This week the Globe and Mail published another article from Capital Economics saying that the House Market was bound to collapse with house prices falling by 25%. I feel sorry for people who have to read this overly simplistic view and hope that they do not follow Mr. Madani’s advice and run for the hills. What Mr. Madani has done is to plot house prices versus income per capita over 25 years for Canada. We have previously criticized the one market theory for Canada. Real estate is very regional. When you look at the U.S. , prices are still decreasing in some parts of the country yet, they are rising in others like Manhattan. But what is really disappointing for an economist is that the simplicity of the graph assumes that housing affordability and hence prices do not change over time. For most of the period, interest rates were 9 ...
ERROR IN SIMPLIFYING HOUSE MARKET FORECASTS
September 5, 2011
UNINTERRUPTED RISE IN TORONTO CONDO MARKET - NOT REALLY
July 29, 2011
Our Company has been selling condos for over a decade in Toronto. Looking back, everyone believes that the condo market has gone straight up and the good times just rolled on – uninterrupted. However nothing could be further from the truth! When we look back, there were a lot of market changes that impacted the Toronto condo market. At the start of the decade there was the High Tech Crash or bubble. You remember all those start up companies selling for millions. Toronto has over 30% of the High tech business in Canada and a lot of it is centred downtown. There were big job losses at the time. Then there was 9/11 in New York. Afterwards no one wanted to live or work in a high rise building or condo. That too impacted our condo business for a period of time. Next we had SARS in 2003! That was ...
TORONTO CONDOS STILL THE BEST BUY FOR THE FUTURE
June 3, 2011
Most experts and economists continue to forecast a market correction with condos being the most vulnerable. But when you weigh the factors, condos keep coming out on top! People have less money to spend with rising gas prices taking even money out of consumers’ pockets. So where will people live? Closer commutes and near to public transportation. Maybe abandon the car altogether? Anyway you cut it; condos will be the preferred choice in the future. In most markets, detached housing is getting just too expensive and people who value location and affordability will be turning to condos in even greater numbers. So rising real estate prices work in favour of condos. Finally lifestyles are changing too. Most economists who work for banks are middle-aged suburbanites who don’t get it – today’s youth don’t want to cut grass and shovel snow. They want to go to Starbucks and travel. The condo ...
ASSIGNMENTS REPRESENT THE BEST BUY IN THE TORONTO CONDO MARKET
May 13, 2011
Assignments (buying a property before it is registered) represent the best buying opportunities for first time buyers – read CHEAPEST! Why? First, there are not as many people looking at these types of properties. That’s because real estate agents don’t know how to structure the Offer and most lawyers don’t know how to close the deal. So most agents will never show an Assignment – meaning less competition. Secondly, Assignments are offered in buildings where common areas are still under construction and the unit may have construction deficiencies. For some, it is like entering a war zone! This will also scare off a number of potential buyers. But remember, the builder is bound by a Tarion Warranty to get all of these deficiencies fixed. So if you don’t mind a little inconvenience at the outset, you can score a great deal. Finally, first time buyers always like to buy new ...
WHY SOME PEOPLE MISTAKENLY THINK THE TORONTO CONDO MARKET WILL FAIL
March 14, 2011
First, negative news always sells. No one in the media wants to publish good news because it does not sell. That’s why anyone who forecasts that the ‘end is near’ will always get the headlines. When you try to tell the story that things are moving along well or doing well, it just gets passed over. Secondly, are the ‘bubble theorists’, who believe that anything that goes up must come down – regardless of any logic or underlying economic facts? It is true that condos have increased in value over the past ten years – but only about 5% per year – and when you adjust for inflation, it is closer to 3%. Is that sustainable? Thirdly, we have those so called experts who are relying on a methodology that is no longer prevalent in today’s market place. We keep hearing about supply because experts are unable to forecast the ...
IMPACT OF NEW CMHC MORTGAGE LENDING RULES ON CONDO MARKET
January 17, 2011
More changes have been made by the Federal Government to CMHC lending practices. Note that these rules do not apply to mortgages that are conventional (under 80%). The first change is to mortgage refinancing. Now existing owners can only refinance to 85% from 90% previously. This will have no impact on the selling of condos. Neither will the second change impact condo sales, whereby Home Equity Lines secured by a property will no longer be insured by CMHC. These loans were used by many for big purchases such as home renovations, investments, and second properties. The key change to the condo market is the reduction in the amortization period from 35 to 30 years. The impact is to increase monthly mortgage payments by 7.8% for the same amount borrowed at the same interest rate. If a buyer is tight to the lending ratios, it means that their income would have to increase by this same ...
UNDERSTANDING THE TORONTO HOUSING AND CONDO MARKET
December 30, 2010
Most experts try to analyze the Toronto housing and condo markets on the basis of interest rates, affordability (incomes), and listing inventory. But they miss the key factor driving the Toronto market. The key factor is the 100,000 new immigrants to the GTA each year. They require approximately 40,000 new housing units a year. While these new immigrants don’t move into the new construction per se, they allow others to move out of existing units and into new ones. The track record of builders over the past ten years is that they tend to sell and build about 30,000 to 40,000 units each year. Given the shortage of land to build detached housing (and also the cost) it is not surprising that builders are turning to condo construction and the preferred location for most buyers is downtown. Thus downtown high rise construction of 15,000 units per year can be sustainable ...
CONDO AND REAL ESTATE MARKETS DEFY EXPERTS
November 17, 2010
We have been tracking sales since July – the month that Armageddon was supposed to hit the real estate market. Sure sales volumes dropped significantly from June. Then August numbers were even lower and the boo birds were out in force. Those in the Industry know however that August sales are usually lower than July and so the drop off was not unexpected. Still the media insisted on comparing sales from this year to 2009 on a month by month comparison and yes those numbers are off by 20%. But surprise, sales numbers in September were higher than in August. And then October numbers increased even more. November sales usually drop from October and in the red hot 2009 markets, sales declined by some 13%. This year our guess is that sales in November will match or drop by only 1 or 2% from the sales recorded in October. So ...
NEW CONDOS VERSUS RESALE CONDOS - WHICH IS THE BETTER BUY?
September 28, 2010
Over the past ten years, Toronto has experienced the biggest construction of new condo units of any city in North America. Also over this same period, the gap in prices – on a square foot basis - between new developments and resales has ranged from a $150 premium at the peak to as little as $25. New developments attract a premium for two reasons. First, owner/occupied buyers prefer new or never lived in compared to a resale. Secondly, investors prefer new because they do not have to invest as much at the front end and may be able to secure a unit for as little as 10% down (until registration) with a chance to sell before registration versus a minimum of 20% down to obtain a mortgage on an existing unit. Today there are some new developments being offered for sale at the SAME PRICE as current resales. Is this ...
NEW CONDO MARKET IS CHANGING IN TORONTO
September 11, 2010
While new condo developments continue to sell out, the buyer mix is changing. Developers think they know their buyers but they don’t! Most buyers for new projects are brought in by real estate agents – they don’t just show up at the new sales centre. When the market exploded 10 years ago, the mix of buyers was about 60% end users or consumers and 40% investors. Today it is almost 100% investors! Why? From the time one buys a new development until it is built and registered is four years on average. Just think of a single male (or female) who buys a one bedroom unit. In four years, they could be married and possibly expecting a child – they then need something bigger and they have to sell before they even move in! So why buy something for the future? Also today’s younger generations want everything now – not ...