Thursday, 27 November 2014

Hamilton: A Life Line for Real Estate Refugees?

Because I focus largely on emerging Toronto neighbourhoods in my real estate career, I am often looking for the signs of a neighbourhood that will be ready to appreciate at a quicker rate than most, and transform into a pleasant neighbourhood where my clients would like to live.

Lately, it seems that Hamilton has garnered quite a bit of buzz. It is not exactly an emerging neighbourhood in Toronto, but I am often asked about my thoughts about Hamilton. Many buyers, whether they are first time buyers or buyers moving up, will know a friend or a colleague who has grown depressed with Toronto real estate prices and has bought a large Victorian house in Hamilton for the cost of a bachelor condo unit in Toronto. That gets many thinking:  Is it worth it to move to Hamilton? Could you acutally live in Hamilton? Would it be a wise investment?

I'm happy that Hamilton is finally having its moment. It's well deserved! Especially since I have been hearing that Hamilton will bounce back for years now, but there has been little sign of it until recently. Still,  there is a lot of optimism about the city right now, despite its rust belt past and decade after decade of decline since the de-industrialization of the Western world. These days, it has the fastest growing economy in Ontario. It is ranked as one of the best cities to invest in in Canada. The Real Estate Investment Network ranked it third after resource lucky Calgary and Edmonton.  It's been dubbed the "comback kid" of Canadian cities. And it has one of the best markers of any emerging neighbourhood or city: It is attracting artists. So much so that the James Street art crawl, or "supercrawl" as the locals call it,  brings in 1000 to 1500 folks to the event each time. It's no Nuit Blanche, but it's homegrown and it's growing.

Of course, we can't let our optimism get in the way of the reality here. Hamilton has a familiar rust belt tale, similar to many American cities like Detroit, Buffalo or Pittsburg. In the past fifty years the middle class and wealthy have traditionally left downtown for the hill or the suburbs or another place to live, and what's left behind is a lot of homelessness, drug addiction and mental health issues.  We cannot deny that Hamilton, once the booming steel town of the first half of the 20th century, fell on very tough times in the second half. You can still drive down sections of some streets like Barton and see boarded up street-front windows or mostly dismal, sad businesses that are on their last leg .

During this long period of decline from the 1950s until recently, Hamilton largely avoided what happened to prosperous, growing cities during that time. They did not tear down their historic architecture and build a large number of ugly, modern buildings and sprawling highways through downtown. The grim and poorly planned architecture of the 60s, 70s and 80s mostly bypassed this city, and what's left is a city full of incredible historic architecture from its downtown to the Victorian and Edwardian homes around the city. So, unlike suburban cities like Mississauga or Oshawa that has small historic areas, lots of highways and mostly sprawling, low density suburban housing, Hamilton has a dense, urban downtown core and blocks and blocks of red-bricked, historic homes.  It is ideal for the kind of neighbourhoods most buyers are looking for these days in Toronto. It is the Riverdale and High Park of 30 years ago.

Strangely, because Hamilton did not grow during an ugly era of architecture, by today's standards, it has become more appealing now. The old neighbourhoods are still in tact.  People want walkable neighbourhoods, local businesses, and community events. Most suburban areas don't offer this.  Hamilton has this, and more of it on the way as the downtown comes back from the brink.

Even though some credit can be given to the city of Hamilton for making the city appealing to artists and new businesses away from steel, Hamilton's success has a lot to do with the region it resides in. More and more, we will see the area stretching from Oshawa to Hamilton function as a more integrated region. In the future, it should have better and more integrated transit service between all areas. That means if you work in Toronto, Hamilton will function as a kind of urban suburb with the feel of a city but a GO train voyage away from Toronto. 

Within that context, I can safely say that Hamilton is one of Greater Toronto's most affordable emerging neighbourhood on it's western borders. I have taken a keen interest in this city and have worked on real estate transactions here from clients who want more space, historic architecture and lower prices.  More and more, I am asked about this city.  More and more, I am learning what neighbourhoods in Hamilton are worth considering, and which ones you may want to take a pass.

Hamilton does come at a price. If you do work in the city, it's a long commute. It will take up a chunk of your day. If you live in Toronto already, most of your friends and family live here too. But on real estate prices alone, you will be amazed at the kind of home you are able to afford, even in a more challenging price range. And that's what the draw is. There are many Toronto emerging neighbourhoods I would recommend as great areas to get in and as a wise place to invest, but Hamilton is in a category of its own.

As a city, it has a long way to go, but I believe it is heading in the right direction fast. Like Detroit and Pittsburg, Hamilton is finally shedding it's rusty past, but most importantly, Hamilton is not just a place where other Hamiltonians go to buy homes, but a place where Torontonians will increasingly go to find affordable homes. Unlike Mississauga, Brampton or the Durham region, Hamilton has not been a victim of suburban sprawl. It has a growing art scene, and some of the most affordable historic homes in an urban centre in the Golden Horseshoe. If this is something you can appreciate, you may want to consider an exploratory visit.

Thursday, 20 November 2014

Let the Light Shine In?

People, like plants, need light. I know I feel a little light-deprived in the depths of winter despite my Vitamin D and plug-in light enhancer that shines on my face for an hour each day during the lean months of limited sun.  This desire for light is often expressed when condo shoppers go shopping for condos as well. Bright, light-infused condos are appealing. Dark ones are not. Makes sense.

The thing is, this desire for light, in the form of wall-to-wall, floor-to-ceiling condos is great for developers too. It is a lot less expensive to build a condo with a glass skin than a precast or brick skin with windows. The materials cost less and the time to put up such a condo happens faster and, in turn, costs less for developers.

There is a bit of a hitch, though, for window-clad condos. They may lead to buyers paying more for their beautiful, sun-filled view down the road. Condos whose skins are made almost exclusively of glass will need upkeep sooner than a condo mostly made of precast or brick, and that upkeep may be fairly expensive. Within twenty to twenty-five years, most of the glass on glass condos will need to be replaced, according to many engineers here in Toronto. The argon gas between the panes of glass may leak and fog up. To replace all of the glass in all of a given condo's units will lead to an increase in maintenance fees or a special assessment on top of the maintenance fees to pay for this expensive replacement.

On top of this potential expense, there is also some concern about energy efficiency with all glass-clad condos. So much so that the province of Ontario has adjusted its building code. Because a unit in a glass-clad condo is also not terribly energy efficient, the province has stepped in to make stricter building codes where only 40% of the condo's skin can be made up of glass. When the developers caught wind of this, they rushed in to apply for building permits for all glass buildings before the deadline from January of last year. So, you will see condos in the city of Toronto that are currently under construction that will have all glass skins. But in the future, this will be no longer allowed. In a sense, the older condos of yesteryear that were not all floor-to-ceiling glass but had some windows mixed with brick exteriors and cement exteriors, will be coming back. What is old will be  new again, with less light.

So, with the options to buy a glass-clad condo unit, an older condo with less light, or a future condo with less light, the question becomes: Is it smarter to buy a condo that is not all glass?

From an energy saving perspective and in terms of keeping your maintenance fees (and special assessments) of the future in check, the answer is a firm yes. There may be some creative solutions in the future to deal with all the condos that will need new windows, but for now, it is a cost that will be expensive.

Still, the new condo of the future is not the perfect solution. They will cost more to build, and the developers will likely pass on the cost to the buyers. You will get what you pay for. You are more likely to have a sturdy building that is less likely to have issues with its windows. Your energy bills will be appealing so that you will pay less to cool and heat your home.  You will, however, have less light. 

So, with that said, I encourage all condo purchasers, current and future, to take the path they feel is most suited for them. Just make sure you know the facts before you move ahead. 

Thursday, 13 November 2014

The Winners and Losers of Toronto's Real Estate Future

Not very long ago, the idea of urbanization was considered a "trend".  It was like no one was really sure whether this idea of returning to the city was just a temporary lapse in judgement. It was as if there was a reluctance, a kind of sense that everyone would grow leery of this trend, and go back to the suburbs or at least not obsess on urban living so much.

The truth is, the return to Toronto, and in most cities in North America,  is not a trend. It's a complete paradigm shift. Many see the price of Toronto houses as sky high, and historically speaking, they are. They anticipate a time when the prices will come down. And they may, but only temporarily. The momentum has grown too much.

The boomers may have been a big part of the exodus to the suburbs in the 60s, but the millennials, the next largest demographic group, seem to be determined to be in the city. It's true that the priorities of the millennials will change for those of them who want to start a family. We do not yet know if they will opt for more space outside of the city or make a small space work inside the city.

In really doesn't matter though. The trends are pointing to more than just going where the big yards are. It is mostly about lifestyle. People want to live in the city. They don't want to commute long distances to work. They crave communities within the city.

Now, I don't want to suggest that Toronto is a kind of Utopia. In the future, houses in the city will come at a premium price. It won't be easy to afford. Only the wealthy will be living in big houses. Condos close to the city, ideally smaller, boutique ones, will be in demand. The pressure to live in the city will change how we live here in many ways. There will be more condos, more density, more businesses, and hopefully more transit. Still, buyers will need to be creative. I believe you will see an increase of co-ownership of homes. Two couples, for example, who may buy a duplex and live in different units. I'm already seeing this kind of arrangement popping up more and more. In the future it will be even more common.

Of course, I don't want to imply that everywhere outside of Toronto in the GTA and beyond will fail, because every one wants to move here. I will say that those areas that have suffered from sprawl of the past thirty years will likely go into decline. Already many businesses are leaving the areas of sprawl for well-planned parts of the city that are better integrated into neighbourhoods.

Other parts of the GTA and beyond will prosper, especially if they have their own downtown hubs made up of home-grown businesses and well-planned streets and transit. I can think of places like Port Credit, Peterborough, Guelph, and Hamilton.

Hamilton has been in decline for so many years it has literally bypassed the urban sprawl of the past thirty years, and now has a renaissance under way. It still has plenty of room for improvement, but with the new GO station to be built, many people will appreciate this alternative to Toronto since Toronto can be easily accessed from Hamilton, and the Hamilton downtown itself is becoming a lot more appealing.

So, for those of you waiting around for those house prices of 1995 or 2000 or even 2012, I'd say you are out of luck. Yes, real estate is cyclical. Prices do rise and fall, but over the long term, Toronto, and many small cities and communities around Toronto will continue to grow and become more attractive places to live. Some suburbs will fail. Some will not. The return to the city is happening all over the world. It's no longer a trend but a fact of life.  Accept and carry on.

Thursday, 6 November 2014

To Gut or Not To Gut

There was a time, not long ago, where dumpy old houses that needed to be gutted were a deal. No one besides contractors would go near them. But then along came HGTV and everyone saw that it was possible to buy a dumpy house, renovate it, and then sell if for more. Flipping properties became a bit of a sport for awhile, but the success of flipping houses brought out more flippers, and now I find that the dumpy houses in a hot neighbourhood can be quite expensive, and not always worth the money. Many of the Toronto public housing that have come to market these past few years have received multiple offers. They have limited marketing, and the houses have not had any care in decades. Still, the bidders come. So, let me be clear. There are no guaranteed bargains here any more. It can happen! But don't assume.

Of course, there is an upside to doing it yourself. You can do every thing right and to the specifications you like. Sometimes, buyers have certain expectations of a fully renovated house. If the house looks amazing, it is often assumed that all of the stuff behind the walls is in good working order like the plumbing and the wiring. That's not always the case. The benefit of gutting a house: You see the house stripped down and there are no secrets hiding behind the walls.

Buying a renovated home has its perks though. The biggest one: You don't have to do any of the renovation work, and you simply move in and enjoy! Of course, the downside, if you find the prettiest house on the block, you will have some serious competition. Though gut-worthy house are not the deal they used to be, renovated houses are like catnip for most buyers. The bidding wars can be tougher here, but if you are able acquire the house, it is easier than the gut-job home.  You won't have to spend a year or more pulled away from your career to tend to a renovation or to apply for the necessary permits. I would say most people do choose this easier route. And who can blame them, really.

Still, there are benefits to both.  if you are the kind of person who likes a project and dreams of putting your mark on you home, then I say, "Get your gut on!" Just make sure you are fully aware of the time and cash commitment will be required. If you prefer the thing done, then that's okay too. Just don't assume it will be perfect. All old houses have their issues, even after renovations.