By Lindsay Smith/Real Estate Columnist
This is an age-old expression. It seems to fit into today’s Real Estate market. Let me explain how.
A quick online search will show that we are going through a time where homes are becoming more and more expensive with first-time buyers are being shut out of the market. However, is that really the truth? If you look on www.realtor.ca or Pinterest you will see large homes, homes that are staged beautifully and others offering every imaginable upgrade. Like many things on social media, these are not the reality for many Buyers in today’s market. I recently read a statistic that indicated 40 per cent of first time buyers are waiting for the prices to drop before they purchase. I have to wonder if they look at what they see, determine they cannot afford a home and the defensive reaction is to say “I’m not playing this game.”
Let’s first look at how holding off has worked as a tactic.
The average home in Oshawa at the end of last month (August/21) was $722,800. If we look at how that has changed over the past few years, we find that in August/20, the average home sold for $612,800 and in August/19 the average was $516,800. In the past 2 years the average has jumped $206,000 or about 40 per cent. I have been selling Real Estate for over three decades and during my career there has only been two times where the values have decreased. Both drops in value were below 30 per cent. Waiting for something to happen, that is beyond our control is a risky bet.
So how does “get your foot in the door” apply with Real Estate? Here is an example; in June/21 our team sold a condo at 1900 Simcoe St. near Durham College. The unit was small, around 500 sq ft and was listed for $220,000 and our Buyer purchased it for $218,000. Before you think “oh but it’s a student rental condo or too small” here is the track record of the building. The first reported sale of the same unit as we sold, sold in December 2019, for $155,000. Based on what our client paid, the unit has increased $63,800 in value, or about 40 per cent. Interesting that the condo has mirrored the increase in values for all of Oshawa.
Let’s make a few assumptions. Let’s guess that the buyer who sold in 2019 put 10 per cent down on the property. That means that the down-payment was about $15,000 (based on a purchase price of $155,000) If the owner sold for $218,000, (the same as our Buyer paid) they would have had an increase of $63,000 on their $15,000 down-payment investment. That is an incredible return! Lets assume that the costs to sell were around six per cent, including all fees, that same $15,000 down-payment added together with the increase in the value of the condo would be $66,000!
This is how “get your foot in the door” works when it comes to the Real Estate market. Once you own a property, even a “student-rental” type condo, the property will Increase in value as the market goes up. It might not sound sexy, however, if you ask a dozen people who bought their first properties 10 or 20 years ago what type of property they first purchased, you will most likely discover their first property was a true starter home.
The first property I purchased was a condo in central Oshawa. I owned it for three years and ended up selling it to purchase my first detached property. In fact, I never lived in the condo, I bought it, rented it out and rented a 1 bedroom flat to live in. It was my entrance into home ownership.
If the statistic suggesting that 40 per cent of first-time Buyers are holding off, waiting for the market to drop, my recommendation is to get your foot in the door, any way you can. It may be the best decision you make for your future.