Wednesday, September 25, 2013

Worst condo sales in a decade in Toronto, August

The number of new condos that sold in the Greater Toronto Area during the month of August 2013 dropped to a mere 633, making it the lowest level for that month in a decade, according to RealNet Canada Inc.

That is a 18% drop from the dismal 772 sales in August 2012. And way below the 1,923 sales in August of 2011.

Toronto’s condo market is cooling so fast it has policy makers in Ottawa worried that if the condo market collapses, the housing market might go too - and thus dropping Canada into the biggest recession we have seen in decades. (2007-2009 will seem like a minor blip).

The Finance Department and Bank of Canada are justifiably concerned.

Finance Minister Jim Flaherty expressed concern in 2012 that too many new condo units were being built, a phenomenon that will ultimately lead to a crash - especially since so many were being built on credit borrowed from Canadian banks. The Bank of Canada has said that such a financial crash will pose a threat to the country’s broader economy and possibly even hurt the US economy too as many American investors are amongst those investing in Toronto condos with the intention of flipping them for a profit.

Real estate agents, brokers and pundits (myself amongst them) say the warnings have already been having an impact on the market, by causing some buyers to think twice about getting in to the Toronto condo market. But is it enough to prevent a crash by warning people not to invest? Doubtful. Most of the investors are Americans or from overseas, and they're borrowing Canadian bank money to make the investment - so if a crash happens and they lose their investment, it will be Canadian banks left holding the bag because the foreign investors will just pull out and ignore any legal threats from afar. (Because if you hold a foreign debt it really isn't that big of a deal if you just avoid that country for 7 years or so.)

For his part Mr. Flaherty has tried taking a number of steps to cool the real estate market, most notably tightening the mortgage insurance rules 14 months ago. One of the changes he made was to cut the maximum length of an insured mortgage to 25 years from 30, a move that took a number of first-time buyers out of the market (and first time buyers are more risky) and cooled it down a bit.

But such moves won't deter the overseas investors, who see Toronto's real estate market as being stable and think they can beat the odds and make a killing in profit BEFORE the market collapses.

But looking at the sales records, it is obvious the market is slowing and will stall sometime in the next year or so.

The total number of new homes, both low-rise and high-rise, that have sold in the Toronto area so far this year stands at 16,775, making it the lowest year-to-date total of the last 10 years.

There were 777 sales of new low-rise houses during August. That is 43 per cent below the 10-year average for the month of August. So the slowdown is effecting the housing market, not just condo sales.

While a growing number of tall condo towers are dotting the city’s skyline, the amount of land that’s available for the construction of new low-rise homes is constrained because of government policies aimed at curbing urban sprawl and maintaining green space. That means that condo growth is the future of Toronto, but it has to be built at a sustainable rate.

The price gap between new high-rise condos and low-rise houses has widened to a record level of $222,149. The low-rise price index rose 8.1 per cent over the past year to a record high of $658,938, while the high-rise price index eked out a mere 0.1 per cent gain to $436,789. What it means is that homebuyers definitely want houses more - and it is driving up prices faster, whereas condos are considered to be more risky despite the lower prices.

The gap between the price of condos and houses averaged about $75,000 between 2004 and 2011, but the gap has been growing at a fast clip during the last two years now that condos are flooding the market and becoming cheaper comparatively.

Many people swear off condos entirely, stating that the maintenance fees are way too high - and this is true for some condo buildings where they have gone overboard on expenses.

The unsold inventory of new low-rise houses now stands at 7,247, RealNet said, while there are 21,028 new unsold condos.

The month of August also marked the fourth straight decline in high-rise inventory, as developers have been bringing fewer new condo units to market of late. But economists say that the number of new condo buildings going up that will hit the market in 2014 - and even more that will be finished in 2015.

So we will see that unsold inventory of condos rise from 21,000 to 30,000 or 40,000 within the next couple of years.

At which time prices should drop significantly, which means people with the money available should be able to buy a condo for a lot less money when the market bottoms out.

Finding a good real estate agent

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The referral agency will look for the top 10 rated real estate agents in your area from which you can choose. Otherwise, the agent must rank nationally or regionally or have received certification or an award of excellence to make the list of qualified real estate agents.

Monday, September 23, 2013

Trump Tower facing financial woes as investors become anxious to sell

Investors in Donald Trump's "Trump Tower" in Toronto are becoming anxious to sell their new condo units.


Because nobody is buying.

Lots of Trump Tower units are for sale on the MLS for outrageous prices - trumped up prices - and they have been on the MLS for months with no buyers and very few interested parties.

The Trump Tower in Toronto is located at the corner of Bay and Adelaide streets, and has units available for $1.6 million.

But in a recent auction by Toronto-based Ritchies Auctioneers, a bid of $550,000 was the only bid and well below the owners minimum asking price.

The owner of the unit, a local real estate broker who invested in multiple units in the building, commissioned Ritchies weeks ago to sell the suite at a 30 per cent or more discount after seeing about a dozen other units in the building stalled on MLS for months with no buyers.

So now he needs to offload his investment at a reduced price, but even then nobody is buying.

Many potential new buyers are changing their minds and don't even show up to view the condo unit.

What is worse is that the executives at Trump Tower - the building managers, etc - are avoiding the media, cancelling viewings of units at the last minute, changing the venues of meetings, etc.

A media tour was cancelled last Tuesday by the executives without explanation and tried to cancel another tour for potential buyers.

In related news many of Donald Trump's investors in the past have tried to sue him - often unsuccessfully due to legal fine print - because he duped them into making a bad investment, taking the money and then leaving his investors hanging with properties they can't sell at the prices he promised them.

How do you think Donald Trump made his riches in the first place? By ripping people off.

Sunday, September 15, 2013

Slow construction at One Bloor

I swear construction crews spend 70% of their time standing around for equipment to arrive or city staff to sign documents.

Thursday, September 12, 2013

Indoor and Outdoor Pool

Since pools is my theme for this month...

When you can't decide between an indoor and an outdoor pool, why not get both???

The best of both worlds!

Outdoor Grotto Pool

Now if a condo (or even people building a mansion) were to build an outdoor pool they have lots of options.

Personally having a pool that looks like a grotto sounds pretty amazing - and looks amazing too. It requires the efforts of a landscape architect and a team of landscaping gardeners - but the results look fantastic.

Condos with Indoor Pools

Now I admit this kind of pool in every condo is a tad ridiculous - and scary if you are afraid of heights - but I really like the concept of a small pool on every balcony or in every condo.

It just feels like the kind of thing a 12-year-old would draw, but wouldn't have the resources to build.

I like architects who have the ability to think like that and companies willing to make that forward leap to actually do it and build it.

Friday, September 06, 2013

Condo Gyms and Pools

When buying a condo everyone wants a gym or a pool in the building.

But then once they have it many people forget to use it.

Just like many people forget to exercise regularly.

You wouldn't pay for a gym membership and then not use it, would you?

What about a pool membership at the YMCA?

Honestly you'd probably go 2 months without going to the gym or the pool and then realize it is a waste of money and then cancel your membership.

Which means why would you purchase a condo in a building with a gym and a pool - when you KNOW, in your heart, you probably are not going to use it.

Condo buildings with gyms and pools have higher maintenance costs due to the extra amenities. That is a given. So you are paying extra to live there - and if you are not using the gym or pool then you are really throwing your money away.

And Toronto condos are expensive enough already without you squandering your money on amenities you don't need.

Which gives you two solutions.

#1. Don't buy a condo with a gym or pool unless you are ALREADY a fitness buff and exercise regularly. Otherwise you probably will only use the amenities once or twice per year.

After all if the condo gym is mostly spin class equipment you could just buy a bicycle instead and bicycle outside.

#2. Hire a personal trainer to come to your condo 4 to 8 times per month.

Honestly, hiring a personal trainer in Toronto guarantees that you will end up using the amenities you are paying for. This way you can guarantee that you will BECOME a fitness buff and actually use the gym and pool you are paying for.

If you don't do this many people who try to exercise by themselves often lose motivation and fall off the proverbial wagon after awhile. Having a schedule to keep and a personal trainer who is tracking your progress, giving you advice, making sure you stay on schedule - well that just guarantees you stick with it.

Otherwise your condo gym will likely stay dark and empty and barely used.

Condo pools and gyms are designed to attract condo buyers. They're like fancy advertising aimed at selling you something that you want [the attractive body that comes with exercising regularly] by getting you to pay extra for something you don't really plan to use.

And then once you have it, it takes up space and you rarely use it - but you are paying through the nose in maintenance fees.

Which means that if you've already purchased a condo with a gym / pool then going the personal trainer route and becoming a fitness buff is the best way to take advantage of your investment.

Otherwise you've just fallen for the oldest trick in the history of marketing: Buy this and you will get a attractive body and then attract similarly attractive people to you.

Monday, September 02, 2013

Low Income Housing for the Elderly

We need more Low Income Housing for the Elderly - and more low income housing in general in Toronto.

The cartoon below is about the crisis for housing for the elderly in the USA, but it works equally well here in Canada.

Many elderly people are also on a fixed income and renting their apartments - and often are found dead only when the landlords realize they missed paying their rent.

Sunday, September 01, 2013

Graduated and Living at Home

The infographic below is proof that there is something wrong in America...

Both in terms of lack of jobs, but also a shortage of affordable housing for people. And by affordable housing I also mean the cost of renting. House prices and the costs of renting are simply way too high for university and college graduates to be able to afford to live on their own.

And the careers that they trained for simply aren't available because too many people are training for things that there simply isn't enough jobs in that field to go around.

Which says to me more Americans should be BUILDING affordable houses, hiring people to do construction, creating jobs in the construction industry - while simultaneously making affordable housing more available.

There is ALWAYS more room for more people in the construction industry - especially the green homes industry. People who become experts at how to build green eco-friendly homes are guaranteed to find work in comparison.

Note: I had to modify the original infographic because it was too tall and wouldn't fit on here properly.

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