Friday, June 14, 2013

New Condo sales Fall 55% in Toronto 2013

Toronto condo sales plummeted by 55% in the first three months of 2013 over the same period last year.

The changes has made developers and investors skittish, as developers are now holding back new project launches and have taken a wait-and-see approach in the face of Toronto's softening market and climbing inventory of condos for sale - which are not selling unless people lower the prices.

A total of 2,728 new units were sold up to the end of March of 2013, down 29% just from the final three months of 2012. That's less than half the 6,070 units sold in the first quarter of 2012 when the condo market was starting to wobble and fall from a record year of sales — 28,190 units — in 2011.
Meanwhile Toronto's inventory of unsold condo units in new projects climbed during Q1 to 18,845 units, a 21% jump over a year ago.
Most of those unsold units, about 64 per cent, are in buildings still in the pre-construction sales phase, meaning they have yet to be built - which means the investors and developers would end up losing money if the projects are cancelled.

So far there hasn't been a collapse in prices, but that is likely because the volume of condos on the market has yet to dramatically increase. The sudden increase will happen in late 2014 - and by 2015 we can expect a collapse in condo prices as the market becomes flooded with cheap condos which were purchased by foreign investors with the intent to flip them for a profit.

But since those investors borrowed money from investment banks - and banks will want their money back - the investors will need to sell for less than their asking prices when the banks start demanding their share.

In which case we will see economic chaos on the level of what happened in the USA in 2007-2008 - except this time in Canada and any places that used bank money for gambling on Toronto's future condo prices.

Homeowners demanding ridiculous prices in Toronto

When it comes to high end real estate it is understandable that some rich people would see their house as an investment to later be cashed in on - and thus are asking for ridiculous prices for their premium estates.

Premium Toronto estate homes are properties listed for $1.8-million to $10-million plus.

Example: In May one Toronto business titan has just quietly listed his house on Old Forest Hill Road with an asking price of $20-million.

I don't know the details, but he probably bought it a decade ago for half of that.

What home-sellers don't seem to be realizing however is that the market is drying up. Buyers aren't buying as much as they used to. Houses are staying on the market a lot longer before they sell - especially for the pricier homes.

A $4-million home in the South Hill area of Toronto recently was sold after almost 13 months on the market.

Two years ago asking for more (A LOT MORE) was okay. During the dizzying spring markets of 2011 buyers were more willing to throw an extra $100,000 into an offer because all of the momentum at the time was upwards - and the market conditions looked stable.

Now it looks like Toronto is ripe for a market correction. Prices are still up, but buyers have dried up. They're all waiting for the market prices to soften.

Even real estate investors are worried. People looking to buy a house and flip it for a profit are also skittish. (At this point only fools are rushing in.)

It is also a regional thing.

Prices of homes closer to the city core are continuing to go up. Its homes further from the centre of Toronto - way out in the burbs, Richmond Hill, Brampton, etc - which are seeing both a lack of interest, but in some areas there is even a drop in prices.

Buyers are evidently looking for places closer to downtown - and they're unwilling to pay big bucks for homes in the middle of nowhere.

Thursday, June 13, 2013

Real Estate Flipping Workshop = Bad Idea

I just heard a radio ad advertising for a real estate flipping workshop - which was promising to teach amateurs how to flip real estate using other people's money.

That sounds like a horribly risky idea.

A bit like investing in high risk mortgages using other people's money...

And the workshop is proposing taking amateurs and teaching them how to do this - is a bit like taking people off the street and teaching them how to invest in subprime mortgages.

Great idea (sarcasm).

Amazingly breathtaking idea (more sarcasm).

I can't believe they are doing it (dripping with sarcasm).

It is bad enough that Toronto's real estate market is so "bubbly" that investors are now pulling out of Toronto because it is considered to be too risky, but now companies (which I am guessing are seeking to unload their bad investments on to unwitting fools who will be gambling with other people's money) are seeking to deliberately muck around with Toronto's already over-invested real estate market.

Its like having a giant cream filled balloon that is already close to bursting and selling it to a bunch of baby porcupines and then running away before the porcupines can pop the balloon.

Which means that the suckers who invest in real estate now - while the big real estate investment firms skedaddle out of here - will be the ones left holding the bag when the bubble does burst.

The mere fact that the big real estate firms are now ditching Toronto - while the getting is good - means they are now wary and skittish about the future of Toronto's overblown market.

When the Toronto real estate bubble does burst I am going to be saying "I told you so" again and again.

I am still predicting the bubble to burst sometime in 2015 or 2016.

Although now that some investment companies are looking to dump their properties it makes me wonder if it might happen sooner than I expect.

Wednesday, June 05, 2013

Mixed signals from Toronto’s real estate market

During May 2013 more than 10,000 properties were sold across the GTA in a real estate market which is down nearly 3.5 per cent from May of 2012.

Sales of single detached homes are up almost 1% and prices in that segment included a 3% year-over-year increase. Toronto Real Estate Board President Ann Hannah describes the market as showing improvement over the past two months.

Ann Hannah believes potential home buyers who had delayed their decisions because of mortgage rule changes by the federal government are now becoming active in the market again.

The average sale price for real-estate across the city in May 2013 was $542,000, up by 5.4% in a year.

However condo sales were extremely weak, down over 9% compared to May 2012, but prices rose slightly.

I believe homebuyers are becoming extremely wary of buying a condo because of fear of when the Toronto Condo Bubble might collapse.

I am predicting condo prices in 2015 - 2016 to drop between 30 to 40% as tens of thousands of new condos come on to the market and flood the market with too much extra supply.

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