Welcome to my April newsletter. Below are the Real Estate stories that have been making the news over the last month.
Highlights
- Average home in Toronto is now $500,000
- Company wants to sell 3 inch “condo” safety deposit boxes.
- More homes being built in laneways
Tight Market Drives Double-Digit Price Growth
April 4, 2012 — Greater Toronto REALTORS® reported 9,690 sales through the TorontoMLS system in March 2012. This result was up by almost eight per cent in comparison to the 8,986 deals reported during the same period in 2011.
“The GTA resale market has not suffered from a lack of willing buyers this year. Buyers have been spurred on by the positive affordability picture brought about by low mortgage rates,” said Toronto Real Estate Board President Richard Silver.
“The challenge has been a lack of inventory. Many listings have attracted multiple interested buyers. Strong competition has led to annual rates of price growth well above the long-term average.”
The average selling price in the GTA was $501,614 in March – up by 10 per cent in comparison to March 2011.
“The number of new listings was up last month in comparison to March 2011. However, based on the historic relationship between price and listings, the GTA resale market should be better supplied. If competition between buyers remains as strong as it is right now, we will almost certainly see an average selling price above $500,000 for 2012 as a whole,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.
Click here to see Full Report [pdf]
Toronto’s condo boom continues after record 2011
If the recently launched INDX project in the heart of Toronto’s financial district is any indication of the state of the city’s condo market, then this year could prove to be even more bullish than last as the core continues to creep toward the heavens.
INDX is among some 27 new condo projects that have launched just since January across the GTA. That’s up from 17 during the first three months of 2011, according to market research firm Urbanation — and that turned out to be a record year for the condo industry across the GTA, far outpacing all predictions.
With condo developers still heady from last year’s 28,190 new sales, and 24,343 starts, there appears to be no letup in sight.
Toronto real estate: Average GTA house over $500,000
The average GTA house price now hovers at over half a million dollars, up 10.5 per cent from March of last year.
Low interest rates and a shortage of homes for sale continue to propel prices skyward and fuel bidding wars that have now become virtually de rigueur in many Toronto neighbourhoods.
That combination of factors helped push prices to an average $504,117 across the GTA and to almost $550,000 in the Toronto 416 regions in March, up from $456,234 and $498,050 respectively a year ago, according to the Toronto Real Estate Board (TREB) analysis of almost 10,000 sales across the region in March.
Prices in the 905 areas averaged $477,006, up from $428,155 last March.
How to win a real estate bidding war
With fewer sellers and high demand for housing in the GTA, bidding wars are back as the spring market gets under way. But for buyers these auctions are stressful and fraught with dangers, not the least of which is that you may end up paying too much for a house and go on to regret it.
Here are some things that can help you come out ahead:
Homeowners: Stress-test your budget
Interest rates won’t stay this low forever. But there are ways homeowners can stress-test their budget to make sure they can afford higher mortgage payments.
Aspiring home owners need to consider the monthly payment – as well as how well they would cope with the added costs of owning a home.
Here’s what you need to consider. A mortgage of $100,000 with an interest rate of 3 per cent would cost $473.25 per month. The total interest cost would be $41,973.65 over a 25-year amortization period, according to the mortgage payment calculator at the Canada Mortgage and Housing Corp. website.
With an interest rate of 4 per cent, the monthly payment goes up to $526.02 per month and total interest goes up to $57,806.06.
The same mortgage with an interest rate of 5 per cent would cost $581.60 per month with a total interest cost of $74,481.50 over 25 years.
Why it’s still a good time to buy a home
For every economist who tells you Canadian real estate prices are headed for a crash, there is another who says prices will remain stable — with both sides using a lot of “averages” to justify their points. Who is right?
When it comes to Toronto real estate, one argument goes like this: The average home price is $500,000. The average income for a family is less than $100,000. In the U.S., when this same one-to-five ratio was reached, the real estate market began its collapse.
The second one argues that the ratio between average household income and average household debt is currently 153 per cent, which also means that for every household earning $100,000 per year, they owe $153,000.
Home insurance: 10 things you need to know
Your home is your single biggest purchase and the things inside it, probably number two. So when it comes to insurance, making sure your home and possessions are protected is important. Here are ten things you need to know.
1. What if my house burns down?
The cost to rebuild your home plays a big role in determining the amount you pay for home insurance. Insurance companies use a formula to figure that out, but since there are several industry approved calculation methods the cost may differ from one insurer to the next. Ask your broker or agent to explain which method they use and the assumptions.
Royal LePage targets ‘mid-market’ segment in commercial real estate push
It’s the part of Canada Royal LePage says the commercial real estate industry has forgotten about.
The residential real estate company, one of the largest in Canada, said Tuesday it is making a foray back into the commercial sector, but this time it will focus on what it calls the “mid-market” segment of the industry.
“We had to have a rationale to get back into the market. It is underserviced in a couple of ways, one because it costs money to have the infrastructure to where commercial and industrial clients are and the good news is we have that. That’s an advantage we have over the majors,” said Phil Soper, chief executive of Royal LePage Real Estate Services Ltd.
Calgary to overtake Montreal as office mecca
Driven by a commodities-fuelled boom, Calgary is expected to overtake Montreal as Canada’s second-largest downtown office market after Toronto, commercial real-estate executives predict.
“Our expectation is that Calgary is eventually going to surpass what we have in our core,” said Louis Burgos, senior managing director of real estate services firm Cushman & Wakefield in Montreal.
“I would expect it.”
Strong demand by oil companies for large blocks of space in Calgary, combined with nearly a decade-long absence of new office tower construction in downtown Montreal, have narrowed the gap between the two cities over the last six years.
Banks tighten condo lending amid bubble fears
Canada’s biggest banks are tightening lending standards for condominium builders at the urging of regulators, requesting higher pre-sales and deposits as policy makers warn the Toronto and Vancouver markets are overheating.
Some banks have been asking construction firms to put more equity into new projects in recent weeks, according to developers. Lenders have also been raising the percentage of condo units that must be pre-sold and are demanding higher deposits as conditions for financing, they said.
“Several of the banks have tightened up” after the Office of the Superintendent of Financial Institutions “told the banks to be a little bit more careful on who they are lending to and how they are lending,” said Barry Fenton, chief executive officer of Toronto-based Lanterra Developments, whose condos include WaterParkCity and Ice Condominiums at York Centre.
Toronto condos lose investment lustre
It’s just one month, but a new set of numbers from Toronto builders showing condo prices climbing just 2% on a year-over-year basis could make investors think twice.
The condominium market in the city, the biggest of its kind in North America for that class of housing, is largely based on a capital appreciation. Most investors finance their units knowing that they will be unable to carry them on a cash-flow positive basis based on present rental rates.
“If you are negative cash flow and the thing is not going up in price, you are out of there,” said certified financial planner Ted Rechtshaffen, noting at these rates, the condo owner has more reason to worry.
The 2% rate — a return you could get from an online bank — would be in stark contrast to the 7% to 9% annual increase condo research firm Urbanation Inc. says has been the norm for the last five years.
A home that shows Toronto what laneway living can be
You’d think living in the only house on a street would be lonely.
But homeowner Bill Gall is anything but. Look out any window and there are houses all around – it’s just that they’ve got their backsides pointed at him…or their garages.
On top of one garage, the “rickshaw guy” has a big pile of old frames pointing at poor Mr. Gall: “You live in this part of town, you gotta go with the flow,” he says with a chuckle. Actually, he likes the rickshaw frames, since their abstract jumble adds to the jumble of wires, windows and peeling paint in the foreground while, in the background, OCAD University’s flying checkerboard jockeys for position with University Avenue’s tall brown Bank of Zurich building.
In Toronto, eager buyers prowl for pods in the driveway
Out and about on the weekend, I noticed some sure harbingers of spring: houses with giant pods in the driveway.
Those containers, which are loaded with household stuff and carted off to a storage facility somewhere, almost always signal “this house is going on the market.”
Serious house hunters keep an eye out for these ciphers because in the overheated Toronto market, they are always looking for an edge. Perhaps these weary survivors of past bidding wars figure their agent can get them in before the open house.
In Toronto, buying homes at break-neck speed
The full intensity of the spring market will be upon us soon. Can bidding wars for Toronto houses get any more zany?
Lots of people watching the eruption of extreme bidding in the city’s real estate market this spring are wondering who the victors are in these contests.
Real estate agent Wilfred Veinot says the winning bidders are often educated couples or single professionals in their early 30s who have watched their peers prosper from buying real estate.
Neighbourhood Scout: Dovercourt Park is a ’hood on the rise
Among Toronto neighbourhoods, Dovercourt Park is something of an unsung hero.
Neither seedy enough to attract rising chefs with cult followings, nor gentrified enough to send real estate values out of sight, it’s long been a stalwart area where immigrants find a community, twentysomethings are able to rent a decent apartment, and first-time buyers can purchase a semi and fix it up.
Mention the name in passing, and many Torontonians have trouble picturing it on a map.
Basement apartments are a minefield for the uninformed
My column on basement apartments earlier this month seems to have touched a nerve among homeowners and real estate agents, many of whom sent me emails. The message in the column was that simply using the term “retrofit” to signify whether an apartment was legal or not was misleading and dangerous.
Bill Johnston, past president of the Toronto Real Estate Board (TREB), wrote: “Thank you for your excellent article on basement units in the Saturday Star. They can be a minefield for the uninformed.”
Current TREB president Richard Silver agreed, saying: “It certainly is a minefield for consumers and agents unless we get some clarification.”
A Toronto developer has plans under way to develop what they believe will be the first condominium building comprised of safety deposit boxes.
Parallax Investment Corporation has purchased a lot in Markham, Ont., to construct its 16,000 sq. ft. ultra high-tech security project comprised of safety deposit boxes that range in size. About half the project will be devoted to client parking, and 2,000 sq. ft. of it will be vault space. There will be around-the-clock security, client reception areas, and small private suites.
But instead of operating as a rental, SafeBox Condominium Vaults will operate as a condo, with presales launching March 31. It will have a completion date some time in spring 2013. Although there won’t be anyone living in the building, it will operate like a condo development, says Parallax’s Nigel Lawson.