How to handle the explosive–and difficult–Mississauga real estate market – insauga.com

Three years ago, worried first-time homebuyers wondered—for good reason—if they would ever be able to own a home (even a very small one) in the city they grew up in. 

Their fears were legitimate. A lack of housing inventory prompted desperate buyers, some with much deeper pockets than others, to sometimes throw an additional $100,000 (or more) at a seller in order to lock down an already egregiously costly fixer-upper. Buyers were purchasing homes without any conditions (who needs a home inspection?) in order to beat out 10 to 15 other bidders, and realtors were shocked to see dozens—sometimes hundreds—of people converge upon an open house. 

The former Liberal provincial government stepped in with the Fair Housing Plan and pledged to levy a special 15 per cent tax on foreign buyers and speculators in at attempt to thwart investors from purchasing properties and letting them sit empty for years while increasing in value. The federal government also imposed a more rigorous stress test (that it’s now modifying) that required prospective borrowers to qualify at higher than normal rates. 

The legislation worked and buyers backed off, but the cooling was only temporary and outrageous bidding wars and sky-high prices are once again becoming the norm. 

“I had a client in January 2020 and we made an offer on a condo that sold for $472,000 and had five offers,” says Nik Oberoi, a sales representative with Cloud Realty. 

“One property in Mississauga recently had 27 offers. We’re getting five to 10 offers minimum, again.

Competition drives prices—which are already high—higher. Recently, the Toronto Region Real Estate Board (TRREB) released its monthly housing data and revealed that the average house price (all home types combined) in Mississauga hit $782,415 in January 2020.

Evidence suggests the market is heating up because the previous legislation failed to rectify the most significant issue: A lack of available housing.

“A big reason is there are a lot of inventory issues, [even in the condo market]. There aren’t a lot of good units that have been well-kept. We have a lack of inventory and we have more buyers than normal. We have a lot of new immigrants in Mississauga and the GTA and interest rates are low.”

Oberoi says more first-time homebuyers are entering the market because of the federal government’s First-Time Home Buyer Incentive, which allows buyers to apply for a shared-equity mortgage with the government of Canada. It offers 5 per cent or 10 per cent for a first-time buyer’s purchase of a newly constructed home, 5 per cent for a buyer’s purchase of a resale (existing) home, or 5 per cent for a buyer’s purchase of a new or resale mobile/manufactured home. 

“There are too many buyers right now and it’s a tough time if you’re a buyer,” Oberoi says. 

Oberoi says today’s real estate climate is becoming a repeat of winter 2017. 

“This is happening to everyone. It’s not just happening in Mississauga or the Square One area. It’s happening in Toronto, Barrie, Durham, Oakville, and Burlington. The entry-level price point for one and two-bedroom condos and towns and semis is more attainable for first-time buyers, so competition for these homes is huge. We’re not seeing this with detached houses as much because those have much higher price points.” 

Oberoi says that desperate buyers will purchase condos without looking at the status certificate, which is risky because the certificate can reveal pertinent information on the building’s financial health and whether or not property management is locked in any legal disputes.

But while the market is a challenging one for buyers to navigate, Oberoi says there are steps people can take to help ensure they find what they’re looking for. 

“First thing, get your financing in order. Do not shop unless you have a pre-approval from a reputable lender or bank. If you give a financing condition, the [seller] could pass you over. Do not actively shop without talking to a bank. Think about how confident can you make the seller,” he says.  

“Second, if you want a home inspection, do it before the offer presentation date. It can hold up the offer otherwise. The seller will go with the offer that doesn’t have any hiccups to deal with afterwards.” 

Oberoi also recommends reviewing the status certificate for a condo before moving to buy. 

“If you want to buy a condo, review ahead of time to waive that condition. It’ll make the seller feel more confident. Don’t go into a condo without looking at the certificate. If you love the place and don’t want to lose it, look to see if other properties are selling in that building. If something is wrong, you’ll see a small number of properties being sold.”

Oberoi also says to be prepared to bid over-asking—but only within reason. 

“You have to look at how many offers there are. If there are eight offers, you know it’ll go for more. Every offer adds about $5,000 to the price. So you might have to go $30,000 to $40,000 over asking,” he says.  

“If you want it, you have to be willing to slightly overpay. You save in the long run, because the next seller will want more than what their neighbour sold their unit for, so you mitigate expenses on the next unit that will cost more money. At the same time, know when to stop yourself. If you keep overpaying wildly, you start the bubble. That’s what happens when someone pays a ridiculous price just to win.” 

As for how much is too much to overpay, Oberoi says it depends on what your plan is. 

“If you’re buying for yourself and plan to live in the home for a long time, it’s okay to spend an extra $10,000 or $15,000 [because you will recoup your investment]. If you’re an investor, it’s not a good time to buy because you will be overpaying,” he says.

“Check your emotions and try to be logical about your purchase. People do have more money to spend because of the first-time homebuyer’s incentive. There are more buyers than inventory. It’s not about what the house is worth, it’s what you’re willing to pay.” 

As for what can be done to cool the market and make it easier for buyers to navigate, Oberoi says he’d like to see real estate better regulated. 

“I’d like to see real estate more regulated. Realtors underprice to start bidding wars and we have a responsibility to keep prices in check, especially when we have immigration growth and job growth in the area.”

He also says buyers should work a realtor who knows the market area well. 

“Work with the right realtor. An inexperienced realtor might encourage you to spend more than you need to. Find someone who knows your area, too—don’t use a Scarborough agent to buy a house in Mississauga.”

He also says that it’s important to ask yourself if buying a home is the right choice for you. 

“I believe in homeownership. It’s good that the government is trying to help people [buy homes] and I want more products in place to help people get into the market. It’s another vessel for you to create more freedom and wealth. But I also want people to be able to afford the houses they are living in instead of using credit lines and borrowing from family,” he says.

“We need more education. There are other opportunities for financial freedom, maybe real estate is not right for you right now.”

Despite how heated the market is, Oberoi still believes Mississauga is a good investment for prospective homeowners. 

“There’s a lot of things happening and the city is not stopping. It is a good time to get into the market, but be careful if you’re worried about this chaos. You can buy pre-construction development. We need to keep a close eye on the market and educate people on how to get in but not be stupid. We can’t have 2017 again, that makes more room for a collapse,” he says.  

“If you have a long-term goal in your home, you will not lose money. People who will be affected by shifts and changes will be those who put everything into the house and struggle to pay for other things. Have a long-term goal—don’t buy now if you want to sell next year. This is still a safe market.”

While Oberoi says it’s hard to say whether or not different levels of government will try to cool the market again, he does say that development—which will ultimately increase inventory—is not slowing down. 

“There’s been a lot of real estate buzz since 2016 and that will continue. We’re seeing condo booms in Barrie and Oshawa. The boom has contributed to Hamilton’s growth, now it’s a little less affordable. People are moving as far west as Brantford.”

The best advice, however, is not setting yourself up for disappointment by shopping before you know what you can afford—and accepting that some homes will simply not work for you and your budget.  

“Make sure you can afford the house. If a bank won’t give you a pre-approval, you cannot afford it.”

Let’s block ads! (Why?)

Source link