TORONTO CONDOS ATTRACTIVE TO FOREIGN BUYERS

We always knew that foreign investors liked our condos. Our Company sells a lot of these properties every year to these kinds of investors.

Now the world read ECONOMIST Magazine in its April 5th edtion confirms our views. It compares house prices around the world in terms of over and under valued and where a housing bubble is most likely to happen. Now we have never believed in national real estate markets - they are defintely local, but you can use their findings for general trends. The Economist has compared average house price increases over the last TEN years against corresponding increases in incomes and declining interest rates to determine where prices should have increased over this period if affordability remained fixed. It looked at the top 20 countries in the world. House prices were overvalued in Ireland by 30+%. Britain was at 28% and the U.S. was at 11%. All are experiencing house price declines in 2008.

Only two countries had negative numbers - Austria and Canada at minus 3%. That means prices in Canada could rise by another 3% on just affordability alone. Now these numbers are for Canada as a whole and when you consider Alberta, and Saskatchewan with price increase over 50% in the last two years, and Ontario having the lowest increases in prices in Canada, then Toronto condo prices have a long way to go. The 'locals' don't seem to get this, but foreign investors, who look at the world markets sure do.

And when you factor in our currency - sure it is stronger against the U.S. dollar, but it is still relatively cheap when compared to the Euro and British Pound.

Why is it that Canadians have less faith in themselves and their country than people looking in from the outside??

April/May 2008 Market Report

Sales Commentary:

Here we go again explaining why sales are down. Yet the market is not correcting, as many newspaper experts want you to believe. Remember last month's Report when we told you that bad weather can impact a market, and that we also expected March sales would be lower too! Well they were! Residential sales for the month were off by 22% from March of '07. Overall condo sales were also lower by 10%, and the Downtown and Etobicoke markets were off by 18% and 14%. So condo sale numbers do lie!! What is more important is that the average 'days on market' is only 24. In the U.S. it is measured in months - try 8 to 10. The average 'sale to list price' is 101% - and multiple offers are very common on good properties. Finally the number of active condo listings Downtown in March of '08 was 92 units lower than in March of '07! Preliminary numbers for April suggest that this month's sales will be 3-5% lower than last year. If you just track the sales numbers, we are simply lagging last year by about 30 days.

The only problem with this market is that Buyers and Sellers can't get on the same page! Buyers read the papers and think they can kick the tires, because properties sales are down; and Sellers think they can list at any price and that multiple offers will be forthcoming. What they need to do is to get the real facts about this market and their property. This can only be done by someone who has access to all the market data - read a real estate agent and not a newspaper reporter.

This month we looked at sales at 65 Harbour Square, an older but well maintained condo on the waterfront. Besides excellent amenities, the units tend to be larger than in most buildings. The first unit we looked at was a two bedroom, two bath unit with parking with the best water view in the building. It sold this year for $839,000. The same unit sold two years ago for $730,000 or an increase of 15%. The price per sq.ft. was only $550. Many new developments are asking the same price without the parking and without a premium view! And only a couple of years ago these units could be purchased for less than $500 per sq.ft. The second unit we tracked was a small one bedroom unit with parking at 640 sq.ft. The most recent sale in 2008 was $256,000. In 2007, these units were selling for $240,000 and in 2006 they were averaging $230,000. Where can you get value like this at $400 per sq.ft.

Rental Commentary:
The rental market is beginning to heat up as 154 one bedroom units were leased in March. To help tenants and owners, we decided to break down the one bedroom market. One bedroom units without parking averaged $1300. Add a parking spot and now you are at $1500. Suppose you want a den - that's another $50 a month. And if you get that second bath or powder room $40 more will cover that. So the one bedroom range is $1300 to $1590! Two bedroom units run from $1900 without parking to $2250 with parking and den. And of course furnished units will cost another $300+ per month.

CONDOS IN MIAMI VERSUS SOUTH BEACH

Having just returned from a short trip to Miami, it is interesting to look at how real estate and particularly condos are faring. Everyone knows about the oversupply in Miami. Cranes are still everywhere, there are lots of supposed bargains to be found, and condos can be purchased from $300 per sq.ft. The U.S. real estate market with all its horror stories can be found in Miami.
Now take a drive across the causeway to Miami Beach and South Beach in particular. There, existing buildings are being protected and are being renovated in the Art Deco motif. There are very few new condo buildings that have been built. These new condos sell at $600 per sq.ft. and go up to a $1,000! Reno’d condo units are also selling for $600+.
What does that tell you? Just look at some of my earlier Blogs. Real Estate is not a national market; it is not even a regional one. It is local! In areas that have not been overbuilt and sold out to investors – flippers, the market is stable.
Unfortunately, bad news and disasters with people losing their homes makes page one of the newspapers. A normal or steady real estate market is not newsworthy. You need to search out the statistics yourself.

REAL ESTATE SALES NUMBERS DO LIE

Sales numbers for March on the Toronto Real Estate Board are down 22% compared to March of last year. Condo sales are also down by 18%. And based on sales only, the Media has decided that the market has turned decidedly downwards.

The trouble is that the Media does not have all the facts. Now I don’t pretend to be an expert on all real estate markets because real estate is not one big market but a series of local markets – see previous blogs on this comment. We do have the facts and the statistics about the Downtown Condo Market to know more about what is going on than the Media!

The weather for March was certainly a factor but the Media has dismissed that. However the real facts are these: we have a shortage of listings! The sale-to-listing ratio is at 50% Downtown and at 40% on the Etobicoke Waterfront. A normal market is between 25 and 35%. Days-on-market has dropped to 23 days from a normal of 45 days. The Media does not have access to these facts and has even more trouble in the interpretation. Multiple Offers are still common place. Instead of asking the so-called Experts, why doesn’t the Media just ask Buyers trying to find a condo how frustrating the search can be!

This past week the weather was better – above zero all week. And guess what, we booked over 800 confirmed appointments on our listings! This is an ALL TIME record for our Company.

You tell me – is this a start of a market turn down or is the Spring Market about one month late in kicking off?

MARKET COMMENTARY - MARCH / APRIL 2008

Sales Commentary:

February was the first month where sales were actually lower than the same month last year in the past twelve months. The Toronto Real Estate Board reported that residential sales were down by 11%. For condos, sales were off by only 3% but Downtown condo sales were lower by 15%! Already the so-called experts are saying the market has turned. The only problem is that they don't have all the facts! Believe it or not weather and snow had a big impact. Real estate sales are not 'date sensitive'. People don't have to buy on a particular date. If the weather is bad, they just stay home. And the snow storm on the first weekend in March will impact March numbers as well! How many people remember SARS five years ago? For two months people would not leave their property except to go to work. As a Company, we even talked about buying masks for people to wear when we showed properties. Sales were that bad. But the market fundamentals had not changed and the market resumed its upward trend after the SARS scare.

So where are we today? Market fundamentals have not changed. In fact we think the market is stronger today than at the end of last year. Forecasts for the Ontario economy suggest that growth may reach 2% this year as opposed to earlier forecasts of less than 1%. We can tell you that parts of Ontario will actually shrink which means that the GTA economy will probably grow by at least by 3%. Incomes are rising, and with a half percentage drop in variable mortgage rates, there are lots of buyers! How do we know? All our agents have qualified buyers lined up. The problem is that there are not a lot of listings to show them yet! The sales-to-listing ratio is currently 45% - a normal market is in the 25-35% range. The first sign of a changing market is when listings swamp the market. The second is when affordability is eroded. Neither exists in this market!! We are not naïve enough to believe that this market will go up forever. However the time for a slump is not this year.

In this issue, we looked at sales in Marina Del Rey - 2261 Lake Shore on the Etobicoke waterfront. There are three buildings on a great piece of property with a stand alone recreational facility. Units are larger and while the buildings are older, they are well-maintained and represent good value. While other condo markets increased in value, the Etobicoke market was flat for a number of years and only in 2007 did prices begin to increase. The first unit we tracked was a one-bedroom loft, just under 900 sq.ft. with parking. The unit has been renovated and sold for $247,000 in December. The very same unit sold twenty one months earlier for $245,000. A similar unit, not renovated, sold for $196,000 in 2004. It was renovated and was resold in February of this year for $255,000. When you back out the renovation costs, the appreciation was only 10% over three years! Prices are $280 per sq.ft. The second unit we examined was a two-bedroom, two storey loft at 1040 sq.ft. It was partially renovated and sold in January for $290,000. We tracked similar units that sold for $240,000 in 2004; and $275,000 in late 2007 that were not renovated. Again this unit is selling for $280 per sq.ft.

Rental Commentary:

Over 100 one-bedroom unfurnished units were leased Downtown in February. The average price was $1525. Only 17 furnished suites were leased at an average of $1775. There were 62 unfurnished two-bedroom units leased for $2100 on average. Eight furnished two-bedroom units averaged $2500. The differential between furnished and unfurnished is $250-500 per month. Compare this to the monthly cost to rent furniture which is quoted at $300 for a basic one-bedroom. Days-on-market to rent out units has increased from the 15 day range to 20+ days. The rental market usually begins to heat up in May through September. Again the weather has slowed the start of the rental season.

REAL ESTATE MARKETS ARE NOT NATIONAL - THEY ARE LOCAL

Why is it that experts have to talk about real estate as one big market when it is not! Not all of the U.S. market is under siege. The high end (over $5 million) has had seven and thirteen percent increases in sales for the past two years and is up again this year. Of the 150 metro markets in the U.S., median prices were falling in 77 (what the press is reporting) but were increasing in 73 (what the press forgets to talk about)!!

Another trend in the U.S. is that the urban markets are outperforming the suburban markets. Unlikely cities such as Pittsburgh, Columbus Ohio (one of the states devastated by the market down turn) and Atlanta have rising sales in their  downtown markets. And in metro markets that report separate condo sales, 41 out of 59 markets report rising condo prices!!! How is this possible if the U.S. real estate market is as bad as we are told?? Let me quote Garth Turner from his latest real estate book on doom and gloom: "an anti-real estate mood has swept America. Within months it will be here". No facts but it is good for book sales. 

So let's look at the Canadian market again. Prices and sales are slowing in the West and we are told it is coming to Toronto - just like a bad cold. When prices increase by 51% in a single year in Saskatoon, what do you expect? A correction. We have never had that type of sales hysteria in Toronto. Just a steady market with good fundamentals. Let me just leave you with the latest story from our Company. We listed a condo at $799,000 and sold it in a week for $890,000 with multiple offers. That's a price of over over $800 per sq.ft.  Is this a sign of a market correction this year? Not likely! The point is that Turner is right, there is always a market correction or slow down coming. Turner claims he called the last one - only he was 4 years too early! My guess is that Turner is early again - maybe not 4 but at least by 3 years. Do you want to be out of the market that long with prices rising! Turner's  hysteria makes for good book sales but lousy economics for home owners and investors. 

CONDOS SALES LOWER IN FEBRUARY

Initial numbers from the Toronto Real Estate Board show that overall sales were 11% lower this February than in February of 2007. Condo sales were also off by by 8%. Already the naysayers - read bank economists - are saying the market has turned!

But people in the market every day are seeing something quite different. The real estate market changes when there is a surplus of listings versus buyers. Buying and selling property is not date sensitive. What we mean by that is: people don't have to do something on a specific date. When it snows, people just stay home rather than go out and look at properties. And we have had record snows!

Anyone remember SARS five years ago? Buyers were talking about wearing masks and people and properties owned by those from the Far East were to be avoided. For two months markets were slow because of the hysteria - not because of any economic reasons. And then it was behind us and real estate markets resumed their upward climb.

Again today, the economic factors have not changed. We can tell you that there are still lots of buyers - more than the supply of good listings. And the fundamentals remain in place - job growth, income growth, and now lower interest rates. Those factors tell us that the market this Spring - when it arrives - will again be strong - lots of sales and rising prices!

If you want to be smart - beat the market. Start the buying process now - before others get into the market. If you have a property to sell act now and have the market to yourself. And for buyers, making an offer now will improve your chances of avoiding the dreaded 'multiple offer' scenario.

February/March 2008 Market Commentary

Sales Commentary:
January started off the year like most of us predicted - residential sales in total were down 2% from the record January of last year. At the same time, active listings were 11% lower than last year. What does that mean? It is still a Sellers' market and the New City Land Transfer Tax has had minimal impact. On the condo front, overall condo sales were up by 13%. Downtown, condo sales were running 14% ahead of last year for January. Sales-to-active-listings for the Downtown condo market were still at 50% versus 40% a year ago - and remember that a balanced market is when the ratio is in the 25-35% range. While the overall market may have leveled off, the condo market continues to grow - again affordability and lifestyle choices are driving this market.

If potential condo buyers are looking for a market pause to jump into the market, it won't happen in 2008. Market timing may work for the stock market; it's never a good strategy for a primary residence. If you continue to rent and prices keep going up - you lose. If you buy, and even if prices fall initially, then you can be sure that the property you want to buy next has also fallen in price. So you never lose but instead you insure your ability to make the next move.

This month we looked at prices in Downtown's hottest market - Yorkville, and the most affordable new building there - 18 Yorkville. While 18 Yorkville is not really in Yorkville, it is really closer to Yonge; the building name itself has probably added another $50,000 to sale prices. The building was registered in late 2005 and so we have just over two years of sales to examine. The first unit we looked at was 1200 sq.ft. - two-bedroom/2 bath with parking. It first sold in January of 2006 for $729,000. The very same unit sold again in November of '07 for $777,000. The increase was only 6.5% over 21 months. Remember my previous commentaries that condo prices only began to escalate in 2007. The second unit we tracked was 500 sq.ft. one- bedroom, without parking. It sold in early 2006 for $246,000, and an identical unit sold in 2007 for $262,000 (an increase of 6.5%). In 2008, another identical unit sold for $320,000! That's 22% in just the last year, but to be fair, this unit was on a higher floor. Both the one and two-bedroom units are now selling at $640-650 per sq.ft. You can find current buildings in Yorkville that sell for more and you can find other new buildings Downtown that sell for $450 per sq.ft.!

Rental Commentary:
There were just over 100 one-bedroom units leased in January. Days-on-market to lease out increased from a summer time average of 15 to 25 days currently. However rental prices stayed firm - averaging $1550-1600 for those with parking, versus $1450 for one-bedrooms without parking. Furnished one-bedroom units averaged $1800. Two-bedroom units took about the same time to lease up. They averaged about $2200. A three-bedroom condo, if you can find one, will cost about $4000 as they tend to be over 2,000 sq.ft.

MULTIPLE OFFERS STILL GOING ON

Multiple Offers are still very common this January in the Toronto condo market. Good properties that are priced at market are attracting two and three offers.

Bad press has scared some people off in these situations. But a good agent can protect your interests. First the agent will find out exactly how many offers are registered before you make your offer. Bigger brokerages have their own policy about registration and dealing with multiple offers. In any multiple offer situation, all offers should be presented in person where possible. When you and your agent show up, you will know exactly how many parties you are competing against. If the listing agent has their own offer, it should be presented first. In that way they can not change their offer after viewing the other offers on behalf of the seller.

A great strategy for a buyer is to prepare three different front pages with the offer - each with a different price. The first if you are the only buyer - people do drop out at the last moment - which should be close or at the list price. The second page, for when there is just one other buyer or two in competition with you, would have a price of $5,000 - give or take - above the list price. The third page is the maximum price you would pay, and if someone else offered a $1,000 more, you would not be upset at losing out. This third page should only be used when there are at least three and probably more buyers involved in the bidding.

What happens when the listing agent says that the seller is an out-of-country owner? The listing agent should invite everyone to their office and you should fax the offers together. That way you can see how many actual buyers show up and again adjust your strategies accordingly.

Multiple Offers don't have to be terrifying. Get a good agent and you will be fine. And yes, there will be multiple offers on condos in the upcoming spring market.

NEW YORK VERSUS TORONTO CONDOS

In previous blogs we have talked about prices and market in big European cities - London and Paris to name a couple.

When we think of the U.S. market, all we hear is falling sales and falling prices. But real estate markets are not national, they aren't even city based - they are really about neighbourhoods. Look at New York. Prices there are not going down. According to a Toronto Star article on January 19, newer condo buildings are offering Penthouse units at $6,000 per sq.ft. At that price a 3,000 sq.ft. Penthouse would go for $18 million - normal for New York but never seen in Toronto, although a couple of condos have been sold for that price from plans but have yet to be built and occupied.

In New York, the latest trend in Penthouses sales means that you can buy a smaller unit for your servants on the first couple of floors in the same building. What are servant quarters going for? Try a minimum of $875,000 for 350 sq.f.t or $2500 per sq.ft. Why you can buy a Penthouse in Toronto with all the upgrades for $1,000 per sq.ft. And you could find servant quarters - read a regular condo for about $400 per.sq.ft.

Toronto prices look pretty good. While we are not New York, or London for that matter, our prices don't seem to be at a point where any price correction is in the foreseeable future. My guess is that prices can move to $600 per sq.ft. in the next three years without any problems!

Anyone want to challenge that assertion?

IMPACT OF NEW CITY LAND TRANSFER TAX

The shouting and complaining over the new city land transfer tax has subsided. But what has been the impact on the sales side?

First, we can tell you that there are a lot more closings in January than normal. A number of people have made arrangements to avoid the tax by closing before January 31. And at least for our Company, December was an all time record December for sales - 30% ahead of 2006.

On the other hand, sales in the first ten days of January are already up 13% over the first ten days of January 2007. It seems most buyers are not that concerned with the new tax! Either they never new about this tax, or they are just accepting it in the standard 'Canadian fashion' - of what do you expect from our governments.

Anyone else seeing these same trends?

2008 CONDO MARKET FORECAST

We have always been known as the most aggressive forecaster of the Toronto Condo Market. We have also been the most accurate. Most economists rely on macro statistics and techniques used to forecast other commodities. They have constantly predicted a market down turn. If you have been keeping score, the down turn started in 2004. On the other hand, Our Ten Year forecast last year said that condo prices would double!

As a real estate brokerage, we have access to stats at a micro level and also more current than other forecasters. The knock against us is that we are just 'salespeople' and we have to hype the market to make sales. So let us share with you a couple of secrets. First, over 80% of our agents have university degrees - and our brokerage actually has economists and MBA's! Secondly, people tend to buy condos for today's needs - without much thought for changing lifestyle or extra space in the future! Younger and older buyers (who either expire or move to retirement residences) make buying and selling decisions that do not reflect any economic cycle. A young couple, living in a one-bedroom condo that is expecting a child will move whether interest rates are 2% or 12%. If the unit they own has gone down in price, then the unit they want to move to has also gone down, so the impact is neutral.

What will impact the condo market from an economic sense is the investor portion, which is less than 30% in total. Economics will also impact the rate of price appreciation for condos but not the volume of sales in the resale market. Economics has the most significant impact on buyers and sellers who can postpone the moving decision - read detached houses! Our Forecast is all about the condo market in Toronto, NOT the Canadian real estate market.

WHAT YOU NEED TO KNOW ABOUT TODAY'S CONDO MARKET:
1)There is still a shortage of good condo listings. The first sign of a market correction will be when we have more listings than buyers - no signs yet.
2)'Owner occupiers' are the major buyers in this resale market - in 2007 investors all moved to new projects, which are completing in 2010/2111. That is when you will see the market change - and remember you read it here first.
3)The impact of the new City Land Transfer Tax will be minimal. The Ontario Government's decision to extend the first time buyer rebate for the Provincial Land Transfer Tax from new units to resale as well will encourage sales downtown and this will mitigate the new City tax. The new tax will however impact expensive properties that are on the 416/905 boundaries, but not downtown.
4)Interest rates are not a factor. Employment also remains strong.
5)More people/buyers still want to live downtown - not just those who work in 416 but also those who work in 905! And then you still have significant immigration.

HOW THE CONDO MARKET WILL PERFORM IN 2008:
1)2008 will be a record year for condo resales downtown - at least 8% higher.
2)Condo prices will increase by 10% (last year was the first year of double digit increases in condos and most markets can absorb three years of double digit increases before a correction)
3)Look for the Etobicoke Waterfront to increase in popularity as more buyers over 50 enter the condo market. It is lower priced than either Downtown or Port Credit.
4)One-bedroom condos are second choice. Buyers want a minimum of one plus a den.
5)While parking spots at $30,000 are quickly becoming the norm downtown, buyers are learning to live without a car or a parking spot!

MORE ON THE LAND TRANSFER TAX

Starting December 14th, the Province of Ontario announced that the tax rebate, of up to $2,000 for first time buyers would be extended to all properties and not just new construction. They obviously are following the lead of the new City Land Transfer Tax, whereby the first time buyer rebate applies to all properties and have seen the light.
In an era where we are trying to curb urban sprawl and encourage people to live downtown, it made no sense to have a tax policy which rewarded the opposite. The Toronto Real Estate Board has been pointing this out for years. The Ontario Government's only answer was that we were losing tax revenues, and that new as opposed to resale purchasers were more of a stimulus to the economy. Such is the intelligence of politicians.
But are these tax changes having any impact in the real estate market? While we have seen a few people move up their buying intentions to save the City tax, there has not been any stampede. It seems that Christmas and the Holiday Season are more of a priority. Let me know if these taxes have changed anything for you? My guess is that they will be rolled into the mortgage. In fact the Bank of Montreal has a promotion for its banking clients. make an offer before February 28, take out a B of M mortgage, and the Bank will pay the tax! For a bank to make that offer, they receive plenty of PR and they have probably figured out it won't cost them much. That's a bank for you!

Market Commentary - Dec. 2007

Sales Commentary:
Last issue we focused on the new City Land Transfer Tax. Now back to the more mundane analysis of the current condo market. Toronto Real Estate Board Statistics for October showed that sales were up 15% over October of '06. This will definitely be an all-time record year for sales in Toronto. Condos, in case anyone still does not know, have outperformed the market. Overall condo sales were up18% in October over the same month last year. Downtown they were up by 28% and over 30% on the Etobicoke Waterfront. On the other hand, Active Condo Listings Downtown are at just over 600 units - or only a 45-day supply (normal is 90+)! Last year, with lower sales, there were almost 800 Active Listings! We are still in a 'sellers market', however we are starting to see new listings coming to market in the past 10 days as people start planning around the new City Land Transfer Tax, which takes effect in 2008. Undoubtedly this tax will spur sales before the end of this year, and then we will probably experience slower sales at the start of 2008.
In this issue we looked at sales at the Matrix Development, the first two condos built at CityPlace. The buildings, at 361/373 Front St., were an instant success because of price and location. Buyers and Realtors lined up in November of 1999 and they were all sold out in the first weekend. (Does this sound like the line-ups for One Bloor in November of this year? To view my comments on this project, go to www.blogging4condos.com.)
The first unit we tracked was a 750 sq.ft. one bedroom plus den with parking and small balcony. You could have bought it that first weekend for about $170,000. When this unit became registered, it first sold for $250,000. Prices remained flat for the next four years. But in 2007, the same unit was listed for $269,900 and was sold for $292,500 - 108% of list price. You could have bought a slightly larger two-bedroom unit - 873 sq.ft. back in 1999 for just over $200,000 with parking. It sold in 2004 for $276,000 and the identical unit sold again in 2007 for $328,500. 2007 prices range from $377 to $390 per sq.ft. In terms of price appreciation, the original buyers would have earned about 70% in 8 years, or just under 9% per year. It is interesting to note that most of this appreciation occurred between 1999 and 2002, and then over the last 12 months. The rest of the time, prices were relatively flat. The morale here: you need to hold real estate over long periods of time to ensure good returns. Holding for a year or two is always a gamble: you can either get a quick gain or a loss (after expenses).

Rental Commentary:
The late Fall is usually the slowest rental period. In October, 207 one-bedroom units changed hands in the Downtown market. The 77 one-bedroom units with parking averaged $1625 per month, while the 117 without parking averaged $1500. While the market is slower, rental rates are holding firm. For the first time there were more one-bedroom units rented without parking than with parking! Looking at two-bedroom units, 65 were rented for an average price of $2350. There were only 2 three-bedroom units rented in October, at $4250 and $4600 - both above the list price. Even though the market is slower, units, except for three-bedrooms, are taking 13-18 days to rent out.

CAN AMORTIZATION HELP RISING CONDO PRICES?

Condos in Toronto are also being marketed as the affordable housing alternative. But prices are now rising for condos at the same rate as houses. So how can first buyers crack the market?

Consider a mortgage with a 25 year amortization rate. (Amortization is the time it takes to pay off a loan with the same fixed payment and interest rate.) The monthly payments for a $200,000 mortgage are $1279.61 at a 6% interest rate. Last year, the Federal Government allowed lenders to increase the maximum amortization from 25 to 40 years. That means if the lender allows a buyer to spread these payments over 40 years, the monthly payment would drop to $1090.18. A saving of $189 a month. That's good news for people with low incomes trying to qualify for home ownership. At the same time, this extended period will mean that buyers will also end up with thousands of dollars in extra interest payments.

Is this the end to extended amortization periods? Why not 50 years? In Spain, you can now get mortgages with 100 year amortizations. We all know that people don't live long enough to pay off that kind of mortage. Now we have new meaning to the word 'inheritance'! Not only does the next generation inherit the property but they also inherit the debt!

Generally, Canadians are a conservative bunch, but it is just a matter of time before we have the 'never pay it off' mortgage.

ONE BLOOR CONDO PROJECT DESERVES COMMENT

The recent stampede and frenzy over the new condo project at Bloor and Yonge last week raises serious concerns over the future of the condo market. The project will not reach market until 2011 at the earliest, so there is plenty of time for more rationale behavior.
The project was originally offered at prices of $700-$1000 per sq. ft. Packages were available to agents for a couple of weeks before the supposed VIP Opening. Agents and their designates lined up for over a week. On the day of the Opening, prices mysteriously doubled - $1200-1500 became the norm. And the building, all 80 floors were almost sold out.
But back to the reality of today’s condo market where resale units sell for $400-450 per sq. ft. The public is prepared to pay a premium for new projects, both because it is new and because they think prices will increase before they have to take title to their unit. The market has priced in about a $75 premium for this. Prime properties and locations can also command another $100 per sq. ft. premium. So at best this project should be priced at $625 per sq.ft. Now if you think prices will sky rocket from now until 2011, you might agree to pay a little more. Even if prices get to $1,000 per sq.ft. in 2011, (which I think is unlikely given that this is Toronto and not some world class city), these buyers could be looking at a loss of some 20% minimum.
In the interest of full disclosure, our Company did not sell a single unit in this project to our clients. Following the official Opening, we have been offered a number of units by people trying to ‘flip’ the units they bought last week. It is interesting to note that buyers have a 10-day recession period after their purchase whereby they can get out of the deal. It will be interesting to find out how many people cancel.
Will the condo market increase in price over the next twelve months? Yes. Will people who paid $1200 + be able to flip their units for a profit on the day they take title to their unit. Probably not. When people think with their feet instead of their head, you can bet that some sort of market correction is inevitable!

City Land Transfer Tax

The new City Land Transfer Tax will double the taxes a buyer pays at closing. On a $400,000 purchase, the new tax plus the existing Ontario Land Transfer Tax means you will pay $8,200 versus $4475 before. It applies to all Agreements of Purchase and Sale entered into after December 31 of this year. It comes into effect February 1st of 2008. That means you can also enter into a deal after December 31, as long as it closes by January 31 of '08. And of course people who bought condos over the last couple of years that have not completed, are exempt too.

So will this create a sales stampede before December 31? What happens after February 1? Will buyers disappear?

Is the Toronto Condo Market Slowing?

I can tell you that the level of condo sales has slowed in October. Is this seasonal or are more people sitting on the sidelines? I can tell you that any uncertainty always causes a slow down in the real estate market. There was the provincial election and then there is the ongoing fiasco at Metro City Hall. Do you think people are postponing their buy decisions?
This week, we also experienced a couple of multiple offer situations. So there are some buyers who are anxious to get their dream property. But a lot less than in August.
Will the market slow down persist to the end of the year? Or will it pick up in another couple of weeks? You tell me!

CONDOS IN BRITISH COLUMBIA

I have been out in British Columbia on business, and naturally I just had to look at the prices of condos. Last week I was in Whistler and I had heard how expensive properties are there. When I came across a condo for $187,000, I could not believe my luck. However when I read the small print, I learned that the buyer only got to use the unit for 28 days in the winter and another 28 days in the summer. The rest of the time, the property is in the accomodation pool. And the realtors tell me that there is little cash flow left over for the owner from the hotel operator. That means you are buying a 15% interest in the property for $187,000. When you do the conversion, the price is OVER $1.2 million to own it outright. And this is just a small two-bedroom unit. Just what I thought prices were like before my visit.
Driving back to Vancouver, I had a chance to look at waterfront condos Downtown. They are pretty nice but you can expect to pay from $800,000 to well over $4 million. In Toronto, great view properties start at $400,000! You want a 'starter' condo in Vancouver - you know about 500 square feet - well you can pay $350,000. In Toronto you can find the same sized units for just over $200,000.
Anyone think Toronto prices are too high? Anyone want to talk about condo prices in other cities you have visited? I would love to hear your comments.

MARKET COMMENTARY - SEPTEMBER/OCTOBER 2007

Sales Commentary:
What can you say about this market? August was another record breaking sales month. Residential sales in August were up 15% over August of '06. Active Listings were down by 20% from this time a year ago - signs of an even stronger sellers market with still rising prices. The condo market was even hotter - sales up 22 % overall, and up by 32% Downtown over August of last year. The Etobicoke market also continued its strong resurgence this year with condo sales ahead by 35%. When a normal or balanced market shows a sales-to-listing ratio in the 25-35% range and we are at 90% Downtown, then you know multiple offers are the 'norm' - not the exception. While early September numbers are ahead of '06 for the month, they indicate that the market has slowed or paused from the hectic summer market - you need to work with a salesperson that is in the market everyday - not someone who does three or four deals a year to stay on top of these changes.

Recent press has talked about multiple offers and more specifically the 'phantom' offer. The listing salesperson says there is more than one offer but you don't know for sure because the listing salesperson says to "fax all offers" and you could be competing against yourself by bidding more than you need to. Instead of whining about the market, take control! In most instances, multiple offers should be presented in person by your salesperson. That way you know how many offers you are competing against and you can adjust your offer price accordingly. If the seller is out of town or suffers from health issues that don't allow for 'in person' offers, then the listing salesperson should invite all salespeople with offers to come to their office and they should fax all offers together. That way, you again know how many offers there are, and more importantly, the listing salesperson does not get to see your offer before the seller gets it. Too often a listing salesperson sees the other offers first and then submits their own. Faxing together would eliminate any temptation for the listing salesperson to alter his offer at the last minute. If the listing salesperson is not prepared to accommodate this request, then don't make an offer. Or if you really want the property, don't offer more than the list price!

This month we looked at sales at West Lofts, 833 King Street West - a former perfume factory converted into real lofts, which is what so many young people want. With only 52 units, it is a high demand building in a trendy area. Pre-sales in 1997 were under $200 per sq.ft. In fact you could have bought a 1614 sq.ft. Penthouse for only $269,000. This same unit resold first for $385,000 in 2003. The same unit sold again in 2004 for $425,000 and in 2005 for $450,000. What would it sell for in 2007? Probably over $600,000 if it came to market. A smaller one bedroom loft with parking and locker sold for $321,000 in June of this year - at 108% of list price! The very same unit sold two years ago for $245,000. That 's a price increase of 31% or over 15% per year. Even without a view, the unit is now selling for just over $400 per sq.ft.

Rental Commentary:
August was a hectic month for rentals. Over 200 one-bedroom units and over 100 two-bedroom condo units were leased Downtown. While condo prices have been rising, condo rents have been almost unchanged over the last few years. However rents have started to move up. At the rental bottom, a one-bedroom without parking could be had for $1200. Last month the same one-bedroom without parking went for $1450 on average. When you add parking, the average for August was $1650. Two-bedroom units that averaged about $2000 are now up to $2200. Days-on-market for one-bedroom rentals was just 10 days. You had longer to look if you wanted two-bedrooms. The average time here was 14 days! Renters need to know market rents and they must be prepared to make an offer on the first visit to the unit if they want it!