Andre Smit's Real Estate Round-up

Thursday Sep 14th, 2023


Hi Folks,

Having just spent the month of September on the beautiful shores of Cape Town, South Africa, sampling great red wines and gorging myself on world class beef steaks, my batteries are now fully charged and I am once again firmly back in the saddle! I came back to list a 3 bedroom, 2.5 bathroom, 1.5 car garage, carpet free, freehold, executive, updated townhouse, minutes from the lake in Stoney Creek for just under $800k!

So the Bank of Canada has now held off on any further interest rate increases for the next two months. However, the governor has warned of future rate increases if the inflation rate does not drop to close to their annual target of 2%. My personal opinion, is that all the recent increases have cut into the bone of our economy and that we are still due for a recession over the next 3-4 months!

Compared to July, actual total sales for August were steady around 5300 units, while total new listings were down by 10% from the month before!

As a result, the ratio between actual sales and new listings, moved up slightly to 43% from 38%, last month. Remember that if the ratio is below 40%, then it indicates a buyers' market. As more and more mortgages are coming up for renewal in September / October and new interest rates at least doubling, and in some cases even tripling, I expect to see more new listings coming onto the market. This will definitely move the market firmly into a buyers' market. Already this month, I am starting to see price decreases in the detached home segment with a list price range of $1 - $1.4 million, in the Halton area.

According to the Toronto Real Estate Board, (the largest in Canada), compared to August last year, total new listings were up by 16%, while total actual physical sales were down by 5.3%. This resulted in the average price for all homes, increasing by only 0.4% from the same month, the year before. The average days that listings spent on the market, before selling, increased by 9% to 20 days, from the same month, a year ago.

The average detached house prices have increased by 3%, compared to August, 2022, while physical sales decreased by 12%, year on year. The number of total new listings, increased by 9.6%, compared to the same period, last year, while the average days that listings spent on the market before selling, decreased by 14% to 19 days, from the same month, a year ago.

However, average condominium apartment prices have decreased by 1% for the same period, while new listings increased by 24% over the same month last year. The average days that these listings spent on the market, before selling, have decreased by 12% to 23 days. Actual physical sales, in this category were up by 8%.

I have always been a supporter of using the equity in your home, in order to create personal wealth. With housing prices having increased by an average of 5-6% p. a. over the last 7-10 years, imagine the capital growth if you had invested in an income earning property at that time! At that rate of annual increase you would be able to double the value of your investment in only 15 years!!! With prices dropping and rentals increasing, now is the time to consider a real estate investment. With this in mind, I have invited my personal, Super Mortgage Agent, Roberto Pelaccia, to take the mystery out of this interesting subject. Enjoy his article!

Buying a Rental Property

Do you want to have $2,000,000 in 15 - 20 years - just buy two $500,000 investment properties!

Real estate is a powerful investment, because it allows for you to use leverage, (a loan). That leverage

means you can buy an asset that is worth much more than the investment you actually made, (your


For example, if you purchase a property for $500,000. You are expected by lenders to put down a 20%

down-payment of $100,000. The bank will then invest an additional $400,000 for you to secure the

property. That is 4 times what you are putting in. They just want you to pay the loan down and they

will profit on the loan interest charges, so any of the upside increase in value on the property is all


Who pays the loans and expenses on the property - the renters of course!

The average growth rate of real estate in Canada is 5% per year. If you let that $500,000 property grow

at an average of 5% per year the estimated value is $1,326,000 after 20 years! That is approximately $1,100,000 in wealth. Do that twice and let the magic of real estate work for you, and you just created $2,000,000 of wealth for you and your family.

Costs and Risk are not avoidable but can be managed and controlled. Closing costs – would include land transfer taxes, legal and title fees, and appraisal and inspection costs.

They can add up to about $12-15,000 for a $500,000 purchase.

Renters – it may take 1-2 months to find the right renter for your place. It is a good ideal to be prepared to have 1-2 months expenses available in liquid cash or from home equity line of credit. The same is to be said when renters leave, and they need to be replaced.

Maintenance—a house that you are renting out is the same as any other property. It will need to be

updated from time to time. Typically, 4% of the rental income annually should be set aside for

maintenance required immediately or in the future.

Down-payment—though you may have cash for your down-payment. Ninety percent of people purchasing an investment property use home equity from their current primary residence. This interest can be a tax deductible, and structured correctly, should not cost you out of your own cash-flow. Working with an experienced Mortgage Broker and Smith Manoeuvre Accredited Professional like myself, will assure that you are truly doing the best with what you have, from where you are.

But how risky is it …

Well, the bank will lend you 4 times what you are required to put in for your end of the investment.

Would they do the same if you asked them for a loan for the stock market, or for a business idea you

may have ?? We both know- they would not give you 4 times your investment for these things. So

why would they do so for a real estate investment ? Simple, because real estate has a track

record of being a safe place for banks to put their money, and that is why it is a good place for you.

If you would like to touch base and discuss how you can purchase your first investment property, please book a time to discuss your plan –, or ask André to arrange a consultation with me.

Roberto Pelaccia- Mortgage Agent, Certified Cashflow Specialist - 905 466 5023 - FSCO#12233


Trim any dead branches on trees and shrubs, before the leaves begin to change colour for the fall. Keep window wells, and gutters free of leaves and debris to ensure proper drainage. Check and replace any outside lighting, as necessary.

Please remember, that if you, your friends or family, have any questions regarding real estate, or indeed, require the services of a good realtor, do not hesitate, to contact me, at 416-898-2852, at anytime.

Enjoy the change of seasons!

Kind regards,


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