The Ontario housing market has been on an upward trend in recent months. Home trends data for June 2021 reveal that the median sale price in Ontario was $573,000. This is a 24.2% increase from the previous year. With a rating of 73%, the Ontario real estate market is currently very competitive.
However, anytime prices rise rapidly, the bubble will eventually burst. According to a recent article, the Royal Bank of Canada predicts that real estate prices could fall by 29.6% within the next year. Bank of Montreal sees home prices falling by 28.7% before the end of 2022.
So, what should real estate investors do when property prices are falling?
Keep your properties in pristine condition.
In a real estate downturn, one of the best ways to protect your portfolio is by making your rentals the best in the neighbourhood. Invest in property repairs, key upgrades, and preventative maintenance. This will enhance the quality of your homes and ensure they continue attracting tenants.
Dispose of risky assets.
Real estate investors should dump any risky assets when prices begin falling. Optimize your portfolio by disposing of poorly-performing rental properties and retaining those that can weather the storm. While home prices are still high, this could be a great time to sell properties that have appreciated significantly.
Develop banking relationships
Before an economic downturn, develop multiple relationships with lenders in case you need to borrow cash for future investments. It would be advisable to go for a credit union or local community bank that has a history of working with real estate investors. Remember to improve your credit score if it isn’t good.
To take advantage of low prices, you need to have enough cash reserves or investment. Avoid spending money irresponsibly and ensure you are not over-leveraged. If you have cash readily available, you will be able to maximize opportunities for buying an investment property.
Expand your portfolio
Savvy real estate investors understand that the best time to buy property is during an economic downturn. During such times, there is usually a glut of homes available at discounted prices. Mortgage rates are also low during a recession. Property sellers are desperate and want to sell as fast as possible. Buying an investment property at discounted prices means that you can enjoy a good return on investment when the market improves.
Falling home prices are not always a bad thing. Watch the news and read real estate blogs to stay abreast of the latest trends. If you are looking for great real estate deals, get in touch with us.