Thursday, 27 August 2015

Ranking Toronto: Does It Have an Impact?

Is it just me or has Toronto been ranked a lot lately? It seems that despite our serious transit misgivings and our back-from-the-brink city government, Toronto is a coveted city of sorts in international rankings. This year, it is also having a bit of a mini-moment with the PanAm Games and all of the infrastructure projects that were triggered from these Games. Sure, it's not as beautiful as San Francisco, and yes, it's not as centre-of-the-universe as New York, but damn, it sure is a livable place.

Don't believe me? Well, maybe you will believe The Economist that ranked Toronto #4 out of 140 cities for 2015. Such livability was based on stability, healthcare, culture & environment, and infrastructure. Of course, Canadian cities tend to do well in these liveable city  rankings. Vancouver was #3 and Calgary was #5.

If you don't like being #4, then you would be very proud that Toronto had finished #1 in the most livable cities in the world for 2015 according to the architecture and design trade publication Metropolis Magazine. This came from a team of so called urban experts who determine the ranking based on the best cities to live, work and play in.

Liveability is not the only ranking for Toronto in 2015. It ranks 8th out of 50 cities for safety. It ranks 20 out of 400 for cities with the best universities.

Back in 2014, we were #1 out of 50 cities as the most resilient city. Also back in 2014, Toronto was ranked as #10 for the world's most influential cities. In other words, Toronto, kills it when it comes to good governance, access to resources and its ability to change and cope with adverse issues.  It's not always number one, but we do seem to rise to the top when we stand beside other cities.

So, if you live in Toronto, this may make you feel a little proud, maybe even a little smug. All of this attention certainly reminds us that many people view this as one of the best cities in the world despite our winter, our ability to elect Rob Ford, and some poorly planned areas of the city.  Since this is primarily a real estate blog, these top rankings for Toronto do reflect on the real estate prices. If you live in a well ranked city, then it is going to be more expensive than ones that don't rank as well. These rankings do reflect a certain health of a city, and more importantly, the desirability to be here.

In the very simplest of terms, it says that people want to live here. It's not as desirable (or as expensive) as London, Paris, New York and San Francisco, but a city that scores so high on liveability is going to attract people, and make its neighbourhoods more competitive to buy property.  People want to live in liveable, safe, resilient cities. Cities like this make for diverse job options, creative economies and it makes a city more interesting - world renown film festivals, new restaurants opening daily, entertainment of many varieties, dessert festivals, Woofstock, gay sports leagues, Shakespeare in the Park, and the many, many languages spoken here.

It's not a perfect city by any stretch, and there is a long list of improvements that can be made including transit, affordable housing, better infrastructure and better governance. There is still a lot to do.  So, these rankings speak a little to Toronto's future. We are well set up. We are not the next Detroit, Athens or Moscow. Whether the future holds a recession or a price correction or none of these, Toronto will remain a desirable place to live for the immediate future, and this should make you sleep well at night if you live here.

Thursday, 20 August 2015

Why Condos Are Back

I often go on about how great I think houses are as an investment in Toronto. They are in limited supply in a growing city, and there are very few builders planning to build any more. Condos, on the other hand, are in great supply, particularly high rise condos. Many have even set off the alarm bells that they are in oversupply.

I am not here today to prattle on about how many condos are in Toronto. You can easily lift your head up downtown and take a 360 degree look around the city. It's changed. No doubt about that. Still, I am here today in praise of condos. At this particular moment in time, condos are not looking so bad - at least if their windows are not falling to the street below.

So, why now? What has changed?
Well, here's a few reasons.

1. There's less condo inventory than you think.  For years now, everyone has been worried about the unsold condo units in Toronto and the pace of new condo units added to the existing inventory. It's a pretty fair concern to have. A growing number of unsold units could indicate that there is too much supply and not enough demand. The truth is, according to Urbanization Inc., the number of unsold condos in Toronto have dropped 13% in the second quarter of this year compared to a year ago. Simply put, more condos were sold this year than last year. The number of unsold units sits at around 17,700 this year compared to the 20,800 unsold units from last year. This may be a sign that this worrisome clump of unsold condo units are actually being absorbed. Should we break out the party hats and uncork the champagne? That may be a bit hasty, but some may consider this a sign that the condo market has come back from the brink of oversupply. 2013 and 2014 where the two years to watch in terms of the most new condos hitting the market. We have passed those two years. From 2015 onwards there will be fewer new condos coming to market.

2. Affordability. Some may be wondering why there are so many people buying condos. Well, a lot of this would have to do with affordability. In other words, houses of all sorts and even lowrise condos have been performing incredibly well in terms of appreciation.  In the last few years, some of these have seem double digit increases making them more and more unaffordable to a larger number of people. So where do they turn? To high rise condos that are more affordable and have not been increasing in price the same way in the past five to seven years as their smaller cousins.

3. There are still investors out there. Though I do believe many of Toronto buyers are largely those who plan to live in their condo units, there are those investors out there who buy up our city's condo units. And in case you have not noticed, the Canadian dollar has been slip sliding away. It was not too long ago that we were on par with the U.S. Now that we're hovering around 75 cents to the U.S. dollar. U.S. investors appear more keen to buy here now for the simple fact that it has become a whole lot cheaper for them.

4. Condos are in awesome neighbourhoods.  For those who truly embrace downtown life, then condos are a reasonable option. A house in a central and established areas would most often clear a million dollars provided it didn't need to be gutted. For some, an affordable house is too far away. These days, if you like to walk to work and to the gym and be near a subway, condos are the best bet.

5. Lifestyles are a changing'. Travel seems to be a high priority for a lot of people these days, especially those who don't have kids or your kids have grown up and left the nest. These folks want to be able to leave on a European or Pan-Asian adventure for months at a time or spend several weeks up at the cottage. Houses are too much work and maintenance. Condos supply the security and the lock-it-and-leave-it option for extended periods of time.

Now, to be clear, I don't want to suggest that there is nothing that could throw the price appreciation on condos off their course. There are. Rates could go up by leaps and bounds. There could be external factors - another world financial crisis, for example. There could be an element of fear that comes into the Toronto market as a whole that could bring prices down. My point here is to say that the oversupply argument that so many have been using for the reason that condos will crash does not seem to be taking hold. The panic over the oversupply of condos may not hold as much bite as many have anticipated. Once again, the art of predicting when a real estate market will change has proved to be tough to do.