of uncertainty related to real estate in our Toronto/GTA markets, and the factors that generally effect pricing; inflation, interest rates, employment, supply and immigration figures to name just a few. As a whole, we have weathered the storm that was Covid-19… and we emerge on level ground, from a markets perspective. I say this because the pandemic was not a financial crisis of any sort - the underlying fundamentals of our banking systems are solid and remain to be. This was the unfortunate result of a global health pandemic. From here we can sense, and maintain, a level of comfort, normalcy and predictability.
With predictability comes that power, to assess and reflect - interpreting statistics to essentially see the future. And the future is good. The indicators I mention above can be examined exclusively;
1. Inflation - although not going away completely, the record high inflation that was propelling interest rates hikes has cooled to a manageable degree. It’s popularly agreed that we will achieve our target rate as early as summer - even with events like the Russia-Ukraine war ongoing. If that is the case, we could see interest rates begin to fall with the leaves, as early as October. Positivity and confidence surrounding realistic targets makes inflation less of a negative market factor and more like the weather - we know it’s there and what it looks like, so we dress for the occasion. No more surprises.
2. Interest Rates - generally motivated by the higher than manageable inflation numbers of yesterday, the BOC paused their hike cycle - for the first time in over a year! This confirms and supports the confidence already prevalent in the market. Based on todays expectations, we can anticipate another hold at the central bank’s next announcement April 12th. Retail rates have already seen over a 1% reduction, and for banks to earn a spread on their lending - I believe, as a major contributor to Canadian GDP, policy interest rates will begin to fall late 2023, early 2024.
3. Employment - job creation and employment statistics are solid within the GTA; with growing tech, manufacturing and finance sectors leading the way - providing opportunity for talented graduates to secure employment. This talent offered in the Toronto marketplace is a major draw for these employers to setup operations locally. We have seen a major push by multinational corporations and their desire to establish operations in the GTA; in addition to top tier talent, the savings that our dollar/exchange rate provide are majorly appealing.
4. Supply - in our supply constraint market, a commitment has been made to build more and build fast; but that simply will not achieve the balance that’s needed to cool pricing. We are a market constrained by natural features; greenbelt and lake Ontario - there is only so much land left to build on, making vicinity to the core even more expensive. Combine land scarcity with political intervention and red tape, labour shortages in the skilled trades sector, complexity in projects contributing to longer timelines, volatility in commodity prices and so much more… we cannot keep up, and will become a renters market similar to NYC and London UK. It’s not a question of if, but when.
5. Immigration - ambitious targets agreed on by both the federal and provincial governments expect a total of 1.5 million people immigrating to Canada over the next 3 year span, 2023 inclusive. That works out to 500,000 immigrants added to the demand side of the supply/demand curve. These immigrants are coming to Canada with money, education and ready to contribute to the economy - they just need a place to live! Most newcomers will be drawn to the GTA for our multiculturalism and opportunity.
No chances here; full steam ahead with confidence. Knowledge is power - the power to make educated gain in the real estate market!