Tuesday, 30 April 2013

Hamilton: Toronto's Next Emerging Neighbourhood?

Over the years, I have developed some pretty decent skills at spotting an emerging neighbourhood. I look for the obvious signs: artists moving in, a commercial strip improving with new independent shops, young families popping up.  Then, I throw in a little instinct and voila, my pretty decent skills.

As far as Toronto goes, there are still some great emerging neighbourhoods that I think hold quite a bit of promise in the years to come. Of course as time marches on, many emerging neighbourhoods are located increasingly further and further from the core. And today, I would like to mention one that is very far from downtown.  In fact, it's not even in Toronto. But it is down the QEW.

Increasingly, Hamilton has become the focus of many real estate investors. The Real Estate Investment of Canada (REIN) has ranked Hamilton as the best place for real estate investment in Ontario (Cambridge and Kitchener were next). But don't get too excited. It's not the first time Steel Town has been named a top place to buy real estate. It's been going on for over a decade.  I've become a little skeptical of the whole thing, but now I'm starting to believe. It just took a little faith and time.

Let's be clear about this city though. I don't think Hamilton will one day yield the kind of prices you will find in Toronto, but there is no doubt that you can find some really great homes for a fraction of the price. Big, detatched Victorian and Edwardian homes at first time buyer prices. It's very tempting.

So why has there not been an exodus to Hamilton yet? Well, it seems to be having a hard time shaking off it's industrial past. For a long time, Hamilton has been a working class mixed with down-on-its-luck  kind of city. The local government, to its credit, has been trying to woe the artist crowd and the profession set to its neighbourhoods for awhile.  And to some extent, it's been working. They offer great grants to artists and the city visionaries have been trying to cultivate a more high tech industry. Artists, as many know, are often an early sign of gentrification. They come to the places  that are cheap, and make it work. With cheap places becoming harder and harder to find in Toronto, I am hearing many stories of Hamilton as a the new place to go.

But stories aside, the cold hard facts speak for themselves as far as Hamilton is concerned. Once a kind of Detroit of Canada, Hamilton now has an unemployment rate of 6%, just below the national average. Not only is it becoming a commuter town for Toronto workers, but it's also developing its own diversified economy.  Don't get me wrong, it's still is a steel town. Steel does rule supreme here, but that industry is certainly not the only game in town any more.

Many see Hamilton as a place to invest for income properties. In some cases, you can find properties that will generate a cash positive cash flow right away. Just don't assume your rental property is an oasis of money making. Renters in Hamilton are generally not as reliable as to the ones in Toronto. Any one who makes a half decent living in Hamilton can often buy a place. Based largely on my experience, I hear of more people who have delinquent tenants in Hamilton than Toronto. And those are a big drain on your money and your time. So, in my opinion, best to buy income properties closer to the university here. Students are messy and can ruin your property but they or their parents usually pay the rent.

But Hamilton is not just for investors. In fact, I mostly hear of people who are leaving Toronto for bigger properties and greener spaces.  It's a mix of first time buyers who want a nice house and don't mind travelling to the city, and buyers who own in Toronto, but have decided they want a larger house.

In my opinion, Hamilton's housing stock is fantastic. Red brick, heritage homes on tree-lined streets. Great Farmer's Market. A downtown that still needs some love, but is heading in the right direction.

It's not for every one though. The commute can kill ya. The drive to Toronto is slow, painful and expensive. But if you can work from home part of the time, or in the city of Hamilton itself, you may be better off.

The transit to Hamilton is not very good if you need to come to Toronto regularly.  There is some GO train service, but it could be much better. Luckily, there are plans under way to improve Hamilton's GO transit in the near future. In the not-so-near future there are bigger plans afoot to create better public transit links between municipalities from Oshawa to Hamilton.

The biggest fear about moving to Hamilton:  If you leave the city of Toronto long enough, it may be tough to get back in. I have seem people move to the suburbs, have their house increase in value far less than in Toronto, and then, when they want to move back, they can't afford it any longer. Your asset will, historically speaking,  increase in value more in Toronto.

Of course, Hamilton is not an ordinary suburb. It has great, historic architecture and more than just cookie cutter suburban houses. Money can still be made on a house here, especially if you have the patience to wait for the improvements in transit.  Simply put: Hamilton will not stay cheap forever. It's gaining momentum. There's still gloomy industrial areas, unpleasant commutes, and run-down homes, but the city is moving in the right direction.  And with continued city support on attracting artists and young professionals, Hamilton can be the next emerging neighbourhood. It may not happen as quickly as some like, but it's certainly happening.

Tuesday, 23 April 2013

South Etobicoke: Suburban No More?

I was in Etobicoke today with a photographer for a listing I have coming out this week. It's a sleek, modern condo in the Network Lofts. Really great finishes, and incredible value, I believe, for a conversion loft that is on the subway line. But don't worry, this isn't a sales pitch for my listing, but it is about my photographer's thoughts on South Etobicoke.  Turns out she grew up in this former suburb. When she arrived to take her photos, she was surprised that so much of the Bloor and Islington area had changed from vacant waste-land to high density living. "It doesn't even feel like the suburbs any more," she said.

And she sure is right. Etobicoke ain't what she used to be, particularly south Etobicoke running from the Kingsway down to the lake. This area was once undeniably suburban in a 1950s to the 1970s kind of way. It was the passover place between downtown Toronto and getting to the airport.  At amalgamation, Etobicoke had the lowest population density compared to the other former Toronto boroughs or towns. For a long time, it maintained it's suburban-ness with houses spread out on big lots.

You can still  find neighbourhoods like Alderwood in this part of town with large bungalows and two story detatched homes. This neighbourhood has a huge tree canopy. It's quiet and green. It's the peaceful life you dream about if you pine for the suburbs. The only sound are birds and lawn mowers.  The Kingsway has been a fancy part of town for the wealthy set for a long time. And then there's the parks. Lots of them from James Garden to the series of parks along the lake including the Humber Park nearby Humber College where the asylum used to be. 

Of course, South Etobicoke has shown the negative side of suburbia as well. That means, historically, a lot of poor planning, and an odd mix of box stores and anywhere franchises. It is mostly built for drivers. Public transit is patchy, at best. And there is a lot of industrial lands, some in use, some not.  

But the truth is, South Etobicoke is undergoing quite a transformation from former suburb to a new urban beast, but this process has only just begun. And it's coming about in three ways:

1. More Densification: We have already seen the condo development along Bloor and Islington, close to the Bloor subway lines. This will continue. We are also seeing some development along the Queensway. This street can be a real mash-up of urban/suburban design from Costco and Burger King on the main drag mixed with mid-rise, very cool condos, like the Hive condos. 

Then there's the brownfields and open spaces. Previously industrial areas ready for new development. Some worry these areas will be filled with poorly planned, giant condos. Some fear they will mimic the condos along Etobicoke's waterfront that have not blended well with with the surrounding community, forming a kind of curtain to the lake. But things may be getting better. South Etobicoke is still keen to sell their lands to developers, but now they have a design review committee to encourage smarter development. 

2. Improved Transit. As I mentioned, transit isn't the greatest around here, though there is the subway line and a few GO stops. Streetcar lines, like the Queen car, also connect you to the core, slowly but surely. It's really not much. Nonetheless, there are plans under way to make this area more transit-friendly, as it densifies. Who knows where the money is going to come from, but the intention is certainly there. It is part of the big realization that all of the GTA is waking up to. This megaregion needs better transit soon from Oshawa to Hamilton. 

3. Urban Villages forming. Parts of South Etobicoke are forming urban neighbourhoods that function very much like a Toronto neighbourhood such as the Annex or the Beach. Traditionally, suburbs are low density. That means, unless you're a mall or a destination box store, then main street is going to be pretty low on human traffic. Plus, the design of most main streets in South Etobicoke are setup to be pedestrian repellant. But this is not the case throughout this area.  Mimico, New Toronto and Long Branch have an improving, viable commercial strip along Lake Shore Blvd. You could drop by independent coffee shops, an incredible home-made ice cream store, or a place that sells some of the best empanadas in Toronto. 

There's still a way to go yet, but the transformation is well under way. It looks like it's mostly for the better. Many suburban areas  like the Kingsway and Alderwood will  keep their quiet suburban charm, but there is no denying that this ex-suburb will be a different place in twenty years. I would be curious to hear what my photographer would say then.

Monday, 15 April 2013

Is Flipping a Renovated Dump Still the Way to Go?

Renovating and flipping has been a Toronto tradition for quite some time, particularly with older houses. It usually follows a path like this: A buyer comes along and purchases a dumpy house that needs to be completely gutted and updated. And by updated, I mean seriously updated - new wiring, new roof, new heating system, proper insulation, new windows, lots of permits and often some structural changes as well. Then, after essentially starting from scratch and setting up the behind-the-walls improvements, you add the pretty - a knock-out kitchen and washroom, new wood floors, pot lights, a new deck or flagstone patio, more closets, and a fresh and modern look.

Characteristically, these dumps have been largely neglected since the 1890s to the 1960s.  Because these dumps looks terrible, many believe they will generally be ignored, leading to a discount price.  The dump becomes the Cinderella that every one wants to dance with the ball. And by "dance at the ball" I mean sell at a much higher price than it was bought and renovated for. For a long time, many flippers made money this way. They would buy cheap, reno and spend money, then sell for much more. And it often worked.

But now, it doesn't work all the time. And it's not because the prices of houses are slipping, but because the prices of dumps in key Toronto neighbourhoods are rising. Dumps used to cost very little because no one wanted to go near them except some brave contractors. The fear of fixing it up was just too much for 99% of the people. Now,  houses in many neighbourhoods are in such demand that the dumps are being purchased close to the price of a finished home. In fact, there seems to be some appeal in the total dump. There are now a group of buyers who prefer to buy a house they can completely gut so they can start over and build their dream home to the exact specifications they want. Sometimes it includes a gas burning stove, heated floors in the washroom or enough gadgets to intimidate James Bond. The fact is, those buyers who want an ideal home now have more confidence in buying dumps. They don't see it as ugly and run-down, which it certainly can be, but as a kind of tabula rasa, some thing blank where they can have a fresh start. It is not so much about selling the house once they are finished, but it's about enjoying the house once they have created it.

Flippers who have renovated homes feel a little shocked that dumps are selling closer to where their finished homes sell. Shouldn't a decked out house sell for more? Well, in a great neighbourhood, I would say: "Not always."

So what can we learn from this current state of Toronto real estate?

1. If you are selling a house that is a dump, I believe it would be wise not to renovate it.  I'm not talking about any house, but one that would require extensive work. In some homes that are dated, or a little dumpy, it may be a good idea to invest in some renovation.  In general, I would just discourage someone from completely overhauling their home.

2. If you are a buyer, don't be afraid of the renovated home. Really amazing renos in in-demand neighbourhoods will often sell for a lot of money and generate a great deal of interest, but some times a few slip by and don't sell off in a frenzy of a bidding war. If you factor in the renos in some places, you may be paying less to buy a finished home than one that requires a renovation once you factor in the cost of those renovations.

3. There is a place between the dump and the beautifully, fully decked-out reno'd house that may still generate bargains. And that's the 80s reno. As a buyer or investor, the wiring is usually updated, the walls are drywall and the insulation are adequit, and if you're lucky, the basement has been dug up and waterproofed to give you some better height and a useable place. Maybe the kitchen is dated, the dark green and dusty rose combo is not giving you the wow factor. These places don't show well, but underneath all that 80s-ness, you don't need to spend as much money on the big ticket items like wiring and plumbing.

Of course, it all really comes down to a specific property.  I would consider this more of a trend than a hard and fast rule. Sometimes it comes down to timing, luck and the right real estate salesperson.

Wednesday, 10 April 2013

Links that Stink: Does Toronto Need More Diesel Trains?

I want Toronto to be a better place. I know that sounds all warm and fuzzy. I mean, who actually wants Toronto to be a worse place than it is? But some times, when I see things happening around me that effect me, my clients, and our properties, I scratch my head and wonder: Who thinks this is a good idea?

Take, for example, the proposed Air Rail Link that will run from Union Station to Person. Initially, this air rail link, brought to us by a provincial organization called Metrolinx, was supposed to be done for the Pan Am Games in 2015. It was part of the Toronto proposal for the Games, and we promised to get it done by then. Or at least Dalton McGuinty did when he was around.

Now, I'm all for an air rail link to the airport. I don't know whether it's an economically sound idea. I heard from several sources that it may cost between $15 to $35 for a one way ticket to the airport. Ouch. But still, in theory, an air rail link seems like a good idea for a city of Toronto's size. Imagine being able to get to the airport in some thing other than a cab or a car! This could be great, if done right.

During the planning for the Games, however, Metrolinx decided to go with diesel trains for this link to Pearson. Right now, they have about  50 diesel trains on the line each day, but once the Air Rail link is finished, we will have up to 450 diesel trains using this route each day. And here's what we know about diesel trains. The pollution from them causes cancer. They are noisier. They may require Metrolinx to build sound walls at certain locations along the corridor.

As you may have heard, there have been residence uprisings in many neighbourhoods near the tracks. Understandably, they would prefer electric trains that don't create pollution and are quieter. Not very surprising really. Since the pollution can carry up to 2 kms, some people a fair distance from this area are also involved.

So, if you are like me, you may thinking: Why not just do electric? It must have to do some thing with cost.... Well, you are right at first glance. To build the infrastructure and to purchase the electric trains, it is more expensive. But they are are cheaper to run and cheaper to maintain. You just need more money off the top, then you spend less.

And here's the really odd thing: Metrolinx have actually built the infrastructure for electric lines for the future. So, it seems that the plan is to build a diesel train system possibly with sound walls only to be potentially replaced by electric ones in the future where sound walls won't be required. So, we may pay for it twice. And why? To meet a deadline for a 3 week sporting event? I feel it's great that Toronto is having the Pan Am Games. I love sports. I'm even a little excited for the Pan Am Games, but I also have to live in the city when it's done.

The funny thing is, Canada is the only Western nation without any electric trains in them. The U.S. has them in the Northwest and soon in California. All of Europe is covered in them from Spain the the UK to Russia and the Ukraine. Japan has them. Australia too.  Even developing nations like India and Malaysia have them.

The good news: There seems to be a slight change in the air around this issue. We have a new leader in the provincial government. This government did not make the same commitments as the last one, and hopefully they can see how this diesel train idea is a bad one. Some politicians have hinted that there may be some reconsideration going on. The light has been turned back on at the end of the tunnel. So fingers crossed that reason will reign here and electric will be done right from the get-go, and we can skip this diesel stuff all together.

Tuesday, 2 April 2013

A 16% Decrease in Home Sales. Should You Worry?

Stats can be a scary thing. Especially in real estate.  Words like "drop", "decrease", "plummet", "bubble", and "crash" can ignite the kind of anxiety a homeowner may feel if he or she were being chased by an axe murderer. And some times the fear should be taken very seriously, like in the case of being chased by an axe murderer. And other times, all you need to do is look at your fear straight in the eyes, and see that there is really nothing to be afraid of after all. Take the recent findings from CREA, the Canadian Real Estate Association. In their latest round of stats, they have found there has been a 16% decrease in home sales across Canada in February 2013 compared to February 2012. Now it is important to distinguish that this is not a drop in the price of homes. It is a different kind of decrease that refers to the number of sales that have taken place. 

To illustrate this, think of the real estate market as a kind of see-saw. On one side you have sellers, and on the other you have buyers. When the market is unbalanced, you may have too many buyers on one side and not enough sellers on the other. This often leads to big jumps in the value of homes simply because there are  more buyers than there is product. And this often leads to bidding wars that can be very frustrating to buyers, and a joy for sellers. Then there is the opposite see-saw scenario, where there are move sellers than buyers.  Because of this, prices fall because there are more options for the buyers. And sellers sadly lower the price of their homes to attract the small pool of buyers. 

A 16% drop in home sales, though, does not necessarily cause prices to fall or rise. In fact, there are fewer buyers and sellers on the see-saw. So there is no imbalance, just less weight on both sides. In fact, across Canada, prices have effectively flat-lined.

So the question becomes:  Why are there more people stepping to the sidelines than last year
Well, part of that answer has to do with last year. If you close your eyes and transport yourself back to February 2012, you will likely remember a pleasant time when the sun was warm on your skin, and your snow shovel was ignored. In fact, winter in many parts of Canada barely existed last year. The Spring market starter much earlier in February. There is just some thing about the Spring, the rise of the tulips and buds on the trees that brings the buyers to the table. This year, in most of the country, winter just doesn't seem to end. And when winter stays, the market is often off a slow start.

The other big reason there are fewer sales has to do with some thing a little more contrived than the weather. Between February 2012 and February 2013, the Federal government has  become much more involved in the Canadian real estate market with a plan to cool the market.  During the last year, they have tried to reign in the real estate market by making it tougher for first time buyers to receive a mortgage, effectively reducing the number of first time buyers. When the banks tried to lure the buyers back in with even better interest rates than we currently have, the government stepped in again and kindly asked them to refrain. 

Then there's Mark Carney, the recent head of the Bank of Canada, who went on a public campaign to let Canadians know they were taking on too much debt. And his public finger wagging worked. Canadians began to slowly decrease their rate of taking on more debt, like big mortgages.

So, with the government effectively trying to slow down sales and prevent the country from moving into bubble territory, they have, in part, cooled the market without crashing it.  They have reduced the number of buyers to more evenly match the number of sellers, leading to a more balanced market with fewer sales. 

Now it would be nice if real estate could be so easily controlled. That's not always the case. The crystal ball is pretty murky when it comes to predicting the future in real estate. At the end of the day, there is always a sense of the unknown when you buy or own real estate. That's what's exciting about taking a risk. 
The key to any real estate purchase or sale is to really understand where you live.   A national average is not exactly exact when it comes to buying or selling property. A condo in Vancouver does not function the same way as a potato farm in PEI. Those are just different potatoes.  It's like a class of say thirty students. They may have a 75% average in a certain test, but there will be students who perform better and worst than that average. Some who have improved over their last test and some that have not.
Markets function in very local, even hyper local ways. In Toronto, for example, houses in some neighbourhoods are still experiencing crazy bidding wars because of the low inventory and the demand of a given neighbourhood while some very large condos in other Toronto neighbourhoods are sitting on the market for weeks on end.  
Still, it would appear, on average, that prices have not really risen or fallen, nationally speaking.   In some markets, first time buyers may actually have a little relief if prices increase at a slower rate, or even slip a little. Current homeowners may not see the same increases they have seen in the past decade, but they may take comfort that they have steered clear of a bubble, and will likely have modest increases to come in the long term. 
All in all, a 16% decrease in sales may sound scary, but it doesn't have to be. Prices have cooled off but have not crashed. Talk of a bubble has subsided (a little). Real estate prices are not on a tear.  In fact, in some ways, it's just a well-earned rest for the real estate market.