Toronto condo sales slowing

While I write this I am listening to "Eye of the Tiger" by the band Survivor... more commonly known as the song during Rocky Balboa's infamous montage videos...



Oddly enough I find it metaphorical for Toronto's slumping condominium market which seems to be gearing down as sales start to slow.

New condo sales have slumped 8% to 4,991 sales in the second quarter of 2010, compared with 5,415 in the first quarter. This is the first time since 1994 that 2nd quarter sales have slumped compared to the first.

“We were expecting sales to be stronger in the second quarter, but it looks like the market is softening,” says Ben Myers, the VP of condo market research firm Urbanation Inc. Urbanation expects new condo sales to continue to slump for the rest of 2010.

Compared to 2009 sales are down dramatically. (Although it should be noted 2009 was a record year for the 1st and 4th quarters with respect to condo sales.)

However there is another problem... the market is becoming flooded with condos. Another 12,000 condo completions are expected by the end of 2010. There will be roughly an extra 2,000 condos that will go unsold.

“That’s an absolutely huge number and a lot of product coming on to the market all at once,” says Myers.

Furthermore the condos that are being purchased are mostly by investors and speculators who are hoping to flip them for a profit once the condo is finished, which means the market of new condos will be even more flooded.

Toronto has 272 condo projects currently active, all looking for buyers in Toronto's real estate market. Except these buyers are being cautious and looking for deals. Another 20 new condo projects are expected during the 3rd quarter, which will flood the market even more.

The problem however is that with so many condo projects and not enough buyers many projects end up with delayed completions because the money isn't flowing in fast enough.

Anybody investing in a new condo now should expect deflation of the value, not flipping it for more. The average price for a new condo in Toronto is $529 per square foot. A few years ago it was $639 per square foot, which shows prices are coming down dramatically.

In contrast its much cheaper to buy an older condo in Toronto. A mere $369 per square foot. The resale market is very strong right now, with the 2nd quarter of 2010 posting record sales of 5,076.

My advice for people buying condos? Keep your chin up and keep trying to find a deal. With the market slumping now is a good time to buy a condo for less. Keep looking until you find a deal which is perfect.

"Let me tell you something you already know. The world ain't all sunshine and rainbows. It is a very mean and nasty place and it will beat you to your knees and keep you there permanently if you let it. You, me, or nobody is gonna hit as hard as life. But it ain't how hard you hit; it's about how hard you can get hit, and keep moving forward. How much you can take, and keep moving forward. That's how winning is done. Now, if you know what you're worth, then go out and get what you're worth. But you gotta be willing to take the hit, and not pointing fingers saying you ain't where you are because of him, or her, or anybody. Cowards do that and that ain't you. You're better than that!" - Rocky Balboa.

CREA shuts down 1 cent MLS listings

In May Dawson Pereira launched a brokerage service touting “one cent” listings on the Multiple Listing Service. A former ReMax agent he was charging $600 to list property in the database, but if the home was sold within 10 days he refunded $599.99.

Excited people looking to save on the costs of listing in the MLS database started pouring in and his business was booming.

But on July 23rd the Toronto Real Estate Board and the Canadian Real Estate Association shut him down, saying he was in violation of regulations.

“I didn’t realize I was breaking any rules. I was just offering people an alternative, but they gave me a major hard time,” says Pereira. He was just one of many discount companies because CREA was accused of restricting competition by the federal Competition Bureau.

Except shutting him down implies they're just doing more of the same: Restricting competition. Their regulations appear to have been designed to prevent competition.

One of the regulations he violated was listing clients' contact info on the MLS website, allowing buyers to contact sellers directly without going through an agent... this is a big no-no according to CREA who makes their money off agent fees.

“They basically want everyone to contact an agent first so they can make their commission, but that doesn’t save the consumer anything,” said Pereira, who has been forced to terminate all listings and give refunds to existing customers.

The Competition Bureau this year managed to CREA to change some of its rules, but one of the rules CREA refused to change was regarding the seller's contact info appearing on the MLS websites.

That one regulation is now the subject of a court case between the Competition Commissioner Melanie Aitken and CREA.

“CREA’s rules were amended to clarify that a seller’s contact information can be included in the Realtor only (private) remarks section of a listing,” says CREA lawyer Catherine McKenna. “This means that a Realtor may direct buyers’ agents to contact the seller directly for appointments if the seller instructs the Realtor to this effect in writing.”

That means the seller’s name is still allowed on the MLS, but in a section accessible only to agents. (Which means CREA still gets a commission.)

This doesn't help sellers at all, says Georgetown resident David Fraser. He signed up with Pereira. Fraser says he could have saved $15,000+ in commissions on his home which was listed for $337,000. “The MLS has a lot more reach, but it doesn’t do you any good if no one can contact you directly,” says Fraser.

Pereira is also in trouble with CREA for using their MLS and REALTOR trademarks incorrectly. His websites 1centMLSlisting.com and savetherealtorfees.com contained the words MLS and Realtor, but did not include their logos. Apparently they're also upset because the word "Realtor" appears in lower case in his domain name.

Pereira thinks the so-called changes in the real estate business may be an illusion. I agree, they made a few minor changes to keep the Competition Bureau happy, but they're still restricting the competition.

Its a bit like slowing down 10 kmph while speeding, but you're still doing 110 kmph anyway.

If sellers can save money by avoiding realtor fees and selling privately I say more power to them. There is no law saying they have to go through a realtor. Only CREA regulations require that and those regulations stifle competition in what is essentially a monopoly for Canadian home listings.

Home sales down 37% by mid July

According to the Toronto Real Estate Board (TREB) / Greater Toronto Realtors only 2,790 sales were made during the first two weeks of July 2010. For the Toronto real estate market that represents a 37% drop compared to the same time frame in July 2009. New listings also were down 8%.

This is to be a little expected however. Last year saw a bumper crop of home sales.

“Last summer existing home sales spiked well above the expected long-term trend. Sales were also unseasonably high during the first four months of this year,” says TREB President Bill Johnston. “Transactions will be down year over - year in the second half of 2010 as the level of sales balances out.”

“With year-to-date sales up by more than 18 per cent compared to last year, we continue to look forward to one of the best years on record under the current TREB trading area,” says Bill.

The average price for July mid-month transactions was $427,931 – up 8% from the same time period in 2009.

Jason Mercer, TREB’s Senior Manager of Market Analysis, believes that there will plenty of sales to maintain the sustainability of price growth.

But what if he's wrong and prices start to plummet?

Retroactive property tax bills

New homeowners in Etobicoke are being struck by multiple retroactive property tax bills for 2008, 2009 and 2010... and they have to be paid in two installments in September and October.

Depending on the size of a home in Etobicoke homeowners can expect the combined three tax bills to total between $2,100 for a small bungalow and $60,000 for a multi-million-dollar mansion.

Having to find such large amounts in a short time period has angered many homeowners, especially since this isn't the fault of the homeowners in the first place. This is the fault of lazy, slow-moving bureaucracy.

Property taxes in Ontario are assessed by MPAC (Municipal Property Assessment Corporation) and are usually assessed in the current year and going back up to two years. Thus the longest any property tax can be retroactive is three years. When that happens, homeowners get an extra hefty bill to pay in a short amount of time. But it is supposed to be extremely rare!

Normally assessment is supposed to happen within the first 6 months of new construction.

What has happened here is because of a shortage of inspectors and rampant growth of new homes in the Etobicoke region there has become a huge backlog of new homes that don't get assessed for 2 or 3 years after being built. (Or rebuilt in the case of fire or there was something wrong with the foundation forcing the house to be torn down and rebuilt.)

This year however instead of 1 or 2 homes being charged retroactive tax bills going back three years, there are literally hundreds of new homeowners who are getting whacked over the head by the tax truncheon. MPAC is refusing to give exact numbers, but the number of complaints continue to pile up.

Worse, if your house was rebuilt and it was originally valued at say $450,000 in 2007 and the new house is only worth $250,000 you still have to pay retroactive taxes on the house as if it was still worth $450,000.

More than 12,300 supplementary tax bills were mailed in the last cycle of land taxes in Etobicoke, mostly representing back land taxes for 2 years. There are 3 to 4 cycles of land taxes per year.

So yeah. That has just scared me away from buying a home in Etobicoke. If they can't send tax bills out on time, just imagine what else is wrong with the system out there.

Leaside, a dream neighbourhood in Toronto

The Bank of Canada has raised interest rates again, making it more difficult for people to get a mortgage at an affordable rate. The key overnight lending rate has been raised from 0.5% to 0.75%.

With that in mind it makes sense to me that people might want to consider buying a house in a region of Toronto which is often overlooked.

Leaside is a small but quiet neighbourhood right in the middle of Toronto. Most of the homes in Leaside are traditional detached two-storey designs dating from the 1930s and 1940s, all-brick constructed, with distinctive intermixing of cut stone around entryways and front bay windows. Homes in Leaside often have exterior details such as leaded glass windows, arched / peaked entrances and broad wooden door casings. Its a level of artistry that hasn't been seen in decades and for someone like myself who enjoys older architecture, a pleasure. Inside you will typically see traditional wooden mouldings, baseboards, and floors... the type of things you'd see when visiting your grandparents.

Or in my case, my parents' farm... or the 1920s apartment building I currently live in.

I look at the architecture of some of the homes in Leaside and I just drool. They're "perfect", almost idealized, like a Carl Schaefer painting.

Not all the homes in Leaside are what I'd call affordable. Some of the really nice homes are $900,000 or more. Depending on where you look however there are more economical alternatives. South Leaside has a variety of semis and bungalows with price ranges hovering around $500,000.

The reason for this is because Leaside is a good place for anyone in the upper middle-class wage bracket. So that means people like myself probably couldn't afford to live there... but I can still dream right?

Sure, its not the multi-million dollar homes of Rosedale... and its not one of the soon-to-be-a-slum condos by the waterfront either. Its just a nice quiet neighbourhood with the following perks:

#1. Conveniently close to both Yonge Street and the Don Valley Parkway. Commute time to downtown is 15-30 minutes.

#2. Cycling distance from downtown. In fact there's plenty of bicycle lanes and trails in the surrounding region. (As a bicycle mechanic, I appreciate these things.)

#3. Abundant local parkland. Serena Gundy Park, David A. Balfour Park, Moore Park Ravine, Flemingdon Park, Sunnybrook Park, Blythwood Ravine, Sherwood Park.

#4. Lots of local schools for children and teens. Maurice Cody School, Blythwood School, Bessborough Drive School, Rolph Road School, Leaside High School, Northern Secondary School, Marshall McLuhan Secondary, North Toronto CI, Don Mills CI.

#5. Oh and its only a short bicycle ride to the Ontario Science Centre, a huge chunk of parkland, fishing in the Don River and the archery range just south of the OSC (as someone who enjoys the sport of archery I can appreciate that).

The area is named after the Lea family from Lancashire, England who arrived in Canada in 1819. John and Mary Lea later built the first brick house in York township in 1829. In 1841 their son William later bought additional land and built an octagonal home which he dubbed "Leaside". The house is no longer there, but its location was where the Leaside Memorial Gardens is now.

I did manage to find a painting of the octagonal home however, shown here.

A lot has changed since Leaside was once prime farmland. Now there's three subway stations nearby, Eglinton, Davisville and Bayview, a plethora of restaurants, boutiques and a combination of small "family businesses" and larger retail stores.

The history of the area includes:

The Leaside Junction Station, one of the busiest train stations and train yards in Toronto from 1894 to 1969.

The Leaside Viaduct, a bridge built in 1927 across the Don Valley.

Residential construction in Leaside didn't begin until the 1930s. In 1967 Leaside became part of East York and eventualled was amalgamated with Toronto in 1997. The area is popular with families, since it has such quiet streets, very little crime and a large number of schools / parkland. Many parents consider it to be one of the ideal locations in Toronto to raise kids.

In the 1990s a number of "exclusive" condos and townhouses were built in the region, attracting more families to the area. Many of Leaside's local shops are geared towards children and mothers, although the area also boasts antique shops, specialty stores and pubs. There's also libraries, community centres, indoor ice arena and an indoor swimming pool, curling rink and an auditorium. The local Sunnybrook Park even has horseback riding stables.

Seriously, freaking horse stables! Who wouldn't want to live in Leaside???

Well, maybe if you were allergic to horses or you have Hippophobia (the fear of horses)... but otherwise, com'on! Leaside is like a dream neighbourhood most people can only fantasize about living in. Of course, if you have a good job and can afford to live there that is another matter entirely.

Learn more about Leaside here:
Leaside : Prime Toronto Neighbourhoods
Search Leaside Homes
A Brief History of Leaside