Thursday, 29 May 2014
The number are astonishing. For the Toronto Real Estate Board, there are nearly 40,000 real estate agents int this city this year. To put that into perspective. That is 1 real estate agent for every 140 Torontonians, twice as many as ten years ago. Four thousand more than last year. If you are looking for a way to not feeling special in this city, become a real estate agent.
So, the question has to be: Why are there so many?
The number one reason: There is a public perception out there that selling real estate is easy money. If you have a winning personality and half a brain, you can be rich and self-employed. There is a belief that any one can do it. But the same stats that show us just how many real estate agents there are here in the city also tell us that a great proportion of the Toronto real estate agents are not making this easy money. I'm sure some may be surprised to find out that almost 27% of all agents in Toronto have not done a single sale last year. To put that into perspective, they are paying their yearly dues, thousands of dollars, to the Canadian Real Estate Board, the Real Estate Council of Ontario, the Ontario Real Estate Board and the Toronto Real Estate Board, and not making a dime. In fact, two thirds of all agents in Toronto have done less than three deals in a year. Of course, people at the top do much better than this, but still the median salary for a real estate agent right now in Toronto is less than miminum wage.
The other shocking statistic: 71% of all real estate agents on the Toronto Real Estate Board are part time. That means that most real estate agents have another job beit a fireman, a part-time teacher or they just don't clock in enough deals to be considered full time.
If you are someone who wants to buy or sell a house or condo, you should find these stats concerning, to say the least. If you are dealing with a salesperson that has less than three transactions a year, then you are dealing with someone who has cultivated little expertise. Now, I know we have all been there. We've all had to start somewhere. And I personally think it's important to support new real estate salespersons as they learn, but it's another thing to have most agents in this city with such limited experience. And I see this on a daily basis. Salespersons who do not know how to write up a deal, who don't understand the conditions I have included. Real estate salespersons who price something incorrectly or market something poorly.
The inexperienced work force does not only come from those salespersons who think they can make easy money and have it as a part-time career. The Ontario Real Estate Council, who provides the educational framework to become a real estate salesperson, also makes it very easy to obtain this real estate salesperson designation. Tougher than the old days, but still fairly easy. The more real estate salespersons there are, the more money OREA makes from providing the educational courses.
Even though it's not a bad idea at all, I don't want to be that guy who says it should be tougher to become a real estate salesperson by increasing the standards of education. A lot of what I learned, I learned from buying and selling property. And if most agents are not turning over more than three transactions a year then I would think the learning curve doesn't curve very much. There is simply not enough opportunity to learn for many.
So, what does this mean for those of us who are not real estate salespersons? For the consumer, make sure you do your homework on your salesperson. Ideally, you would seek out someone who has some skills and some experience, works well with your personality, and who is, most importantly, full time in their career. If you want to give your cousin or best friend a chance who has just become a real estate agent, maybe have him or her work with someone more experienced on the transaction. As for part-time agents, I don't know if they can be as effective as a full time one. Would you prefer a part-time doctor over a full-time one? I think with any profession, whether you're a brain surgeon or a tambourine player, full time will make you better at your job.
Thursday, 22 May 2014
People love real estate statistics. And I'm included in this group of people. It's almost a leisure activity for me like playing tennis or watching Game of Thrones. Still, as with any statistics, you always should be a little skeptical of how the statistics come about. I often find there are many reasons to be doubtful with the real estate statistics from a national perspective. It's just too simple. Not every city and neighbourhood function in the same way all over Canada. Often, I'll hear things like "The average price for a Canadian home went up such and such a percentage point last year." The truth is, markets across the country function in very different ways. A sweet bungalow in a declining small town in New Brunswick does not function the same way as a micro condo in downtown Vancouver.
When it came to the financial crisis that triggered the American housing collapse in 2007, you may think that real estate across one country can change all at once. And you would be partially right. It would appear that almost every real estate market in the U.S. slipped in price. Though a closer look will show you that the drops in Texas were minimal and the collapses in California, Nevada and Florida were colossal, like Godzilla strutting through town.
Still, there are practices and policies that can affect all real estate markets across one country. In Canada, federal policies about tightening lending practice will influence how buyers buy properties across the country, no matter where you are. A change in interest rates can certainly have a bearing on anyone who wants to buy a property or renew a mortgage.
For the most part, though, the things that affect the real estate market tend to be local, even hyper-local. This year alone we can see Vancouver, Toronto, Edmonton and Calgary all enjoy healthy gains in home prices. Montreal, Victoria and Halifax, have gained very little.
Toronto, for example has very specific housing policies that only affects this city. We have a provincial and Toronto land transfer tax. The double land transfer tax deters many people from selling since it becomes too expensive to sell and pay the two taxes. This, in turn, causes few listings to come to market, and more competition and higher prices.
Even within Toronto, the condo market functions differently than the market for houses. Even condos in the same neighbourhood that are relatively the same size and age will function differently from one another. All you need is one very well managed building compared to one that is poorly run to show you the difference. Well run condos will have much more appeal that is reflected in the price. The board will use their reserve fund wisely and take care of the building. A poorly run condo will have a low reserve fund, possibly some issues with the builders, or insanely high maintenance fees that don't reflect the work that has been done or the amenities included.
So, the next time you see the word "national" and "real estate" together, take this statistic with a grain of salt. Though there are some factors that truly affect all properties across the country, the local and hyper-local factors have a much stronger influence.
Thursday, 15 May 2014
If you have been following real estate in Toronto for the past few years, you are likely very aware of just how well houses are increasing in value in this city. Condos are a different story. It's not that the condo market is crashing, but there is a growing supply of them. Houses have a limited supply and very few are built in Toronto any more. More condos to buy means more reasonable prices. Fewer houses to buy means more buyers trying to buy what is left at higher prices.
The stats from Urbanation do speak to that. In the last year in Toronto, the cost of detached houses has increased by 13.2 % to hit an average price of $965, 670. Semis have jumped by even more since April of 2013, 18% higher than last year to an average price of $702,332.
Resale condo gains have been much more humble, but should be given their kudos for their resilience. The condo market seems to be the place where a lot of Torontonians put their fears. There has been a decade long concern that the condo market is going to crash. It's true that the last few years have shown slim gains for condos, and even a few slips in some areas for condos, but the price for a resale condo this April was up to an average of $384,758, which is 1.8% increase from April 2013. It's not the kind of wild increase we're seeing with houses, but it's certainly not a crash.
Now there are two ways of looking at this info. First, you can see that houses are far better investments since they perform very well. You can also see that many average Torontonians who are buying their first home may not have the funds to purchase a house. As houses get up there in price, they begin to become unattainable for many. So, for those who want to stay in the city, we are going to start to see many families, couples and even singles who need space searching for condo properties that have two-to-three bedrooms.
For a long time, most developers in Toronto have built condos that are one bedroom or bachelor apartments. Compared to New York, Toronto has significantly fewer condos that are more than one bedroom. Downtown New York neighbourhoods like Manhattan and Brooklyn have been neighbourhoods where families have lived in apartment buildings for a long time. So, it is not unusual for families to grow up in apartments. Since New York has this kind of culture, many condos have been built to accommodate larger households. In Toronto, this has not been the case. Not too long ago, most families or couples could afford a house quite easily, not too far away. This has not been the case in New York for a very long time. Now, Toronto is becoming a place where owning a house is becoming increasingly competitive, and traveling to the suburbs for an affordable house is a commuting nightmare. I predict, in the years to come, that two-to-three bedroom condos will become much more in demand.
When the condo boom started here in Toronto, the developers largely targeted singles and first time buyers who wished to remain in a central location. Very few two-to-three bedrooms were built, and quite honestly they were not really in demand. Often three bedroom condos pull in prices similar to two bedroom condos. Do you see where I'm going with this? Those couples and families who are priced out of the market for houses will soon start to look for these two-to-three bedroom units as a house alternative. These will become good units to buy, in my humble opinion, over the next few years because the prices have not been on a tear like the houses. They are currently affordable.
Now this doesn't meant that one bedroom condo apartments are not valuable. For those condos, location and style of building will remain important. Still, if we return to the simple economics of supply and demand, I can see a limited supply of two-to-three bedroom condos in central Toronto in the years to come. In other words, a good investment.
Thursday, 8 May 2014
It's been almost 20 years since I moved to Toronto from Montreal, and I can confidently say one thing to Toronto: "You've changed". The changes have been huge. In 1994, Toronto was not yet the amalgamated mega city it is today. Ford Nation was not our problem. We were a lot less dense with many more parking lots, and less traffic. Many of today's real estate investors look back fondly 20 years ago. Sure, rates were higher then, but housing prices had been in decline since 1989, and it may have been one of the best times to buy in our city.
As someone who is a little crazy about the best emerging neighbourhoods in which to invest, I can see that what was emerging back then became, for the most part, quite different neighbourhoods today. So what were the emerging neighbourhoods during the same year that Pulp Fiction was released, OJ Simpson was pursued in his Ford Bronco and Celine Dion was Canada's top export? Where were the real estate risk takers heading to?
In 1994, when I arrived in Toronto, I rented an apartment on Shaw Street, just north of Queen West. At the time, my landlord questioned his early 90s purchase of his Shaw Street house because it was so close to the CAMH, or as he called it,"the mental hospital". He was concerned the proximity to this institution would affect home values.
Queen West was still forming back then. There was some activity going on just west of Bathurst to Trinity Bellwood parks, but I still remember there were boarded up shops right across from Trinity Bellwood Park and discount hookers along Queen West. The Queen West coolness had not yet rolled into Trinity Bellwood, and most folks looking to buy property could find incredible discounts just west of Dufferin Street.
Little Italy was certainly an emerging neighbourhood in 1994. The College and Clinton intersection was considered Toronto's main hipster street, though, like Queen West, it was very cool just west of Bathurst, but started to become dull once you approached Ossington. Ossington was derelict and run by gangs. Still, if you were a first time buyer, this was probably the place you were going to get in.
One of the few places that has not changed all that much is Kensington Market. It has managed, for better or for worse to keep its collection of shops and small businesses. Sure, some of the businesses are different now, and maybe there are more restaurants in the mix, but the flavour of the neighbourhood is still the same.
In the east, the Danforth was where some of the entertainment artists and students lived. I remember seeing it for the first time in the opening of "Kids in the Hall". Apparently, many of the cast lived there before they became more well known.
In 1994, my sister lived in Roncesvalles, which was a little more hippie and emerging back then. I even recall a Burkenstock store, exclusively dedicated to the iconic hippie sandal. West of Roncesvalles was considered better. Discounts were available east of Roncesvalles.
Many of the successful emerging neighbourhoods of today like Leslieville were scary outposts, places that you had to travel through to get downtown from the Beaches, back when the Beaches were called the Beaches, and not the Beach.
If you wanted to buy a condo, it was more of a lifestyle decision, rather than a financial one. It wasn't that they were the cheaper option to a house. There were a lot of cheap houses for sale back then. Condos were much fewer in number at this point. They were just easier to live in. No cutting the grass. No mowing the lawn. No replacing the roof. They were certainly made bigger than they are today.
In 1994, real estate was not hot. RRSPs were hot. Tech stocks were hot. Nowadays, many buyers lament: "Oh, why didn't we buy then? We could have bought a Victorian near Trinity Bellwood for $150,000!" And you know what? I'm not going to disagree. If I had a time machine, I would go back and buy myself a lot of Toronto real estate. That is, if they would accept my future currency.
Still, there is something to be learned from going back to Toronto of 20 years ago. Yesterday's scary or bland or too far-from-downtown neighbourhoods are the areas that will be coveted in 20 years. There's no promise of that, but if current trends continue as they are, Toronto will grow. Houses in the city and even in some of the old suburbs along with some condos in the right areas will be worth more some day. You may not know where you will be in 20 years, but I'm pretty sure Toronto will change again. 2014's emerging neighbourhoods will be the solid neighbourhoods of 2034.
Thursday, 1 May 2014
With a blog called Emerging TO, it's not very surprising that I go on A LOT about emerging neighbourhoods. But as we all know, not all neighbourhoods are emerging. Some will likely never emerge while others have already developed into established neighbourhoods.
Established neighbourhoods are ones where the schools are often top notch, and the homes have been tarted up inside and out. Often the age demographic can lean a little to the older side of Toronto's demographics. Many residents bought way back when prices were more reasonable, or they have had the opportunity to make more money in their first house or condo from another neighbourhood to purchase a move-up house in an established one.
Whether you’re younger or older, there are a lot of reasons to choose an established neighbourhood. Emerging neighbourhoods are great from an investment perspective - buy low and sell later when the neighbourhood becomes more desirable. Some of us, however, do not always think of a house as a mere investment, but as a place to live. If you have children, sometimes it isn't wise to wait for a neighbourhood to improve. You may need the good schools ASAP. So, if you can swing it, it may well be worth your while to invest in an established neighbourhood. And if you buy an investment property, you will certainly pull in higher rents. Established neighbourhoods are rarely the part of town where you are going to land a house at a discount price, but they are amazing places to live. You will be happy there.
If you are buying a condo, the same rules apply. Price-wise, it will be easier to get into an established neighbourhood with a condo, but if you compare condos in an emerging hood to an established one, the price per square foot will certainly be lower in the emerging one.
The rules of buying in an established neighbourhood are different from buying in an emerging one, though with both, you want to keep an eye on the commercial strip. In many established neighbourhoods, the commercial main street may fall victim to what I call "The Established Hood Curse". This is when a successful neighbourhood falls victim to its own success. At one point, new businesses had rushed to get into the neighbourhood to open on the growing commercial strip. Soon after, the landlords noticed how in-demand the area has become. So, they jack up the rents. The small businesses can't afford to stay, and the landlords get too greedy. So, the local flavour is lost and more chain stores with deep pockets move in. New and innovative businesses that keep the neighbourhood interesting won't come here because of the rents. Some stores even close down in expensive neighbourhoods only to open up again in emerging ones down the street. Such is the case in the Beach. Don't get me wrong, it's a great place to live. The houses are in beautiful neighbourhoods, the beach is right there, but the commercial strip has become a little blah.
Other established neighbourhoods that are losing their lustre are the ones located far from downtown. At one point, if you had money, you wouldn't live downtown, but a respectable drive from it. Our city has changed quite a bit since this point in time. We are moving in a direction where the closer you live to downtown, the more your property will likely be worth. The more affordable home you desire, the further you have to go out. In the future, this will only become more true. So, rich suburbs will stay rich, but with increased traffic, it will not be the pleasant drive home it used to be.
So which established hoods are best? There are many. Some just stand out a little more than others. So, if you are going to buy in an establish neighbourhood, here is where you should consider:
1. Roncesvalles - You can't lose here. You're by the largest and best park in the city, and the main street has not suffered from the "Established Hood Curse" The commercial strip is thriving. It suffered a little when Roncesvalles was having the new streetcar tracks put in, but it’s back with a vengeance.
2. Cabbagetown - Some of the best Victorian architecture in the city is right here in the neighbourhood, and the residents have done an outstanding job of keeping the area looking good. Parliament Street has been a work in progress, but it is getting better. They have Riverdale Farm, and it's close to downtown.
3. Little Italy and Trinity Bellwoods - This established neighbourhood has not lost its cool factor. College Street and Queen West are two of the most walkable and eclectic streets in the city. Your houses will likely not be as huge here, but you will be part of one of the most distinct neighbourhoods in Canada.
Not all established neighbourhoods are created equal. It's important to pick wisely. Sure, they make for big mortgages, but if you have the money or you are looking at purchasing your next home, then treat yourself to a neighbourhood where you can flourish.