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.

Hong Kong Image courtesy of http://photoeverywhere.co.uk

More and more people I talk to who are inside the condo industry have a growing apprehension towards the direction of condo development right now. Specifically they are worried about the long term impact of what I call the “Mega Tower”. I define a “Mega Tower” loosely as a building with:

• 40+ storeys
• more than 10 units per floor
• largest unit tends to be about 800 sq ft
• average unit size is about 550 sq ft (just 3 years ago it was probably more like 750 sq ft)
• average price is about $375K
• 90-95% of the suites are purchased by investors

When I talk to my colleagues in the industry in New York they think it’s absolutely crazy that our condos here have gotten so small. In NYC, the average apartment size is still around 1000 sq ft. On the flip side though, people who grew up in European cities, or Hong Kong say it’s about time that we start shrinking the condo. In Hong Kong for example, entire multi-generational families will live in 700 sq ft apartments and that’s considered normal.

The worry or apprehension that some developers and industry insiders are feeling is surrounding the question of what will happen when all these buildings get finished in 2014-2016? How will the resale market respond to such buildings? Will the rental market continue to remain strong enough to absorb all these investor-owned units? Will the negative cash-flow situation come to a head if rents don’t continue to rise? Ultimately, should we aim to be a city more like Hong Kong, or more like New York?

I know some developers and architects are planning projects that will be quite different to what we are seeing everywhere today. They are going to launch towers with much larger suites, many 2 and 3 bedroom suites, and much higher price points. A throwback to the good old days of 2006 if you will! They feel that there will be  backlash at some point against the current “Mega Tower” concept, and there will be a shortage of larger units in the years to come downtown.

My opinion though is that nothing will change in the short term. As long as people keep buying into these mega towers in the tens of thousands every year, the trend will continue. Developers are primarily in the business of selling condos, not building cities (although that is a secondary motive for many of them). Their goal is to sell out 65%-75% of their buildings as fast as possible, and right now, the best way to do that is to make as many small units as possible.

The great news is that the rental market is still unbelievably strong.  As I’ve mentioned recently on this blog, all signs are pointing to increased rents moving forward, and no one is building rental housing in this town so condos are it. Still, how much of our market is relying on increases in appreciation versus cash flow? Most of my clients are long-term investors who look to buy and hold properties, but I know that many buyers still have no intention of being landlords, rather they just are looking for the quickest flip possible.

These are some of my thoughts, I’d love to hear yours. Leave a comment or contact me.

CBC Radio Interview from Andrew la Fleur on Vimeo.

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.

Is Toronto on its way to becoming just like Manhattan? This question has been asked for years now, and the comparisons can be made that Toronto is a sort of ‘mini New York’ – a major financial and cultural centre, the heart of a mega-region, and home to some really expensive real estate. But are we moving away from being an affordable city for the middle class to a city built primarily for the rich? Will $1000 per square foot to purchase a mid-grade condo and $2500/month to rent a studio soon become the norm here?

I’ve had some interesting conversations with some of my clients with international experience lately, and here are some of the sentiments and theories that they are espousing:

• Like Manhattan, prices and demand are rising to the point where Toronto could perhaps become a city where much of the real estate is owned not by individuals, but by corporations
• Could we reach an average price level where home ownership becomes a possibility only for the wealthy? – i.e. the first time buyers market will cease to exist (can’t make these condos much smaller than they already are!)
• Will first time buyers will be forced to look outside the downtown, (as is the case for many in Manhattan), live in the inner suburbs for years before saving enough and building enough equity to move back into the city?
• What about investors? It is taking higher and higher down payments to get condos to cash flow – will this continue, or as prices rise, will we finally see rents rise as more and more would-be buyers are priced out of the market and forced to rent?

Sorry for the random collection of thoughts, but these are some of the talking points I’ve been having lately with some of my clients. I’d love to hear what my readers think about this subject and where people see prices, rents, and the first time buyers market going in the next 5-10 years. Leave a comment or contact me!

Image from photos4travel.com

I was meeting a new client yesterday at the Ritz-Carlton, and no surprise we got to talking about the market. I was somewhat surprised when this banker from Hong Kong said that he he believes Toronto is still severely undervalued. The Ritz Carlton  in Toronto is selling now at about $1100 per square foot. An equivalent property in Hong Kong would cost approximately $4000 per square foot he informed me. He remembered telling the sales people when he bought his unit for roughly $650PSF 5 years ago that they were being way too conservative with their pricing (they should have charged much more). He went on to say that luxury properties like this in Hong Kong will rent out between $10-$15 per square foot per month, versus Toronto where $3 per square foot is considered a high water mark presently.

Another thing that makes Toronto so special compared with other major world cities is that we still have a first time buyers market.  As a first time buyer on an average university graduate-type salary, you can actually buy a decent piece of real estate in Toronto and walk to King and Bay (our country’s financial heart) in 10-15 minutes. Where else in the world can you do this? In other cities like NYC or London, you buy in the outer burbs, have kids, save,  save, save, and then maybe when your kids are grown and moved out you might have enough saved up to buy your dream apartment in the city. In Toronto you can still do it when you’re 25. Amazing and rest assured, this will not be the case in Toronto forever.

I am still very bullish on Toronto. The next 10 years may have their ups and downs, but the trajectory of Toronto on the global scene to me is clear and this is a fantastic place to invest your money. I believe Toronto will continue to see tremendous growth over the long term.

If you are a non-resident of Canada and you would like to discuss investment opportunities in Toronto, please contact me.

Here are 2 recent examples that should serve as reality checks to anyone left who still thinks that the process of buying in a brand new development is (or should be) ‘FAIR’:

1. I waited in line all day for an event where there was supposed to be approximately 75 units priced around $200-$250K, and an additional 150 units priced above $250K. I was #27 in line, so I thought I stood a very good chance of getting a unit in that range for my client. Turns out that in actuality I was probably #57 or even higher as large number of at least 30 agents and their clients just showed up at the start time and by-passed the lineup completely (this was obviously pre-arranged ahead of time). When we finally were brought inside, they were virtually sold out of all units under $250K!
2. Because of my reputation as one of the top agents downtown, I was granted a ‘priority number’ for a VIP sales event several days ahead of the actual event (regular agents were forced to wait outside for hours/days). Even though I was #3 in line, when we were invited into the sales area to buy, we saw there were several people already signing deals and low and behold, all the units we wanted to buy were already sold! Surprise!

In the final analysis, the words of a Realtor acquaintance of mine who managed to get to the front of the line (in example #1) without waiting while I froze my butt off outside sums up the current state of the VIP-buying Toronto Condo Market when he said, “It’s all just politics.” It’s a game of who knows who, who owes a favour to whom, and who knows how to work the ‘back channels’ the best.

Think twice before you believe any Realtor who claims to have ‘VIP’ access to every project in town. It’s simply not possible. Even a top agent like myself (top 1% of all agents for condos sales, member of various ‘Platinum/VIP’ Agent Clubs) cannot promise EVERY buyer first access to EVERY development. No matter how ‘VIP’ you think you are, there is always someone more VIP than you!

My advice for those looking to buy at these VIP events: choose an agent you trust, and who has a solid track record of sales. Choose someone who will put your best interests first, who understands how the game is played, and will use every resource available to get you as far to the front of the line as possible. Above all: Never.Give.Up.

Questions or comments? Contact me.

The most recent case was an email that I received from a prospective client. He forwarded me an email that he received from another Realtor (whom I have never met) about Theatre Park. The client was confused at the origin of the email and thought I was involved with it somehow. Reading through it I realized that the words of the email were copied and pasted from my recent blog post about Theatre Park. Brutal!

I know that the Toronto condo market is the NFL of condo markets, and that I am part of a hyper-competitive industry (30,000 Realtors in the Toronto Real Estate Board). We all copy each other to some extent (myself included), but when imitation crosses over into plagiarism, I can’t help but throw up a flag and call a foul.

So I wanted to put it to my loyal readers and followers: what should I do about these plagiarizers? Should I expose them publicly on this blog or some other forum? Should I threaten legal action (or actually pursue it) where warranted? Should I stop taking myself and my blog so seriously and ‘get over it’?

The angle I have taken to date has to simply ignore them, keep my eyes locked in the forward position, and concentrate my energies on creating the best, most informative, most BS-free, and most insightful Toronto condo blog on the Internet. What say you readers??