People often ask me what I think the market will be like in the future. It’s a good question because it’s helpful to know this when you’re trying to determine the best time to buy or sell.

I usually have a pretty good idea of what the residential real estate market in central Toronto will be like for the next little while, say 4-6 months, because I’m so immersed in it every day. I can’t really speak with any confidence about other areas because every neighbourhood is just so different. And truth be told, having a good idea of what the market will be like isn’t the same as being able to actually predict what will happen with any certainty. There are way too many factors that affect the market for anyone to be able to do this!

Some of the factors that affect the market are local, like interest rates, population growth, employment rates, the economy, immigration and consumer confidence. There are also numerous global factors that affect us locally. Remember when the Enron scandal first broke in 2008? It caused our real estate market to stop on a dime. How do you think the fortunes (or lack thereof) of the European Economic Community will affect us? If China continues to grow and require our natural resources, that’ll bode well for us, but if China falters……..

The truth is that there are experts whose full time jobs are to predict the future levels of each of these local and global factors. If I could predict the levels of each of these factors on a certain date in the future AND calculate how they would impact the residential real estate market in central Toronto on that date, I dare say I’d probably be spending a lot more time on a beach or a golf course (or on my private plane flying to beaches and golf courses all over the world).

My best advice? If you’re thinking of  buying a home and holding on to it for 10-20 years or longer, you can take some comfort in the fact that real estate has proven to be a good long term investment. If you’re looking at making a move in the next few months, then base your decisions on what’s happening in the market at the present moment and on what’s most likely to happen in the near future.

But if you’re considering what course of action to take in the interim period of the next 6 months to 10  years, be careful because that period of time is the most difficult to predict. I would suggest you not bet too heavily on the market moving in one direction or another when making decisions regarding this time period. That’s a dangerous game to play. Mistakes can be costly, and, even more importantly, very disruptive to your lifestyle. What happens if you need a larger home and are counting on prices falling, but they rise instead? You might get priced out of the market and be unable to afford that larger home. Or how about if you bet on prices rising and postpone selling your home in order to increase your retirement nest egg, but prices fall unexpectedly? You may have to retire later than you’d like.

Ideally, you should examine how your plans might be affected if the market moves up OR down, then factor in the risk associated with these possibilities and make the best decision you can. Either that or buy yourself a good crystal ball.