As the autumn deepens with the beautiful leaves, warmth is already felt comfortably. I hope you have been doing well.

As I mentioned in my previous post, I would like to talk about basic and highly informative knowledge and information related to the economy, real estate, and investment in the Greater Toronto Area for all those who have a connection with Canada, whether it be immigration, studying abroad, or other investments.

The essence of the content is roughly as follows. Despite the fact that many countries, including Korea, the United States, and globally, have shown poor performance in the economy and real estate, why has Canada (especially the Greater Toronto Area) continued to grow steadily over the past decade, and is expected to continue to grow in the future…
Furthermore, by clearly understanding the significant differences between the economic structure and real estate between Korea and the Greater Toronto Area, I hope to alleviate any unfamiliarity or fear about the real estate in this area, and furthermore, emphasize that unlike in Korea, “real estate” has played the most significant role in the growth and happiness of each household economy in the Greater Toronto Area, and will continue to do so in the future.

Since 2003, I have been holding seminars and individual consultations on Toronto real estate during my business trips to Korea. I am scheduled to do so again from late November to mid-December this year.

Since the seminar in 2008, I have actively encouraged Koreans to sell their real estate (especially apartments) and will continue to do so this year. I have also advised them to cut their losses and sell even if it does not sell well, but it may not have been easy for them as the direct parties involved.

Some who have sold their Korean real estate and bought Toronto real estate have seen significant results in their household economy, but the majority who have not sold have been waiting for a good time, fearing a loss if they sell and clinging to the ambiguous hope of “real estate never losing value” that has been ingrained in the minds of Koreans for decades.

Now, in addition to seminars and individual consultations, I hope to provide fundamental knowledge and information on real estate growth factors, structures, and systems that influence the growth of Korean and Toronto real estate through various platforms, including this article.

1. Socialism-based capitalism with a strong foundation and principles (the difference in public perception of real estate)
Looking at the growth process of real estate in Korea, it has not grown based on normal economic principles of supply and demand but rather through abnormal speculation based on discriminatory systems led by the government or local governments such as new cities, redevelopment, and reconstruction. It peaked in the mid to late 2000s and exploded, revealing itself to all Koreans through the complete dissemination of the internet, and quickly reversed to a decline, returning to its original normal price. Since it was an extremely abnormal surge at that time, it will still take quite some time to completely return to normal. (Similarly to Korea, Japan, which has pursued a government-led real estate policy, reached its peak in 1991 and has not fully recovered even after 22 years.)

The Greater Toronto Area in Ontario, Canada, is an advanced type of capitalism with order, and if you look deeply into its capitalist structure, it has a very strong socialist inclination. Therefore, it is called socialism-based capitalism. It is a strong economic structure that ensures as much freedom in economic activities as possible but imposes high taxes on those with high income to redistribute wealth equally and provides all welfare of the society free of charge, including low-income groups. If there are no global shocks such as the 2008 US Lehman Brothers crisis, it will continue to grow steadily every year.

Canada is the first country in the world to decouple from the US, which means it is the country that is least affected by the US economy. Although the territories are easily accessible on the same continent, Canada has a strong independent structure and network with a completely different economic system from the US.

For example, when the US subprime mortgage crisis occurred in 2006, Canada continued to grow without any impact, and even when the Lehman Brothers bankruptcy shock came in September 2008, most countries around the world suffered economic difficulties along with a decline in real estate values for several years after the shock, but the Greater Toronto Area recovered after only six months and fully recovered to pre-shock prices after one year. It was the fastest recovery in the world (Vancouver suffered from the shock for a considerable period of time).

Under socialist-style capitalism, the Greater Toronto Area here is perceived by all citizens to have a minimum annual growth of 3-4% in real estate value. In other words, it is commonly understood that the value of real estate must increase by the combined amount of inflation (2.5-3%) and property tax (0.5-1%) (3-4%) in order to maintain its actual value from one year ago. While the government will not overlook the collapse of economic order caused by a sudden surge in real estate prices, they also do not ignore citizens experiencing economic hardships even if real estate values rise by only 3-4% annually.

2. Steady influx of population leads to real estate demand.

Currently, Korea’s birth rate is at the lowest level in the world, making it difficult to expect natural population growth. Especially in Seoul and the metropolitan area, the population has been decreasing since 2011, and the supply and demand of housing (apartments) will continue to be imbalanced, making real estate prices a fundamental negative factor in the forefront. As the population decreases and ages, and the absolute desire for home ownership decreases among the younger generation, the construction industry cannot revive, and it will be difficult to expect a further increase in housing (apartment) prices for at least a certain period of time.

Canada receives an average of 250,000 to 270,000 immigrants and 100,000 international students every year. About 80,000 of the immigrants and 40,000 of the international students settle in the Greater Toronto Area (GTA), which translates to about 40,000 families based on a family size of three. If we include natural population growth and immigration from other cities, the number will be much larger. If we calculate this number in terms of high-rise condominiums, at least 100 buildings or more need to be built, and if we look at the city, nearly 60% of the population in Richmond Hill or Markham, areas that Korean Canadians prefer, immigrates to the GTA every year. Therefore, the real estate demand stemming from this is the foundation of the GTA economy and creates a dynamic force for the city’s businesses and daily life.

Whether it is a country or a city, the construction industry is the last stronghold of the economy. As long as the construction industry is alive due to real estate demand, the GTA will continue to be a vibrant and lively city until the day Canada declares that it will no longer accept immigrants. The GTA is the economic capital of Canada, where the country’s financial, educational, cultural and artistic centers are concentrated.

3. Real Estate Prices and Financial Debt Repayment Ability in Comparison to Income Levels
As of 2012, Korea’s per capita national income was $23,679, while Canada’s was $51,688. The average apartment price in Seoul is $470,000 (500 million KRW), while in Toronto it is $370,000. This means that even though Korea’s income is only 45% of Canada’s, the price of apartments in Seoul is actually about 30% more expensive than in Toronto. In other words, this indicates that the overall real estate prices are relatively too high compared to the income levels of the Korean population. This fact could be an indicator of how the future of Korean real estate will progress.

Most households that purchase homes (apartments) pay a portion of the housing price themselves and borrow the rest through loans from banks. Therefore, the interest rate on the loans is the most sensitive and important factor for households. Currently, in Korea, the interest rate on loans varies between 3.5% and 6%, including both variable and fixed rates. Here in the Greater Toronto Area, the interest rate is between 2.5% and 4%. In other words, even if borrowing the same amount, Korean citizens are burdened with much higher interest rates, causing a greater financial strain on their households.

Korea’s per capita national income is less than half of Canada’s, and the housing (apartment) price in Seoul is on average 30% higher than in Toronto. In addition, citizens are facing the triple burden of paying much higher loan interest costs, making it difficult for many to purchase new homes (apartments). In a market where the supply of housing far exceeds the demand, it will not be easy for prices to rise. Although there may be temporary increases in prices due to policies such as the presidential election or measures to boost the real estate market, if such a time comes, it is recommended that you recognize it as the optimal time to sell your real estate.

4. Conclusion
Based on a strong economic foundation of diligent socialist-oriented capitalism and a healthy real estate market based solely on the principles of supply and demand, steady immigration and student inflows, and ultra-low mortgage interest rates, as well as the Canadian government’s appropriate financial management capabilities according to the timing and situation, the economic capital of Canada, the Greater Toronto Area, will continue to sustain stable growth in the future, unlike the United States or South Korea.

The real estate market in the Greater Toronto Area is entirely different from that of South Korea in several ways. In terms of economic management in a country with a strong socialist color, the core of Canada’s national economic management goal is to fairly and equally promote the growth of all citizens. It is impossible to imagine the government causing damage to the preservation and growth of citizens’ assets and causing pain through policy and implementation mistakes. Therefore, to ensure a stable household economy and to prepare for retirement, we strongly recommend that you become more familiar with “real estate” than any other financial product in this Greater Toronto Area. Renting and throwing away thousands of dollars (millions of won) each month is the most significant factor that hinders household economic growth in this Canadian Greater Toronto Area, and it should be the top priority to be resolved. On the other hand, the Greater Toronto Area is also a place where you can earn stable income by making thousands of dollars each month with just rental income excluding price differences.

5. Analysis of reasons for postponing the purchase of a house (condominium) and alternatives
5-1). Settlement of immigrant/study abroad families

*** The experience effect of the Korean real estate bubble bursting: Nowadays, immigrant/study abroad families who have experienced both the skyrocketing and plummeting of real estate in Korea are delaying their home purchases in Canada, including Toronto, where real estate has risen significantly, due to concerns that the real estate market may not deteriorate like Korea in the future, even though they have the financial means.

It is expected that the comparison of the economies and real estate of Korea and the Greater Toronto Area, as well as various other factors, as explained above, is sufficient to alleviate worries and concerns.

*** Plan to live for about a year and then purchase with a clear understanding: Many families who are new to this area start with renting, planning to purchase a home once they have a clear understanding of the unresolved situation in Korea, or when they are confident about the real estate market in Toronto, which they are uncertain about.

Typically, most families start with renting and expect their own household economy to be positive after one year of renting. However, there have been more cases where their expectations were not met. According to statistics on my clients during that time, the situations that arise when they try to buy a house after one year of renting are as follows: 1) The house prices have unexpectedly risen since the start of the rent, 2) A large amount of money has been spent on rent and initial settlement costs for a year, resulting in a decrease in the available assets compared to a year ago, and 3) Various issues left in Korea that were expected to be resolved after one year are still unresolved. As a result, there were many cases where they had to rent for another year, and once one year of rent becomes two years, it is even easier and more natural for it to continue to five years due to the reasons mentioned earlier.

It is also a natural plan and idea to live for one year and then decide on the location. However, based on the experience of numerous families among my clients, the probability of moving to another neighborhood after one year of renting is very rare. Firstly, the children have to adapt to the school for a year and say goodbye to their teachers and friends, and then they have to adapt to another school in another neighborhood, which is not easy. Secondly, the cost of moving is high, including the cost of breaking the lease agreement, security deposits, and moving expenses, and it is not easy to find a new home with better conditions and prices than the current one. Therefore, it is often the case that they end up continuing to rent in the same place for several years, even if it was not their original plan.

For example, many of my clients who immigrate to Richmond Hill and Oakville, which are famous for their good school districts, purchase a house as soon as they arrive and settle well. The key point is that these two areas are located far apart from each other (north and west), and the atmosphere of the residents is completely different, with Chinese and Canadian ethnicities. However, my clients living there boast that their neighborhood is the best in the Greater Toronto Area and always encourage each other to move there. In other words, this means that any neighborhood in the Greater Toronto Area is not significantly different from the one preferred by Korean immigrants. Once settled, that neighborhood becomes a comfortable and welcoming second home, and there are no problems sending their children to university.

My Best Home has been helping immigrant/study-abroad families settle down for the past ten to twenty years. Based on the experiences of many immigrant families, we strongly advise against renting, and instead recommend purchasing a home right away. If you must rent, we suggest reducing the rental period to a minimum (within 3 months to 1 year) and preparing fully before renting.

Please refer again to the “Comparison analysis of the economic value (asset increase) of renting/purchasing” that we recently sent you for further assistance.

5-2) Existing Canadian Residents’ Case

***Impact of Negative Forecast by Mass Media (Newspapers, Magazines, Press): For the past ten to twenty years since I started working in real estate, financial institutions have traditionally issued negative forecasts every year (without exception) about the real estate market in the Greater Toronto Area due to negative views from the mass media. However, the results have always been steadily rising to a reasonable level. Even two or three years ago, financial institutions unhesitatingly claimed that the bubble was up to 10-30% (most financial institutions calculate it as a bubble except for the official inflation rate), but the results were the opposite, with a steady growth every year. In Toronto, the market is formed by real demand and supply, so the possibility of a bubble is very low. However, every year, many potential buyers who were planning or proceeding to purchase real estate gave up on making normal decisions due to the negative real estate predictions that financial institutions traditionally announce to the media, resulting in great anxiety. Many people miss the opportunity to purchase once or twice, which can result in being unable to purchase for a long time, leading to catastrophic consequences for immigrants’ fundamental asset formation and proliferation.

In the future, we recommend that you do not believe or hesitate too sensitively to accept the media’s predictions or claims about the real estate forecast. Instead, we suggest that you consult a trustworthy professional realtor to alleviate anxiety, establish stable plans, and proceed.

*** Various recommendations from acquaintances: When you immigrate or study abroad and live there, you will inevitably meet various people regardless of your own will. Children’s school parents, ESL, church, golf, alumni, etc… When you get to know them, you naturally talk about real estate, and you come across many opinions of such acquaintances. The problem here is that even if many people’s opinions are the same or similar, it is a fact that they are all different in reality. Among various opinions, many people cannot decide on the region, residential form, budget, etc. for their second home and keep putting it off and continue to rent for a long time.

People who express various opinions on real estate are not experts, but ordinary people. The worst of their opinions is that they unhesitatingly say that it is best to keep renting because someday the housing prices will drop. Acquaintances are just acquaintances and do not take responsibility for their own financial situation. The opinion that you should listen to the most is that of a real estate professional. We recommend that you consult and proceed with a professional Realtor who has a vision and perspective that can plan and carry out your income, future child growth, and retirement together in terms of region, residential form, budget, mortgage, and future.

6. Choosing the right realtor is the most important decision that must be made with great care.
After living in this area for 2-3 years, you will understand the saying ‘the future of an immigrant is determined by who greets them at the airport’ and realize that it is true. Similarly, in the immigrant life in the Greater Toronto Area, selecting a realtor, aside from choosing a spouse, is always emphasized as the most important task. This is because realtors play a crucial role in the success of each household economy in this place. Deciding on your own real estate transaction with the help of a relative or friend who knows insurance or other unrelated fields could be the worst decision you make. Depending on the insight and attitude of the realtor who assists the immigrant household, the success or failure of that household’s economy can change drastically for 5, 10 years or even in preparation for retirement. You may find it difficult to understand right now, but after living here for 2-3 years, you will understand my words well enough.

In cities other than Toronto, or when seeking advice through phone or email from Korea, many people also come for consultations in person. When you visit, I strongly recommend that you meet some well-known and reputable individuals in Toronto for advice, apart from consulting with me. Those who are respected or socially known in Toronto are likely to be successful individuals who have developed and succeeded with a positive and proactive attitude in this city. Meeting with those who are passive or dissatisfied with reality and just settle could potentially negatively impact your decision-making process and your own motivation. It could be a surprisingly important aspect of immigrant life, so please consider this advice carefully.

7. Summary / Suggestions
As I continued to write, I had additional thoughts that I added throughout, resulting in a substantial amount of content. I thank everyone who has read this far. Now, let me summarize the main points of the above content.

The main messages emphasized in the content are as follows:

1) The Greater Toronto Area (GTA) has a robust foundation and system in social institutions and economic management that are entirely different from Korea or the United States. With an influx of hundreds of thousands of immigrants, international students, and a mobile population, ultra-low mortgage interest rates, and the government’s appropriate real estate management, the GTA’s real estate market is continuously growing steadily and reliably. So, you can buy or invest in real estate here with confidence.

2) Many people delay buying real estate and choose to rent due to media reports, the opinions of acquaintances, or their own anxious thoughts. Renting can become a significant cause of economic hardship and suffering, as it can last for a very long time against one’s will. Even during the initial stages of immigration, it is recommended that you avoid renting and seek the help of a trustworthy professional Realtor to purchase and settle in. If you must rent, set a short rental period and establish a reliable plan to purchase after renting.

3) Choosing a professional Realtor in the GTA is crucial for settling and living here, so much so that it can be called “the most important choice after selecting a spouse.” Depending on the Realtor’s perspective and mindset in helping and influencing clients’ homes, it may determine the direction of their family’s economy and lifestyle for five, ten, or more years to come. Be careful and choose wisely in the future.

4) If you have extra money at home, it is strongly recommended that you purchase real estate with a mortgage and invest in rental properties or new condo pre-sales. Such real estate investments can yield returns that are four to twenty times higher than other financial products. Also, when purchasing, be sure to receive as much mortgage as possible to increase your investment returns.

5) If you plan to use your extra funds to repay the mortgage principal on your existing home (condo), it would be more beneficial to invest in real estate, such as purchasing property or investing in initial sales, which can yield at least 6-8 times higher returns. Please remember this.

6) Buying a new condo during the initial sales period also has various advantages in different fields, and it is the most profitable investment method. It would be a good investment for each household to actively consider. If you invest with a generous heart, it will be the biggest asset for your family in the future. We highly recommend it.

When it comes to real estate globally, it is often associated with Jewish people, which might be the reason why they dominate the market in the United States. Here in the Greater Toronto Area, Chinese people follow in the footsteps of Jewish people as the most active buyers of real estate. They typically own 2-3 condos per household and rent them out, and they also receive the most initial sales during new condo sales. There is a saying that “if Chinese people are lining up for something, it is never a failure if you join them.”

The Greater Toronto Area is the most dynamic city #1 in North America. It is the economic capital of Canada and the center of all finance, education, and cultural arts. It is a lively city where the construction industry is the foundation of the economy, and it is full of vitality. I am confident that Toronto will become “Canada’s Manhattan” in the future. We are all fortunate to live in such a beautiful city with all of these wonderful environments and conditions.

We hope that each household’s economy will become more prosperous and our hearts will become more generous by becoming familiar with all the real estate in this area where we live comfortably in this beautiful city of Greater Toronto.

Thank you.