Thursday, 30 July 2015

For Real Real Estate Stats

This time I'm not going to give you my opinion on its own, but instead I'm going to offer up some interesting real estate facts brought to you mostly by the folks at the Toronto Real Estate Board and the Canadian Real Estate Board. Then I may sprinkle my opinion around these facts.

There's been a lot of chatter about Toronto's rising prices. So, let's a have a good look at those numbers. I do realize that statistics can be as interpretive as any thing else, but this does offer us some perspective.

Prices vary widely form neighbourhood to neighbourhood, even house to house on the same street.  It really does appear that Toronto has two different markets occurring at the same time. The market for houses and the market for condos. Still, for all types of property combined, including condos and houses alike, there  has been a 9.34% increase in the value of all properties from June 2014 to June 2015 in Toronto. A year ago in June, the average property was $618,526. In June of 2015, it was up to $682,264. If we break down these statistics by housing type, Toronto detached houses in June of 2014 would cost on average $921,005 compared to June 2015, which would average $1,051,912. That means detached homes were up 12. 44% from June to June. Condo apartments, by comparison, were 6.56% from June 2014 to June 2015, one of the better condo performances of the past few years.

In the 2nd quarter of 2015, the Toronto neighbourhood Mount Dennis around Eglinton and Keele was averaging a price of $326,677 for all property types including condos and houses sold, though this area is mostly houses. On the other side of the spectrum, Forrest Hill South was averaging $1,978,424. This will give you some idea of the range of price points between Toronto neighbourhoods. I'm sure it's not a shock to most people who knows this city that neighbourhood stats can vary widely. This is especially true in Toronto neighbourhoods that consist overwhelmingly of condos. Take, for example, Toronto's most condo laden neighbourhood, Waterfront Communites, where the average price lands at  $474,741 for a property in June 2015. The giant Donald Trump style mansions in Forrest Hill compared to 450 sq ft condos in the Waterfront Communities hardly seems like a fair comparison.

Like all stats, you need a large pool of data to find accurate results. So, take these stats withs a dash of skepticism. Most neighbourhoods don't have enough sales to offer consistent results. Also, some neighbourhoods have a culture of listing low to trigger a bidding war. With that said, here are the top neighbourhood performers with regard to the best sale price to list price for the second quarter of 2015:
     1. Player Estates with 108.9% of list price to sales price
     2. Danforth Village East York 108.5% of list price to sales price
     3. Oakwood Vaughan 108.2% of list price to sales price

 The national average for home prices rose 9.6% from year over year in real estate. Seems impressive, but as we all know, not all cities are firing off in the same way. If you take out Vancouver and Toronto from these stats, the national price average would be up 3.1%.

I agree. Toronto is an expensive place to buy real estate. But let's not think that Toronto and Vancouver are working with the same price points. As mentioned above, the average price for a detached home in Toronto is just over a million. Wow, I know! Still, that would seem like a bargain out west. The average detached house within the city of Vancouver as of May 2015  averages 2.23 million.

Should we expect these kind of results forever so that first-time buyers can never afford anything, and any one who bought a house 10 years ago will be a multi-millionaire? No. That would be nuts. Let's not confuse a good year for the norm. Still, Toronto is morphing into something quite different than it has ever been. So, the same real estate rules of the past won't always apply. Neighbourhoods will transform, and space will be at at premium.

Wednesday, 22 July 2015

Is 2015 the last year for real estate growth in Toronto?

I've just read it again. The "this is the last year" thing.  This time I read it in the Toronto Star, but it could have come from anywhere, beit a national newspaper or that guy at the water cooler who thinks he's smarter than every one else.  If you are not familiar with this phrase and how it pertains to real estate, then let me explain.  "This is the last year" goes something like this: Home prices will continue to rise for 2015 but will stabilize in 2016. 2015 will be the last year of significant price growth in real estate. Fair enough. That seems reasonable to me. The housing market may very well unfold this way.  It would make sense that after a sustained period of growth, prices would stabilize, or as some may believe, plummet from the sky like a plane with too many birds in its propellers.

The thing about the "last year" thing, it's been something I have been hearing every year for over ten years. When I bought my first place in 2004, I read in the Globe and Mail that that would be the last year of the Toronto's great real estate run. At the time, it made sense. Interest rates were going up. It looked like I bought at the top of the market. I didn't lose any sleep over it, but it worried me. Then, as you know, the next year prices still went up. My sister bought her first place in 2006. I remember my brother-in-law and his father, two great guys who are deeply plugged in to the world of finance telling my sister to hold off on her Toronto home purchase. Homes were at their all time high and interest rates will not go any lower. They could not believe that houses cost $450K. Outrageous! My sister still needed a house. She was about to get married and have a kid. There was no waiting. Again, there was no real estate change the next year, prices went up.

In 2008, this had to be the year of the collapse. The sky looked like it was truly falling, but after short blip of a downturn, the market was going up again. Much of the rest of the world certainly saw prices fall in real estate, but not Canada. Perhaps it was delayed  here. In 2009, 2010, basically every year up to and including 2015, I have heard or read that real estate prices would stabilize or collapse in Toronto in the next year from Maclean's Magazine, Toronto Life, the IMF, German Banks, American think tanks, Garth Turner, and crabby people who comment at the end of real estate articles. But it didn't. I'm not saying in can't, but it didn't happen every time these so called experts declared it would.

Here is my take on this "last year" approach: It's an easy thing to say. In fact, I think I may have said it myself a a few times. It becomes hard to believe that prices will continue to go up year over year because it does not seem sustainable. If you look a year ahead, you would assume it would slow down.

The truth is that no one really knows when the real estate market will slow down. It's not a science. There is also the possibility that there has been a fundamental shift in Toronto with how we spend our money on real estate. It's true that low interest rates have made prices much higher, but there is a change in Toronto. We see much more foreign investment who prefer to buy in a "stable" real estate market. This sends prices up. We see a growing city that does not build any more houses making houses a very desirable commodity. We see that people desire to live in a city centre and not the suburbs any more. The opposite was true 20-30 years ago. Now, the city is more and more appealing, but there's no room to expand.

I don't believe Toronto home prices can continue their huge climb as they have been for the past several years, particularly houses, because condos are more reasonably priced and have seen smaller increases.  Still, I do think there's has been a shift in how we live in this city. People pay more for less space. This is why the parks are now overflowing with people.

Will 2015 be the last year of growth for Toronto properties? Maybe, maybe not. But I guarantee if it isn't, the all the real estate predictors will be telling us that 2016 will be the very last year for growth until 2017 comes along.

Thursday, 16 July 2015

Could This Recession Lead to Higher Home Prices in Toronto?

Technically speaking, Canada is in a mild recession. We're not talking 2008 here. The money systems of the world are not at stake. It's more of an embarrassing surprise, like discovering you had your fly open all day. You may not have been truly aware that something was happening until someone presents the data.

To believe that Canada is in a recession right now, may make you a traditionalist of sorts. If you define a recession as two consecutive quarters of negative growth, then yes, we are in a recession. Some consider a recession to be a pronounced negative change in the economy for a sustained period of time. And if you accept that definition of a recession, then we're likely not it one since the change we are seeing is not so pronounced. So, for the sake of argument, let's define it the first, traditional way - a recession is two consecutive quarters of negative growth. I think this may be how the Federal Government is looking at it.

Usually, when the word "recession" is talked about, mediated and printed enough times, home prices start to fall. People may lose their jobs or fear they will lose their jobs. Consumer spending slows down, unemployment goes up, and Canadians feel they need to be more careful with their money.

I don't think that's going to be the case in this so called recession from the perspective of Toronto. In fact, this recession may cause home prices in Toronto to go up even more.

How you ask? Doesn't this defy the logic of what recessions do? Well, I think there are some good reasons why this recession would put upward pressure on property prices, instead of downward.

1.  LOWER INTEREST RATES: When the fear of a recession starts, and folks start to feel more careful with their money, the government tries to stimulate their desire to buy. The Canadian government has lowered interest rates yet again to help boost us out of the recession. So, for those buyers who are looking now, they will be paying less in interest, and they will be able to afford even more.  This leads to more buying and more competition with buying houses.

Alberta and its abundant resources seems to be the biggest reason why we're heading into a recession. And prices of homes have fallen there. Oil and other resources in Alberta and in other provinces like Saskatchewan and Newfoundland are not as successful as its been in the past few years. Though there is a good possibility that Alberta will come roaring back to life, Ontario does not seem to be as damaged by the resource slump. If Alberta continues to slump, there is a good chance we may see some net migration out of Alberta to Ontario just like in 1986 to 1988. Back then, when the oil prices fell, many Albertans moved to Ontario to send home prices higher here in central Canada. If Albertans return again, we'll see more competition with new migrants from the prairies competing for our housing stock.

Lastly, the falling dollar caused largely by falling oil prices in 2015 have made manufacturing-loving Ontario a lot more appealing. Now, businesses in Ontario and BC could sell their products abroad more cheaply. Now that the Feds have lowered our interest rates, the dollar will go down in value again. It makes for a more expensive trip to Hawaii or New York, but it makes the Ontario economy happy. It will also make foreign investors more interested in buying real estate in Canada while the dollar is so cheap.

So yes, we may be technically in a recession, but this recession is different from the last one. If you live in Toronto and most of Ontario, it will trigger more demand for housing and higher prices instead of the usual sad slip in prices. This may be a good or a bad thing, depending on how you look at it. Some feel consumer debt is already too high in this country. Adding to it could only put more stress on the debt levels of Canadians. If you are a buyer, it's both a good and bad thing. You will have less interest on your mortgage and you may be able to qualify for a higher amount, but home prices will be more competitive and higher. For sellers and homeowners, it will be good. Sellers will have a better chance of making more money off of their assets and homeowners will, once again, see gains in the value of their home and their net worth.

Friday, 10 July 2015


This time of year really brings out the dreamer in me. Summer and the city could be a lot of fun. Lots of festivals, parades, and this year the Pan Am Games. Still, summer is the one season where I just want to give nature a big hug. So, as the temps start to top 20, I start dreaming of owning a cottage or as some call it, a cabin. Yes, I know these projects could be a lot of work, and yes, reality tells me that I don't have the summers off, but a guy can dare to dream of spending more time throwing sticks off the dock for my dog to go fetch.

During a distracted moment, I often find myself on the MLS drifting away from Toronto properties to explore properties on a lake. I scribble down calculations on how to make the financing of this work. That's where it usually stops. At this point, I just can't see myself spending enough time there. Not yet any way.

Still, if someone is looking for a cottage, seriously or not, there needs to be a reality check. Cottages are not the shacks you pick up for next to nothing because they are far from the city and there's no heating. It hasn't been like that for awhile. Also, with Canada's falling dollar, and our international reputation as a natural wonder, foreign investors are setting their sites on Canadian vacation property. In fact, a report from Christie's  this year named Muskoka the second hottest luxury property in the world behind France's Cote D'Azur. I'm not so sure about that, but it's not hard to find multi-million dollar properties in Muskoka, especially with foreign vacationers coming in and buying up recreational properties with the dropping Canadian dollar.

It's not just the Muskoka's though. The Kawartha's has seen the median value for a home go up 28% from last year.  Cottage country is booming. And if you're not a multi-millionaire, buying one that is closer to a starter cottage may require you change your search strategy.

Now this rant is not meant to squash your cottage dreams. If you happen to be part of the 1%, then you'll be in good company up in Muskoka. There is a reason it is so desirable. It's beautiful -deep, dark lakes, and dramatic, rocky cliffs.

Of course, if you are part of the 99%, there are other options. Very trendy these days is Prince Edward County. Here you'll find wineries, star chefs and a growing number of millionaires. My suggestions: Buy here before the millionaires take over. It's only 2 hours away ( on a good traffic day). So, not that bad by Toronto cottage standards.  You may find a cottage on Lake Ontario which can be chilly, but the perks are there including Sandbanks Provincial Park which looks like it's a stand in for Cape Cod.

Still want cheaper?  Then you're best bet in to head to Lake Erie where lakefront cottage drop in price. Lake Erie is cold too, and you won't find the hipster factor here ( for better or for worst) that you will in Prince Edward County. Still, if a private getaway is what your crave, then maybe start exploring this side of the province.

If you really want affordable, then drive, baby, drive! Around Sudbury you'll find prices that will put a big smile on your face. The distance won't, but it's pretty and northern. The theory here is like finding a house in Toronto. Drive until you qualify. It's just on a much larger scale.

If you don't want to drive too far and you want cheap, then you may have to give up the lake. You could find a nice farmhouse or even a property with lake access that is not on a lake for a fraction of the cost. It can often be half the price of lake front cottages.

In the end, looking for a cottage is similar to looking for a condo or a house in the city. First, figure out what you can afford, but remember that banks do want 35% or more down to buy a vacation property, more than your first condo or house. Second, make a list of your must-haves. And lastly, know what you are able to give up. Could you drive further out? Do you need to be right on the water? Could you live somewhere less cool?

 If your answer is no to all of these, and you're not going up every weekend, my last suggestion would be to find someone with whom you could co-buy that snazzy, dream cottage on the lake. Just make sure they can afford it and they are as clean and cottage proud as you would be.