If you are a condo news junkie like me, you probably have been enjoying the past few months because the level of interest in the Toronto condo market appears to be at an all time high. The big boys of Canadian media: The Toronto Star, Globe and Mail, and National Post all run stories about the Toronto Condo market just about every single day.

Yesterday Scotiabank released an alarming statement claiming that up to 25% of Toronto condos are empty and that we were in danger of becoming a “Ghost City”. Several of the major media outlets picked up on this juicy quote and ran articles on the subject.

Let’s look a closer look at some of the buzz words and phrases you may have seen used in these articles that are designed to cause a reaction in readers, to generate fear, and ultimately to get more eyeballs looking at their newspapers and websites:

“25% of condo units are sold but sitting vacant…other analysts say the figure may be too low”. Hmmm…One in four condos in Toronto is empty eh? Well, that would certainly explain why it’s so hard to find a rental apartment in this town (vacancy rates consistently around 1%), too many landlords who hate making money! This statement was so ridiculous it was laughable by anyone who has any exposure to the real estate market in Toronto, but this was the crux of these articles and the quote came from a report out of Scotiabank, who were quoting a figure they thought was from CMHC. CMHC denied they ever said that 25% of condos were empty and Scotiabank retracted their statement but the damage was already done and the newspapers were happy because they got their ten thousand clicks they wanted and they had already moved on to the next story.

“This is the ghost city phenomenon.” I like how the writers use quotes like this as if to imply that this is a well-known, widely understood concept and it is something that we’ve all feared would happen and now it finally has. You know, the ghost city phenomenon. Toronto=Chernobyl.

“Shades of Miami at the height of it’s collapsed condo bubble in 2007″. When in doubt, make reference to the mothership of fear-inducing condo bubble prophecy: Miami. Miami is the poster child for the worst case scenario in condo markets. By simply putting the word “Miami” in the article the writer guarantees they will get a reaction from their readers, and newspapers are in the reaction-generating business.

In conclusion, newspaper editors and writers are very smart people and they know what sells and what doesn’t. As a reader and particularly as a real estate investor, you need to learn how to cut through the rhetoric and get the truth on what is really happening in the market.

And now for something completely different: “Canada Housing Bubble Talk Dismissed”.

Questions or comments? Contact me.

There are starting to be signs that the condo market might be slowing down. I am seeing and hearing accounts of several newly released condo projects not getting near the sales numbers they were anticipating. But how can this be the case when just last month we saw near-record breaking sales happening at MEGA projects like INDX Condos and Massey Tower? Hundreds of units were sold in both projects within days. Now we are seeing top-tier developers launching high profile projects downtown and for some, sales are

I have 3 current theories as to why the pre-construction market might be slowing down right now:

1) There is Too Much Product on the Market. There is no question that several developers are rushing projects to market that they normally would not. Projects are going to market without residential zoning approvals in place, let alone approved planning applications to build hundreds of condo units. They are trying to take advantage of a hot market, but in doing so, they are shooting themselves in the foot because they are causing an over supply of product.

2) The Weather Sucks. It’s almost May and I’m still wearing my wool coat and the seat heater is in the ‘on’ position. It seems simplistic but I can tell you from years of experience ‘on the ground’ in real estate, the weather DOES make a noticeable difference in people’s buying behaviours. When the weather is good, the sun is out and the winter coats are left in the closet, people feel better and they suddenly want to buy! When the weather is cold and wet and damp (like it has been for the past couple weeks) people feel worse and they are not in the ‘buying mood’.

3) The Market Has Peaked.  The red-hot market of 2011 may have had some carry over into 2012, but now we are coming back down to earth as it were. This is certainly a possibility. Time will tell if this is just a blip or if we are in fact entering a different market atmosphere.

A perfect litmus test has just arrived that will give us a very good indication of the market and that is 88 Scott. The project is launching now to Platinum brokers. It bears many similarities with INDX and Massey Tower. All three are 50+ storey MEGA towers within spitting distance of Yonge street and the financial district and all are averaging around $700 per square foot. This tower should be a smashing success and should be 60%+ sold out within a few weeks. If 88 Scott does not sell well I believe that will be the indicator that the market has shifted.

Questions or comments? Contact me or leave your thoughts/opinions below.

I would like to specifically break down this quote from Benjamin Tal, Deputy Chief Economist for CIBC and resident MSM go-to guy for quotes on the real estate market in Canada. Tal is quoted as saying, “Prices are already softening, housing starts aren’t in the sky, MLS [multiple listing service] activity is starting to soften, so it suggests the market is already starting to level off”.

1. Prices are already softening. Really? Where exactly is this occurring? All I see are prices going up in the resale and pre-construction segments. There are far more buyers than sellers and average DOM (days on market) is still less than 30. Definite sellers market territory.
2. Housing starts aren’t in the sky. I’ve never understood why anyone bothers to look at housing starts as an indicator, other than on a year over year macro level. Housing starts go up and down with great volatility every month. Two new condo developments start selling today, one might break ground in 9 months, another in 19 months. One might take 18 months to build, another might be 26 months. Starting and selling and completing are three very different things. If someone can enlighten me on this metric I’d be much obliged.
3. MLS activity is starting to soften. I’m looking for a resale buyer who thinks this is true. Please contact me immediately if you feel that you have more than enough choices of quality, well priced listings fitting your search criteria! All I see when I’m on the ground every day with buyers is a shortage of listings and anything that hits the market with any sort of quality will sell over asking in multiple offers.

I would love to take Tal along with me as I search for properties (both condos and freeholds, pre-construction and resale, investors and end-users) for my buyer clients. I’m quite sure that after a day or two his opinion on the Toronto real estate market would change dramatically.

Please don’t get me wrong though-a slow down in our market would probably be a good thing after the run we’ve been on since March 2008. It would breathe some much needed life into the entire industry, however, I just don’t see it happening any time soon unless there is some dramatic shift in the market. I still stand by my comments I made in July 2011 on the market. Unless there is a rapid change in interest rates and/or a major economic catastrophe, the Toronto real estate market and the condo market in particular will continue on its current path which is presently appreciating at about 8% per year.

Those are my thoughts. What about you? Contact me or leave a comment.

I guess this makes it official: everyone is talking about the Toronto condo market. I was interviewed a couple weeks ago for an article on our condo market by a writer for the Wall Street Journal, and today that article hit wsj.com. Read the entire article here. See what people on Twitter are saying about the article here.

The article certainly has a bearish slant to it, with the basic thesis being: the market has been booming for so long it therefore must crash. Certainly not something we haven’t heard before many times over the last decade, but should this article give individual investors pause as to whether or not they should be buying a condo in Toronto right now?

I was asked my opinion on the market and the prospects for a ‘correction’. What I told the writer was the same thing I’ve been saying on this blog for a while now: the likelihood for a correction in the short term is very low, the fundamentals right now are strong. However, even the most bullish investor must admit that a key driver to this market has been the lower-than-low interest rates we have had over the last few years. If rates continue to stay low, demand will continue to be strong, prices will continue to rise, and thus, the potential for a correction will grow. In other words, no market can rise at 6-8% per year ad infinitum, but as long as money is cheap, the market will likely keep its momentum.

I would love to hear your comments. Leave one below or email me.

Graphic above taken from the wsj.com article.

The Globe and Mail and the Toronto Star are competing for your eyeballs right now running the same story: some of the good folks at TD bank are claiming that sometime in the next 2 years the market will slow down and prices will fall. Wow, what a bold prediction (sarcasm)!

Here are my problems with this prediction (and others like it):

1. They are extremely vague. Interest rates will go up and incomes will go down, therefore prices in Toronto and Vancouver will fall 10%. Really? How will this happen? Why will this happen? Show me some statistics in the market right now that leads you to believe this is going to happen. These articles are always very short on specifics.
2. They are too broad in scope. Economists and bankers are trained to think of the big picture. We live in a global village, however, real estate is still local. If you want to know what will happen to the downtown Toronto condo market – talk to the experts who live and breathe the market, not some economist who has never set foot inside a Toronto condo.
3. They are too long term. Trying to predict the real estate market beyond about 6 months is a fool’s game. Look at any of the predictions made 2 years ago for where the market would be today and you’ll see what I mean.
4. They are media driven. Bad news sells. Good news doesn’t. This is a simple concept we all understand. If a pundit comes out and says that everything seems fine and will continue along as it has been, that pundit will soon be out of work!

I only see two things causing a change in the Toronto condo market in the short term:

1. RAPID rise in interest rates. If interest rates rise, this won’t likely impact the market – because they will rise slowly and the market will adjust accordingly. If they rise quickly and significantly, then we will see a big impact. (Consult further: Toronto condo market in 1989.)
2. MAJOR economic catastrophe. If Greece defaults, or the U.S. doesn’t get their act together and they are downgraded, the world will feel the pain and the trickle down effect will most likely and eventually hurt the Toronto condo market.

Thoughts or questions? I always like to hear from my readers. Leave a comment or contact me directly.

Are we different? This recent piece from MSNBC on the differences between the U.S. and Canadian housing markets once again hits on the big question of why did we not experience the housing market crash that the rest of the world (especially the U.S.) did. Are we fundamentally different and insulated from the U.S. housing market? Even more important – moving forward is the Toronto Condo Market at risk of collapse?

Doomsayers like Garth Turner would say that we are exactly the same as the U.S. in that we have lax lending requirements and our own versions of sub prime lenders, and that we are living way beyond our means. Of course, Garth has been saying this for about 3 years now, and written two books about it, and still we are awaiting the big crash that he says is imminent.

Most bankers and economists would tell you that Canada is different because we are more conservative or something like that.

Both sides of the argument to me sound like a whole lot of cliché and not much analysis of the numbers or reasoning behind their statements. Predicting the real estate market beyond the next quarter or so is always a fools’ game. Look at every long-term prediction that has been made by bankers, Realtor associations (like TREB or CREA), economists, and pundits over the past 5 years. One thing they all have in common is that they were all wrong! The best these so called ‘experts’ can do it seems, is tell you that things will be slightly different next year than they were this year.

There is no debate now that the Toronto condo market is losing steam. Listings are up, sales are slowing, prices are weakening. The inevitable questions are now are will it crash? How long will this ‘down market’ last? Isn’t it our inalienable right as Torontonians to always have an upward moving condo market?? But the biggest question is, where do I put my money as an investor? There are good opportunities in every market, including down markets, in which to invest. I’m investing now, and you should too. Contact me if you’d like to discuss.

**********************************************

1 Bloor was the most celebrated and most reviled symbol of Toronto’s recent real estate boom.

Realtors lined up for weeks (or paid students and homeless people to do so) for the chance to buy units there only to learn that the developer increased prices by 25-50%  from what they were told they would be paying. It didn’t matter as they bought anyway and hundreds of units were sold in a matter of days at prices in the $1000 per square foot range.

Now, more than 2 years after the initial hype began, no shovel has hit the ground and no one is moving into their piece of Toronto real estate history any time soon. Still the million-dollar question remains:

Will 1 Bloor actually get built?

The latest rumours news on the project is this: it will be built, only it is going to be scaled back to 68 stories instead of the original 80. This is according to the Globe and Mail. So that would mean it is no longer Canada’s tallest residential building, and purchasers who bought units on floors above 68 are…screwed.

But hold on, because The Toronto Star has a remarkably different article in their paper today which says that 1 Bloor is going into receivership and that the current Kazakh financial backers of the project are in mired in a massive scandal. That doesn’t sound like the recipe for building a 68 storey tower to me.

So who is right? I have no idea, but this corner of Toronto deserves a landmark, be it 1 Bloor or something else. My fear is that if plans for 1 Bloor are scrapped, something mediocre will be built in its place. When it comes to condos, Toronto already has plenty of mediocrity but greatness is in short supply.

For a trip down memory lane, check out some of my old blog posts on the 1 Bloor development from when I was a contributor to BlogTO.

• Kazakhstani Developer to Transform Yonge and Bloor: Very Niiice!
• 1 Bloor: What will you miss the most?
• 1 Bloor: Crosshairs of Insanity

After months of writing to my readers about how slow the market has been, there has been a fundamental shift in the marketplace over the past 4 weeks. Multiple offers are back with a vengeance. The best properties are selling over asking and in less than 1 week. Buyers are feeling the pinch and I am starting to get used to the phrase ‘sorry, that property is sold’ when I go to book appointments for my buyer-clients.

The stats for April should be released by the Toronto Real Estate Board any day now, and they will almost certainly reveal that sales are up and prices are up beyond what anyone was anticipating for this month.

Why? What happened? Has Barrack Obama worked some kind of magical spell over our economy? Are things not nearly as bad as everyone thinks they are? Are we all just living in denial and making things worse on ourselves by buying up all this real estate?

My thoughts on what has caused this recent upswing in the market:

1. Affordability. Prices have come down about 10% overall since the peak about a year ago. Interest rates have been basically cut in half since about 18 months ago. 
2. Spring Fever. Every year at this time the market is at its hottest. This is always the busy season, so in that sense this upswing shouldn’t surprise us.
3. Changing Attitudes. Sellers are more realistic on their asking prices, and buyers are more aggressive as many have been waiting to buy for 6 months or more.
4. Canadian Pride. People are starting to see and believe that maybe it’s true – things here in Canada are not nearly as bad as they are in the rest of the world. Where is the best place for your money to be long-term? Many are thinking once again the answer is real estate.
5. The Investor Equation. For the past couple years, it was very difficult to find a cash-flow positive condo in Toronto with 25% down. Now, due to lowered interest rates and lowered prices, with rents staying pretty flat, it is.

All this is leading many people to wonder if the bottom of the market was back in January or February. Certainly there were some great bargains had during those months compared to what we are seeing today.

What are your thoughts? Contact me or leave a comment.

Feb 2010 update: MYC is back! Relaunch coming soon. Contact me for new pricing and new floor plans. Starting from the high $200s.

Cresford is making a very bold move with MYC. They are lowering their prices on all suites-significantly. As in up to $90,000 per unit.

MYC launched with much fanfare, but with terrible timing. They started sales literally the very week that the stock market began to plummet and it was bad economic news followed by worse economic news every day that week back in October ’08.

I was there at the broker’s luncheon event where they announced the broker’s sales event which was to happen a couple weeks later. The luncheon was absolutely packed. Something like 250 brokers and agents were there and it certainly seemed like the project was going to be a massive success and would likely sell out very quickly.

The broker’s sales event took place as scheduled a couple weeks later, and to everyone’s surprise, only a handful of units were sold that night and there were more valet parking attendants than buyers (seriously)!

Prices started at about $500 per square foot and as you reached the higher floors on the south side you were easily paying $600+ per square foot. Resale units on Merton were going in the $400-$500 PSF range and many buyers were baffled at the prices they were seeing at MYC. Most buyers I talked to loved the project and the location especially, but they just could not swallow the prices.

Fast forward to today and the project is only about 35% sold, not even close to the number they need to get the project done relatively on schedule. So Cresford announces they are lowering prices of all suites to the tune of $60-$100 per square foot.

And in a somewhat unprecedented move for a Toronto developer, Cresford has said that they will credit all previous purchasers an amount equivalent to the reduction in price! A savvy PR move that will surely win them some favour with their clients, the broker community, and the public.

So why is Cresford doing this? My thoughts:

• Their construction costs are significantly lower than first budgeted. I was told something like 12% lower.
• They believe strongly in the project and want to get it built. The location is amazing and the architecture is beautiful.
• They understand that they can always raise prices again in the future once they hit their threshold to start construction.

More details to come. Once I have a revised price list, I will try to post it here. For more info, contact me.

It’s that time of the month again, TREB just released their stats for February. The numbers aren’t as painful to look at as in the previous few months, but does this mean we are on the way to recovery?

Compared to February 2008:

• In C01 (downtown west), condo sales are down 31%, average prices are down 8.5%, and inventory is up 46%. The number of sales as a percentage of active listings was 19% versus 40% last year.
• In C08 (downtown east), condo sales are down 9%, average prices are down 13%, and inventory is up a 85%. The number of sales as a percentage of active listings was 29% versus 59% last year.

Everything is still down over last year, but the drop is not nearly as extreme as it has been over the past few months. The trend has been double the inventory and half the sales, with average prices down 10-12%. So what exactly is going on here?

 

• Total inventory is actually down slightly in both C01 and C08 compared to January (last month). Normally we would expect inventory to increase as the weather warms and the spring market approaches.
• How about C08? Sales are down only 9% over last year (compared to 32% and 45% over the last two months respectively), and median prices are down only 7% (compared to 9% and 8% last 2 months). 
• Compared to 2007 numbers (2 years ago), average and median prices in both CO1 and C08 are still up significantly

 

So what is up? Is the market showing strength and signs of recovery? Maybe. My feeling is the appearance of postive change is mostly attributable to the fact that February 2008 was the first month where we started to see a dip in the market overall. Sales began to slow and inventory started to climb. February 2008 was also the first month that the Toronto Land Transfer Tax kicked in as well.  In short, we will have to wait to see a few months worth of data before we can say the market is trending up.

Download a PDF file with all the stats for February.

Your thoughts? Leave me a comment or send me an email.

Like what you are reading? Why not subscribe to the blog? Enter your email address in the “Subscribe by Email” box.