Tuesday, 26 February 2013
Toronto never used to be a fancy place. Sure, people loved good food, and is some neighbourhoods you would spot a few snappy dressers, but generally we never really had the interest to push our city toward the ultra high-end heights that you find in places like New York, Hong Kong or L.A. In many ways, luxury just didn't seem to be very Canadian.
But many condo developers took a look at Toronto's size and it's dense, culturally-rich downtown, and realized: It's time to bring some fancy to town! So, the luxury condo developers, designers and dreamers came here to create a whole new type of building for us: The luxury condo/hotel.
And strangely, instead of testing the market with just one of these hybrids, four luxury condo/hotels, with brand-familiar names, announced their intentions to build in Toronto at the same time including the Trump International Hotel and Tower, The Shangri-La, the Four Seasons and the Ritz Carlton. And to a smaller degree, the King Edward had also joined in by planning to add a condo component on an already existing hotel.
Of course, many will wonder what makes them so luxurious? Crown moulding? Room service that would make you feel like a royal? That feeling like you are living in a 5 star hotel?
Well, yes, I would imagine so. But one thing that these places have going on more than any thing else is their brand. They all have an undeniable name recognition. If you live at the Ritz Carlton or the Fours Seasons, you could almost be any where in the world, and people would know you live somewhere posh. They don't even have to know which city you live in.
But maybe you're not a sucker for such things. I'm sure you're not alone, but the truth is, a lot of people are. The brand makes a difference. If you don't buy into it, fine, but some people will pay good money for the right product.
Still, these brands can only go so far. These luxury condo/hotels have to deliver. At first, it would seem they were all lumped together. "The luxury condo/hotels are coming!" read all the newspapers.
But now we are starting to see who is pulling ahead, and who is clearly falling behind.
In my mind, Shangri-La seems the most promising so far. They mounted a striking and enormous sculpture outside called "Rising" that certainly adds some cachet to the entrance. Plus, they have managed to launch one of the most well-reviewed luxury restaurant in the city, Momofuku, with chef David Chang. For me, they have delivered the real goods of "luxury". Top notch food and bold style.
Then there's the Trump Tower. Right from the start, I felt they were a little doomed with their corny, 80s "champagne and cavier" theme. Already you feel like you're going to be riding the elevator with Thursten Howell the Third and Alexis Carrington. But my personal biases aside, the publicity on this place has not exactly been the best. Falling green glass crashing down to Adelaide street. The hotel portion of the Trump Tower has reportedly been performing far worst than originally expected. And then there's the lawsuits. Angry buyers who apparently feel the company has misrepresented what they were selling, and even the developers themselves, suing buyers for not closing on their original purchase.
Despite the successful or not-so-successful branding of these luxury condo/hotels, the value of the their units has a lot to do with the market. And I don't think it was wise to launch four of them at the same time. It seems many of the original purchasers may be disappointed if they want to sell sooner rather than later. Like any large condo, when the owners of the units are allowed to start selling, a lot of the units hit the market at the same time, often driving down prices. The luxury condo/hotel will likely follow this pattern as well, especially since there are four of them relatively close together in a market that really didn't exist before in Toronto.
Some may hold their value more than others. Smaller luxury condo/hotels, like the King Edward, are conversion projects. This hotel has existed here in Toronto since 1903. So, it's an established and local brand in the city. Many of the new condo units are too small, and there are no parking spots - only valet parking, of course! But sales have been strong in pre-construction. So, resale may do a little better here than the other developments.
All in all, buyers would likely benefit the most from this upcoming resale market, ready to snap up units when they start hitting the mls in large numbers. They may want to stand clear of the troubled Trump Tower for the time being, but there may be some deals to be had if you are in the market to buy a luxury condo/hotel unit. The glut won't last forever.
Tuesday, 19 February 2013
I didn't vote for Rob Ford. I don't think he has the chops to run a big, complicated city that's in a constant state of transformation. I do, however, believe many voters in Toronto had grown so cynical and hopeless about municipal politics around the time of his election that they decided to drop a bomb on the status quo, and go for some thing completely different. Sure, there wasn't much thought about what that "something different" may turn out to be, or how Rob Ford would run the city. Regardless, people wanted change in Toronto City Hall, and they got it.
Of course, the success of Ford's job as mayor has proven to be fairly disasterous so far, though entertaining at times. Who didn't enjoy the story of Ford's 911 calls when the fictional TV comic character, Marge Delunty, came knocking at his door? But I'm not here to talk about his gaffs or his inability to stop a gravy train, or if there is even one coming into the station. But I do support one of Ford's election promises, and that's to ditch the land transfer tax here in Toronto.
The Toronto Star recently published an article expressing that Rob Ford is wrong in wanting to ditch the land transfer tax. The writer argues that land transfer tax has been a golden goose. It has injected hundreds of millions of dollars into the city's anemic accounts allowing for Toronto to grow a little autonomy. I certainly don't disagree with that. I believe Toronto should have a lot more power that it currently does. The Feds and the Province have downloaded a lot of their costs on to us, and quite frankly, we really need to fix our infrastructure for this city, if we want to make this a livable place. Simply put, we don't have the funds to pay for them, even if some of the gravy can be cut.
So, let's get some perspective here. I agree, the city needs more money and a revenue stream and more autonomy. After all, it is the 6th largest government in Canada, but it doesn't have the kind of power you would expect considering its size.
When the Toronto land transfer tax came in, it almost doubled the amount a buyer would pay in land transfer taxes. So, if you bought a property worth $500,000, you would pay $6475 in land transfer taxes for Ontario. With the Toronto land transfer tax, that is only 5 years old, you would pay an additional $5725. So, before 2008, a buyer would pay a total of $6475 in land transfer tax. After 2008, a buyer would get a total bill of $12,200. That's almost twice as much, nearly a 47% increase in this one time tax.
In addition, the land transfer tax places the burden of raising funds for the city on the backs of buyers. I don't believe this benefits the city of Toronto. It is a inconsistent tax that is disproportionately thrown at buyers at a time when they are paying lawyers, and home inspectors, and renovators and movers. Also, if the economy ever goes south in this city or if there is a steep fall-off of in real estate transactions, then this revenue stream will slow to a trickle and the city will make a lot less money. It does not provide a consistent level of revenue for a city to build budgets around.
I think, if the city of Toronto wants to keep the golden goose and keep the money coming in, they need to increase their property taxes. I know that won't be popular, but if we do need the money, and the revenue stream, then raising property taxes would spread out the burden more widely with all of the city's property owners. Plus, if there is a problem with the economy, the city still gets their taxes. It's a consistent way of generating money for the city. After all, according to a Toronto Star survey, Toronto pays some of the lowest property taxes in Ontario.
Now, I don't think any of this is going to happen. There will be no raising of the property tax rates, and Rob Ford will not get rid of the land transfer tax as promised. But I do think he's on to some thing here. I don't agree with this guy very often, but in this case, I support Rob Ford!
Tuesday, 12 February 2013
I'm not sure they were ever really gone, but it seems as we move further into 2013, first time buyers are coming back to the real estate market. After crabby reports on the slumping prices in Toronto in the second half of 2012, first time buyers are putting up their mitts in bidding wars for houses across the city.
And if you are one of these first time buyers, it may feel like you just can't catch a break. No one could use a drop in the value of real estate more than someone who would like to buy their first place. They have every thing to gain from a price drop and nothing to lose from one. And though there has been a little weakness in certain segments of the condo market in Toronto, first time buyers remain in a competitive price range, especially when it comes to houses. In the last two months, I have had more competition in the first time buyer housing segment than any other.
Not only are they in a competitive price range, but first time buyers worry that Toronto will become too expensive, and they'll get priced out of the housing market. On the flip side, they are concerned that Toronto is at it's real estate peak. After all, they have a lot to lose if the market heads south, especially if they have just bought a property.
Yeah, it may seem a little grim, but here's why some Toronto first-time buyers are not feeling so glum:
1. Yes, houses are competitive, and there can be bidding wars to buy them, but they are great investments. There are only so many left in this city, and at some point, first time buyers won't be in the price range to buy houses in Toronto at all. In the near future, buying a house for a first time buyer will simply be out of reach. But it isn't yet. Even though it is in a lot of other cities, like Vancouver.
2. Condos are still affordable. So, maybe houses are already out of reach for some first time buyers, or they would prefer the ease of a condo. If that's the case, there are a lot of condos to choose from. But do pick wisely. Though the larger condo developments may seem cheaper, they often do not increase in value in the same way as a townhouse or a midrise or lowrise.
3. Rates are good. I know we keep hearing this all the time, but it's true. Plus, renting isn't much better than buying. Yeah, there are those who think you can rent and invest and make/save more money than if you buy, but I don't believe it. Rents have done a pretty good job of keeping pace with the rise of house prices. In fact, some can carry a mortgage with the rent they pay. So let's say you currently pay $1500 in rent. If you put 5% down or $15 737, you can have a purchasing price of $314 733 with that $1500. Then you start to build equity. Of course, this is all with what the lenders are offering now, according to Joe Sammut at Mortgage Architects. This can change. And it does take time to build enough of a nest egg to cover a down payment and some of the closing costs. At the end of the day, though, once you buy a home with a 25 year mortgage, you pay the same mortgage every month for 25 years with a variation on the interest rates only. Rents go up.
Tuesday, 5 February 2013
Everyone's using it. It's the new real estate catchword of 2013: Balanced Market. This term has been thrown around by agents, water cooler gossipers, pundits, think tanks, banks, cranks and columnists talking and writing about real estate in Toronto. It's a pleasant pairing of two words. It gives buyers, sellers and property owners of Toronto a sense of blissful calm. Far fewer jaw-dropping bidding wars where prices race forward, defied by logic and reason. No blunging values of properties, American style, to send fear through the hearts of all homeowners and investors. And no pent-up celebrations for all those buyers sitting on the sidelines for years waiting for the real estate apocalypse. It's the universal pacifier for every one involved in real estate.
It sounds simple, the balanced market. No hastiness. No insanity. No sudden movements. There are some buyers, and there and some sellers, but one does not vastly outnumber the other.
But the truth is...it's kinda complicated. There will be bidding wars, and there will be slipping prices at the same time. There are very few areas of Toronto that are truly balanced. Overall they balance out, but most homes for sale in this city are heading up or down in value. No part of Toronto will function in the same way in a balanced market. Some areas will languish a little, and some will flourish even more. Personally, I will always assert that the emerging neighbourhood will outperform other neighbourhoods in the long run. House-rich and improving commercial strips like the West Bend, the Junction Triangle, Danforth Village, Long Branch and Alderwood will see improvements in the long run, in my opinion.
Of course, it's not as straight forward as one neigbhourhood over another. Some neighbourhoods will have certain types of properties, whether houses or condos, that will do better or worst based on layout, street, or say, the healthiness of the condo corporation. Even some houses in the same area may see positive or negative gains. Some larger condos will have a tougher time selling than their smaller counterparts. Some stats have shown that high-end condos have shown price declines. I am still participating in bidding wars with some condo townhomes and starter homes.I know I am biased here, but it is a good time to have an informed real estate salesperson or someone who has a sense of what neighbourhoods and property types are going up in price and which ones are not.
A balanced market does not mean all properties balance out the same way. It should calm the nerves of real estate enthusiasts around the city, BUT it also makes the idea of purchasing much more intricate. Not only do some neighbourhoods do better than others, but some properties will improve in value this year, while others will not. And they can be right across the street from one another.