Where should investors look for good deals in 2020?
January 17, 2020
In early January, I recorded an episode of the True Condos podcast with broker Andrew Lafleur. We discussed the 2019 new condominium apartment market, and what we expect new home buyers to encounter in 2020. We ultimately landed on the question: Where should investors look for good deals and high returns this year?
In my market studies for developers and lenders, you’d be surprised how many sites are now being underwritten with the assumption that sales revenue will exceed $1,000 per-square-foot (psf) on average. That’s not the end of it either, I just recently finished a report recommending the developer launch at $1,460 to $1,480 psf. An investor purchasing a 500 sq. ft. unit in that building would be required to put down almost $150,000 to secure that unit, this is a huge upfront commitment.
That project, like most developments with such a high price, is located in a prime downtown area, adjacent to transit, with immediate access to entertainment and employment.These types of developments have typically experienced the highest price growth and the highest rent growth. On the other hand, investors should be concerned about affordability, and take into consideration the fact that there may be a limited number of people with the financial ability to purchase or rent this unit from them in the future.
Investors will have to spend time researching and visiting new and upcoming areas of the Greater Toronto Area (GTA) to understand and forecast the next great communities. The south Downsview and Yorkdale Mall area has tremendous potential, many of these sites are within walking distance of the subway and one of GTA’s best malls. With York University just a couple subway stops north, there will always be a significant number of tenants looking for small-space accommodation.
Another up and coming neighbourhood is Danforth Village at Main Street and Danforth Avenue, which has a GO Train, a subway stop, and a streetcar line. Tribute Communities and Greybrook Realty have recently launched a high-rise condo tower in the area, with other major players like Marlin Spring, Osmington, Carlyle Communities, and Slate Asset Management also making acquisitions nearby.
With the exception of the waterfront, the majority of new condominium apartments in Etobicoke have been modestly scaled projects. However, many of the old malls in Etobicoke are set for major redevelopments with multiple high-rise towers, and the Mimico GO Train area will experience a full-scale remake. 2020 may be your opportunity to get in just as the area starts this amazing rebirth.
Surprisingly, there has been little talk in the media about the Eglinton LRT recently, and the impact it will have on real estate values and development along that stretch. Take a look at what is being proposed close-by, and what sites will launch along Eglinton in 2020, as values will likely increase significantly once the transit line is up and running. Are there any projects with a direct connection to the LRT line? If so, this is a huge advantage, as limiting outdoor time during our harsh winters is extremely valuable to resale buyers and renters.
Maybe you’re looking to purchase an investment unit for under $700 psf, which really limits your options in the GTA. Kitchener might be the right market for you. With huge growth in the tech industry, and a rapidly changing downtown core filled with bright young professionals and students, you can take advantage of Kitchener-Waterloo’s emergence and the desire for high-style accommodations from these recent graduates.
As I always say, do your own research, surround yourself with experienced professionals, only buy what you can afford, and buy for the long-term. Good luck.
About Ben Myers
Ben Myers is President of Bullpen Research & Consulting, a boutique real estate advisory firm, that works with landowners, developers, and lenders to better inform them of the current and future macroeconomic and site-specific housing market conditions that can impact their active or proposed development projects. Follow Bullpen on Twitter at @BullpenConsult or find Ben at bullpenconsulting.ca