Newsletter: May 2008
It seems like the Toronto media knows something about the real estate market that we realtors don’t. I’ve taken quite a few calls from clients this past month who’ve been reading the headlines and think that they have to sell their property right away before the bottom falls out. If the market drops off, then the thinking goes that there will be a lot of houses not selling and maybe even an eventual oversupply of product in the GTA. So should you get your top buck now while you can, while the market is still strong? Or is it already too late? The papers are saying that we’re done for, so this must certainly be the case. Or is it?
Check out some of these captions that ran in Toronto media in the month of April:
Toronto Star: “Is the housing boom officially over?”
In this story, BMO Nesbitt Burns deputy chief economist Doug Porter declared that "Canada's six-year housing market boom is officially over. Sales are melting faster than this year's snow pack." The Canadian Real Estate Association said in a report that the steep decline in activity in Toronto, which represents about one-quarter of sales, was the major reason for the dismal national figure.
Globe & Mail: “The sky is falling”
This story argues that the double-digit increases in real estate had to abate at some point, so now that we’re heading towards a recession there is no way our market can sustain itself. They refer also refer to the “Great Real Estate Correction of Early 2008”.
Financial Post: Home price climb slows in Canada
This article talked about how the crisis that began in the U.S. subprime mortgage sector has eroded the value of U.S. homes and threatens to push the whole North American economy into recession.
"We know now that the Canadian real estate market has followed a markedly different path from that of the United States," said Phil Soper, president and chief executive of Royal LePage. "While Canada will not escape the negative impact of a troubled American economy, Canadians' home equity should remain safe, as the market moves into a period of slow growth, but growth nonetheless."
Canoe.com: “Real Estate Boom likely over”
This story points out that 2007 was another record year for MLS residential property sales in Canada. Any comparisons with last year mean comparing with a record breaking year. What the statistics indicate is that the residential housing market is easing back towards more historically typical levels.
Take a look at the graph below that looks at the first few months of activity on a year-to-year basis:
Note how so far our YTD numbers are not vastly below last year’s. Compare to the difference from 1997 to 1998 - or more recently from 2002 to 2003. There doesn’t seem to be near the same degree of sales drop. The first two weeks of April were only 4% lower than last year and we still don’t have our final numbers for the month either.
Now here’s my reality in the day-to-day world of buying & selling income properties in Toronto. There was a triplex on Delaware (Bloor & Ossington) asking $375K that I had some interest in. The final sale price was $485 – a full hundred grand over asking price. Another client of mine put his triplex up for sale for $499K. On the day of offers someone came to the table with $501K, but we refused it. I subsequently raised the price to $529K and worked it for a couple more weeks and we ended up getting $525K. Now this simply should not happen if the market is in a slump. Once no one came to the table at asking price, it should have been over. But in a hot market where there is always pent up demand, someone will still come out of the woodwork to pay your price. This is the market in Central Toronto.
There are still multiple offers going on out there. Until they subside it is very difficult for me to sound the death knell of our market. And what about interest rates? They continue to be at very aggressive rates and there’s talk that may be even going down again. The bottom line from my perspective is that it is simply too early to tell. A slight easing of sales from historical highpoints is not something to be up in arms over – at least not yet.
*
Before I sign off I like to repeat a paragraph from one of my newsletters from a couple years back. I often get asked about what the rules are for creating a rental apartment in your property. Some of the conditions of creating a second suite (which is perfectly legal) include:
• the suite must be self-contained with its own kitchen and bathroom;
• the house, including any additions, must be a least 5 years old;
• the square footage of the second suite must be less than the remaining unit;
• generally, homes with a second suite must have a least 2 parking spaces. In parts of the former City of Toronto - R2, R3 and R4 districts - these suites are exempt and only require 1 parking space;
• any new second suites must comply with the Ontario Building Code and need building permits. Existing suites must comply with the Fire Code and zoning/property standards.
I also always recommend getting legal advice prior to doing any significant changes to the status of your property.
That’s it for this month. We’re only a few weeks to the May 24 weekend and the official start of summer. As of this writing, Toronto FC has now won three in a row. I think we’ve found our new boys of summer. Go Reds Go!
P.A.
Friday, May 02, 2008
Saturday, April 05, 2008
Toronto Income Property Newsletter: April 2008
I’m sure that everyone is as happy as I am that spring is almost here. I think we’ve seen the last of the heavy snow and the biting cold. It couldn’t have happened quickly enough as the bad weather slowed down the business for the months of February and March, particularly with income properties in the downtown core. I mentioned last month that a lot of opponents of the new municipal land transfer tax were pointing to these monthly decreases as the result of buyers not wanting to pay this new tax. It is very difficult to make this argument when the three weeks after the implementation of the new tax had the worst weather in almost seventy years. Take my word for it – when there’s a snowstorm, we agents don’t like to go out and show properties – especially tenanted properties. So with fewer showings come lesser sales. That’s my take on it. If the market continues to be down in April and May then we’ll have something to talk about.
While we’re talking about a potential downtown in our real estate market, Garth Turner has released a new book called “Greater Fool” that I suspect will get a lot of attention. In it he basically suggests that our Canadian experience is not that far removed from the recessionary tendencies of the U.S. and a day of reckoning is coming. He examines the myths and counters with the facts. He dissects the American sub-prime experience and finds that the problems go far beyond mortgage products, and also reach into Toronto, Calgary and Vancouver.
I comment on this because Garth is one of Canada’s leading real estate forecasters and a lot of folks subscribe to his views. He also backs up a lot of his theories with historical data. I can’t say where the market is going after a frigid two months, but I’m still seeing multiple offers on many properties. There is also a lot of new inventory hitting the market. If the prices were too high on these new properties, the multiple-offer process would die – and that hasn’t happened yet.
It stands to reason though that the status of our economy will parallel the American situation. Canada is right now moving along with the U.S. towards recession. In fact the whole world is heading towards recession. Naturally a lot of industries are tied to what happens in the U.S. so logically it should only be a matter of time before our real estate market starts to suffer. I just don’t think it will or even can happen overnight, so we’ll see the signs well in advance. I promise as soon as it starts (if it ever does) then I’ll let you know about it.
When I meet new clients or novice investors they often ask what happens if at some point during ownership of their income property something goes wrong with the tenant relationship. Naturally we would all like to avoid trouble or disputes at all costs, but sometimes we can have a difference of opinion that could cause friction with tenants.
One of the best resources for landlords in the GTA is the Ontario Rental Housing Tribunal. The Tribunal resolves disputes between landlords and tenants about rights and responsibilities under the Tenant Protection Act (TPA), including rent increases, evictions and privacy issues.
• The system resolves disputes in a less formal environment than found in provincial courts.
• Landlords and tenants of most residential rental units are covered under the TPA, including high rise rental units, single family homes, basement units, rental condominiums, care homes, and mobile homes.
• Some units are partially covered by the TPA, including new residential complexes, and government owned and non-profit housing units.
• Some accommodation is completely exempt from the TPA, including units with a kitchen or bathroom shared with the owner, and temporary accommodation such as hotels and motels.
They are an independent, quasi-judicial agency. In mediation, a Tribunal mediator will help a landlord and tenant to resolve a dispute and reach an agreement they are satisfied with. In adjudication, a hearing may be held. A Tribunal member makes a decision based on the evidence examined, and issues an "order." The Tribunal also provides landlords and tenants with further information about the rights and obligations each has under the Tenant Protection Act. It is an invaluable service that has helped relations between landlord and their tenants.
Another wonderful resource is www.landlordselfhelp.com. This site is geared towards small scale income property owners and they do a bang-up job of offering informative tips and advice. I also always recommend checking out our website (www.plex.ca) as I make sure that we update it with the most relevant and poignant links
The last topic I’d like to address is for all my existing clients who are looking to buy income properties for investment only. I have been keeping a lot of buyers at bay, essentially advising them to wait until prices stop increasing and returns get a little stronger. The question then becomes, given that income properties continue to sell in top neighbourhoods, what is the minimum return that should be acceptable? How low should a cap rate go given that buildings tend to appreciate in the future and we continue to have a very strong rental market?
My answer is simple – seven.
If you see a seven cap or better on paper and the property is in a good area and has some upgrade potential, then I would pursue it. Financials statements have a tendency to sometimes forget key expense items, so usually the stated cap rate is going to be less. I know that over the past three years, marquee income properties have sold for four and five caps based on their neighbours, but if you’re not going to live in them, I believe that this return is simply too low. Given the responsibility of being a landlord, you would like your property to outperform a paper-based investment. If I don’t see a seven cap on the listing, then there are better places to put your money. Of course if you are going to live in the property, it’s a different story entirely. You can accept a lower cap rate if you can derive ulterior benefits by residing there.
I’d like to thank everyone that ordered a copy of my new “Live for Free” guide. It is still available for sale on the Plex website (www.plex.ca) and www.amazon.com if you’d like to get a hard or digital copy.
That’s it for this month. I realize that with an early Easter in March there are no more long weekends until the end of May, so work hard and have fun everybody during this long stretch.
Go Toronto FC!
P.
I’m sure that everyone is as happy as I am that spring is almost here. I think we’ve seen the last of the heavy snow and the biting cold. It couldn’t have happened quickly enough as the bad weather slowed down the business for the months of February and March, particularly with income properties in the downtown core. I mentioned last month that a lot of opponents of the new municipal land transfer tax were pointing to these monthly decreases as the result of buyers not wanting to pay this new tax. It is very difficult to make this argument when the three weeks after the implementation of the new tax had the worst weather in almost seventy years. Take my word for it – when there’s a snowstorm, we agents don’t like to go out and show properties – especially tenanted properties. So with fewer showings come lesser sales. That’s my take on it. If the market continues to be down in April and May then we’ll have something to talk about.
While we’re talking about a potential downtown in our real estate market, Garth Turner has released a new book called “Greater Fool” that I suspect will get a lot of attention. In it he basically suggests that our Canadian experience is not that far removed from the recessionary tendencies of the U.S. and a day of reckoning is coming. He examines the myths and counters with the facts. He dissects the American sub-prime experience and finds that the problems go far beyond mortgage products, and also reach into Toronto, Calgary and Vancouver.
I comment on this because Garth is one of Canada’s leading real estate forecasters and a lot of folks subscribe to his views. He also backs up a lot of his theories with historical data. I can’t say where the market is going after a frigid two months, but I’m still seeing multiple offers on many properties. There is also a lot of new inventory hitting the market. If the prices were too high on these new properties, the multiple-offer process would die – and that hasn’t happened yet.
It stands to reason though that the status of our economy will parallel the American situation. Canada is right now moving along with the U.S. towards recession. In fact the whole world is heading towards recession. Naturally a lot of industries are tied to what happens in the U.S. so logically it should only be a matter of time before our real estate market starts to suffer. I just don’t think it will or even can happen overnight, so we’ll see the signs well in advance. I promise as soon as it starts (if it ever does) then I’ll let you know about it.
When I meet new clients or novice investors they often ask what happens if at some point during ownership of their income property something goes wrong with the tenant relationship. Naturally we would all like to avoid trouble or disputes at all costs, but sometimes we can have a difference of opinion that could cause friction with tenants.
One of the best resources for landlords in the GTA is the Ontario Rental Housing Tribunal. The Tribunal resolves disputes between landlords and tenants about rights and responsibilities under the Tenant Protection Act (TPA), including rent increases, evictions and privacy issues.
• The system resolves disputes in a less formal environment than found in provincial courts.
• Landlords and tenants of most residential rental units are covered under the TPA, including high rise rental units, single family homes, basement units, rental condominiums, care homes, and mobile homes.
• Some units are partially covered by the TPA, including new residential complexes, and government owned and non-profit housing units.
• Some accommodation is completely exempt from the TPA, including units with a kitchen or bathroom shared with the owner, and temporary accommodation such as hotels and motels.
They are an independent, quasi-judicial agency. In mediation, a Tribunal mediator will help a landlord and tenant to resolve a dispute and reach an agreement they are satisfied with. In adjudication, a hearing may be held. A Tribunal member makes a decision based on the evidence examined, and issues an "order." The Tribunal also provides landlords and tenants with further information about the rights and obligations each has under the Tenant Protection Act. It is an invaluable service that has helped relations between landlord and their tenants.
Another wonderful resource is www.landlordselfhelp.com. This site is geared towards small scale income property owners and they do a bang-up job of offering informative tips and advice. I also always recommend checking out our website (www.plex.ca) as I make sure that we update it with the most relevant and poignant links
The last topic I’d like to address is for all my existing clients who are looking to buy income properties for investment only. I have been keeping a lot of buyers at bay, essentially advising them to wait until prices stop increasing and returns get a little stronger. The question then becomes, given that income properties continue to sell in top neighbourhoods, what is the minimum return that should be acceptable? How low should a cap rate go given that buildings tend to appreciate in the future and we continue to have a very strong rental market?
My answer is simple – seven.
If you see a seven cap or better on paper and the property is in a good area and has some upgrade potential, then I would pursue it. Financials statements have a tendency to sometimes forget key expense items, so usually the stated cap rate is going to be less. I know that over the past three years, marquee income properties have sold for four and five caps based on their neighbours, but if you’re not going to live in them, I believe that this return is simply too low. Given the responsibility of being a landlord, you would like your property to outperform a paper-based investment. If I don’t see a seven cap on the listing, then there are better places to put your money. Of course if you are going to live in the property, it’s a different story entirely. You can accept a lower cap rate if you can derive ulterior benefits by residing there.
I’d like to thank everyone that ordered a copy of my new “Live for Free” guide. It is still available for sale on the Plex website (www.plex.ca) and www.amazon.com if you’d like to get a hard or digital copy.
That’s it for this month. I realize that with an early Easter in March there are no more long weekends until the end of May, so work hard and have fun everybody during this long stretch.
Go Toronto FC!
P.
Saturday, March 01, 2008
Toronto Residential Income Property Newsletter: March 2008
Hello everyone. I’m pleased to announce that my new booklet entitled “Live for Free, to be free to live” is finally here. This book is a very handy guide for anyone looking to purchase a duplex, triplex or multiplex in the G.T.A., and is especially beneficial for live-in investors and first-time buyers. I have taken all the key pointers and observations that I have learned from my years of experience in the field and neatly summed them up in this simple and easy-to-read publication. After months of rewrites, typeface and layout changes the first several hundred copies came off the presses in February. I am happy to report that the initial responses have been very encouraging.
For those of you that have known me for the past few years, the “Live for Free” concept isn’t new. I wrote my first version (a whopping fourteen pages) back in 1999 before I had even obtained my real estate license. I was shocked to find at that time that with all the myriad of books on real estate investing, there were very few that talked about living in income properties and how best to buy and maintain them. There was also very little written specifically about the Toronto income property market, which is indeed a unique animal all unto its own. Surprisingly, all these years later there still isn’t a definitive duplex or triplex strategy book so I’m hoping that my effort will fill that void.
This version is the first full-on upgrade that I have done in years with many new sections, a glossary and an investment bibliography. All in all it’s sixty seven pages, with particular emphasis on tips and strategies to maximize your chances for success. I resisted the temptation to pad the book in order to give it more volume with stuff that isn’t really relevant to a discussion of residential income properties. There are also many other Canadian investment books that do a better job of explaining cap rates or how to buy a strip mall, so I’ll leave that discussion to them. I know duplexes and triplexes, with pretty much all the ingredients that go into buying and selling them, so that is what I have tried to completely cover for my audience in this booklet.
“Live for Free” is currently available for sale through the Plex website (www.plex.ca). For the first time, I have decided to charge a small amount just to help recoup some of my upfront production costs. You can purchase the physical guide itself for $14.95 plus $2.00 shipping and handling. You can also get a link to download the book digitally as a PDF file for only $9.95. Just click through to the format that you desire and you will be taken to PayPal where you can easily pay by credit card. I don’t intend to make a profit from this book but there is a cost to printing and mailing them out so that is why I have applied these very nominal charges.
I am also working on a new webpage dedicated specifically to the book to be ultimately found at www.liveforfree.ca. I think that there are a lot of people out there, not just in the Toronto vicinity, but potentially all around the world that can benefit from the information I am providing. That is why we are starting to work on a book webpage separate from our real estate company website. I’d love to hear your thoughts and comments and love it even more if you could help me spread the word and even assist me in generating a few extra on-line sales.
O.K. – enough shameless promotion. Now on to a few topical issues: The new Toronto Land transfer tax went into effect at the beginning of February. Many of you have been asking about what the early read is on its impact. I can definitely say that (from my perspective) February was a slower than average month and sales were less than the same time in 2007. However, the weather has been terrible and it has been very cold. I think that this is more so the reason that the sales numbers may seem a little sluggish. I just got back from Florida to get away from our winter and I’m sure that I’m not the only agent that did the same thing. When the weather is really bad, none of us relish getting out there to trip through properties. As I stated in my past newsletters, I think that this extra upfront fee will be absorbed by both buyer and seller and it ought not to have a huge impact on our market.
TREB’s statistics of housing sales have shown an interesting trend since City Council’s approval of a Toronto land transfer tax last October. When City Council approved the Toronto land transfer tax, it also decided to exempt home purchases made by December 31, 2007. In both December and November of last year, there was a significant increase in market activity. For example, although the month of December typically sees less market activity because of the holidays, in December 2007 housing sales in Toronto were up by 26 per cent over December 2006, significantly higher than the 6 per cent increase for the GTA as a whole. Obviously, when the final numbers come in for February we will be able to get a more complete picture as to this tax’s real effect on the market.
The final numbers for 2007 came out a few weeks ago. Take a look at the chart below and notice how 2007 had higher sales volumes than other year in the past twenty. For all the market analysts who have been predicting a downturn in the market, it’s hard to expect these sales numbers to continue to spike up indefinitely.
I believe that the huge glut of condo sales have helped produce these past few record-breaking years. Once they slow down (and they will!) then we’ll start to see the volumes subside a little. Since income properties represent less than 10% of the total inventory (and I think it’s even less), I don’t feel that they really impact sales volumes that directly. My golden rule still stands: a quality income property in a great part of town that doesn’t need a lot of upkeep will always be desirable since these properties fuel themselves.
That’s it for this month. Go to the Plex site and grab a copy of “Live for Free” and tell all your friends about it. I always appreciate all the help and kind words. See you next time.
P.
Hello everyone. I’m pleased to announce that my new booklet entitled “Live for Free, to be free to live” is finally here. This book is a very handy guide for anyone looking to purchase a duplex, triplex or multiplex in the G.T.A., and is especially beneficial for live-in investors and first-time buyers. I have taken all the key pointers and observations that I have learned from my years of experience in the field and neatly summed them up in this simple and easy-to-read publication. After months of rewrites, typeface and layout changes the first several hundred copies came off the presses in February. I am happy to report that the initial responses have been very encouraging.
For those of you that have known me for the past few years, the “Live for Free” concept isn’t new. I wrote my first version (a whopping fourteen pages) back in 1999 before I had even obtained my real estate license. I was shocked to find at that time that with all the myriad of books on real estate investing, there were very few that talked about living in income properties and how best to buy and maintain them. There was also very little written specifically about the Toronto income property market, which is indeed a unique animal all unto its own. Surprisingly, all these years later there still isn’t a definitive duplex or triplex strategy book so I’m hoping that my effort will fill that void.
This version is the first full-on upgrade that I have done in years with many new sections, a glossary and an investment bibliography. All in all it’s sixty seven pages, with particular emphasis on tips and strategies to maximize your chances for success. I resisted the temptation to pad the book in order to give it more volume with stuff that isn’t really relevant to a discussion of residential income properties. There are also many other Canadian investment books that do a better job of explaining cap rates or how to buy a strip mall, so I’ll leave that discussion to them. I know duplexes and triplexes, with pretty much all the ingredients that go into buying and selling them, so that is what I have tried to completely cover for my audience in this booklet.
“Live for Free” is currently available for sale through the Plex website (www.plex.ca). For the first time, I have decided to charge a small amount just to help recoup some of my upfront production costs. You can purchase the physical guide itself for $14.95 plus $2.00 shipping and handling. You can also get a link to download the book digitally as a PDF file for only $9.95. Just click through to the format that you desire and you will be taken to PayPal where you can easily pay by credit card. I don’t intend to make a profit from this book but there is a cost to printing and mailing them out so that is why I have applied these very nominal charges.
I am also working on a new webpage dedicated specifically to the book to be ultimately found at www.liveforfree.ca. I think that there are a lot of people out there, not just in the Toronto vicinity, but potentially all around the world that can benefit from the information I am providing. That is why we are starting to work on a book webpage separate from our real estate company website. I’d love to hear your thoughts and comments and love it even more if you could help me spread the word and even assist me in generating a few extra on-line sales.
O.K. – enough shameless promotion. Now on to a few topical issues: The new Toronto Land transfer tax went into effect at the beginning of February. Many of you have been asking about what the early read is on its impact. I can definitely say that (from my perspective) February was a slower than average month and sales were less than the same time in 2007. However, the weather has been terrible and it has been very cold. I think that this is more so the reason that the sales numbers may seem a little sluggish. I just got back from Florida to get away from our winter and I’m sure that I’m not the only agent that did the same thing. When the weather is really bad, none of us relish getting out there to trip through properties. As I stated in my past newsletters, I think that this extra upfront fee will be absorbed by both buyer and seller and it ought not to have a huge impact on our market.
TREB’s statistics of housing sales have shown an interesting trend since City Council’s approval of a Toronto land transfer tax last October. When City Council approved the Toronto land transfer tax, it also decided to exempt home purchases made by December 31, 2007. In both December and November of last year, there was a significant increase in market activity. For example, although the month of December typically sees less market activity because of the holidays, in December 2007 housing sales in Toronto were up by 26 per cent over December 2006, significantly higher than the 6 per cent increase for the GTA as a whole. Obviously, when the final numbers come in for February we will be able to get a more complete picture as to this tax’s real effect on the market.
The final numbers for 2007 came out a few weeks ago. Take a look at the chart below and notice how 2007 had higher sales volumes than other year in the past twenty. For all the market analysts who have been predicting a downturn in the market, it’s hard to expect these sales numbers to continue to spike up indefinitely.
I believe that the huge glut of condo sales have helped produce these past few record-breaking years. Once they slow down (and they will!) then we’ll start to see the volumes subside a little. Since income properties represent less than 10% of the total inventory (and I think it’s even less), I don’t feel that they really impact sales volumes that directly. My golden rule still stands: a quality income property in a great part of town that doesn’t need a lot of upkeep will always be desirable since these properties fuel themselves.
That’s it for this month. Go to the Plex site and grab a copy of “Live for Free” and tell all your friends about it. I always appreciate all the help and kind words. See you next time.
P.
Friday, February 01, 2008
Income Property Newsletter - February 2008
This month I’d like to look at a segment of the Toronto real estate market that I haven’t discussed too much in the past. As you know, at Plex we are very active with duplexes, triplexes and multiplexes as well as “fixer-uppers” that may have profit potential. One other area that I have also done a lot of business in the past is with mixed-use buildings – retail storefronts with two or three apartments and/or offices above.
Most of these properties are on popular retail strips like Queen, Bloor, College and obviously Yonge St. There are also little strips like the Forest Hill Village, the shops on Bayview south of Eglinton or at the top of Coxwell in Leslieville. Many neighbourhoods have retail strips that offer every good and service imaginable. Some areas are more known for specialties – for instance restaurants on the Danforth, or on College in Little Italy. Most of the time these buildings fall under the I.C.I. umbrella (commercial rather than residential) even though there may be residential rental apartments above the main floor retail space.
These properties can be quite interesting for someone looking to live-in or for the absentee investor. These mixed-use buildings have been similar to strictly residential properties over the past few years insofar as lower bottom-line returns and negligible cap rates. My advice is to make sure that if you buy a mixed-use building that your main floor retail tenant is on a long lease and that their business is strong, unless of course you have a business to operate out of the main floor yourself. Most of the properties derive the bulk of their income form the main floor lease and it would be difficult to immediately make up that rent if the tenant splits. It is much easier to find a residential tenant than a commercial one. Remember too that every user is going to want to build to suit, so that cost is likely cost you months of free rent. Also, most of these properties are on busy main streets, so keep that in mind if you intend to live in it.
Some of my clients have asked where the commercial market is going since each month my comments seem to be more focused on the residential resale side of the equation. Unlike houses in the prime areas of the core, I think that the prices of commercial properties may start to come down a little. It is believed that REITs (real estate investment trusts) are great indicators of where the commercial market is going. Experts say that the overall commercial prices have already started to drop and there may have been as much as a 5% decline last year, with potentially more of a drop to follow. This is quite interesting because there is no indication that this is happening yet on the residential side.
So does that mean that a storefront with two units above it will be a better buy this year than a regular triplex? Quite often I will highlight duplexes or triplexes that trade for over-asking and comment on how the investment value gets thrown out the window.
I’d like to look at some of last year’s activity that may shed light on what’s happening with these kinds of properties:
Here are all the sales in C01 west of Yonge Street south of Bloor, specifically categorized as stores with apartments or offices above. These include shops on Bathurst, Ossington, Dundas West, Queen West, College St and others.
Field Count Mean
(Average) Median Mode Low High
List Price 37 $860,951 $689,000 n / a $325,000 $4,100,000
Original Price 37 $884,735 $699,900 $799,000 $325,000 $4,700,000
Sold Price 37 $825,486 $680,000 n / a $325,000 $3,900,000
% List 37 96.27 97 98 82 117
Taxes 36 $8,877 $6,648 n / a 2226.7 $55,000
Bedrooms 0 n / a n / a n / a n / a n / a
Washrooms 17 3.6 4 n / a 1 6
Days On Market 37 61 44 n / a 3 232
Note that only six of the thirty-seven sales were over a million dollars. The largest sale which would skew the numbers up was a whole block of College near Spadina that sold for $4M. Most sales are in the five to six range but they tend to be further west towards Dufferin. Obviously to closer to Yonge, the more expensive the buildings become.
Here’s the same analysis for mixed-use buildings on the east side of the DVP. These would include sales on the Danforth, Broadview, Gerrard, Pape, Coxwell St. Clair East & many on Queen Street East.
Field Count Mean
(Average) Median Mode Low High
List Price 61 $566,926 $469,000 $549,000 $245,000 $1,499,900
Original Price 61 $575,039 $485,000 n / a $259,000 $1,499,900
Sold Price 61 $528,146 $444,000 n / a $231,000 $1,350,000
% List 61 93.66 95 95 64 106
Taxes 60 $8,251 $7,910 $3,642.84 $1,500 $25,554
Bedrooms 0 n / a n / a n / a n / a n / a
Washrooms 26 3.3 3 3 1 8
Days On Market 61 53 41 n / a 7 255
The average sales prices are lower than on the west side. The highest sales here are Queen St in the Beach and prime larger buildings on the Danforth. Again the average for a small building with one apartment above seems to around $500K.
I think that the bottom line is if a mixed-use building is throwing off better numbers than a completely residential multiplex and has good lease(s) in place, then it should be considered seriously. I prefer all residential just from a rentability point of view but remember that investment real estate is all about the returns. If cap rates start to get noticeably stronger on mixed-use buildings, I will start steering more of my clients in that direction. It hasn’t happened yet, but as I pointed out earlier, it may.
I’d like to wish you all a Happy Valentine’s Day, especially to all the single folks out there that feel snubbed at this time. If you’re single go out and buy something for yourself – I suspect you can probably afford it more anyway. Enjoy the cold too folks because it doesn’t look like it is going anywhere fast.
P.A.
This month I’d like to look at a segment of the Toronto real estate market that I haven’t discussed too much in the past. As you know, at Plex we are very active with duplexes, triplexes and multiplexes as well as “fixer-uppers” that may have profit potential. One other area that I have also done a lot of business in the past is with mixed-use buildings – retail storefronts with two or three apartments and/or offices above.
Most of these properties are on popular retail strips like Queen, Bloor, College and obviously Yonge St. There are also little strips like the Forest Hill Village, the shops on Bayview south of Eglinton or at the top of Coxwell in Leslieville. Many neighbourhoods have retail strips that offer every good and service imaginable. Some areas are more known for specialties – for instance restaurants on the Danforth, or on College in Little Italy. Most of the time these buildings fall under the I.C.I. umbrella (commercial rather than residential) even though there may be residential rental apartments above the main floor retail space.
These properties can be quite interesting for someone looking to live-in or for the absentee investor. These mixed-use buildings have been similar to strictly residential properties over the past few years insofar as lower bottom-line returns and negligible cap rates. My advice is to make sure that if you buy a mixed-use building that your main floor retail tenant is on a long lease and that their business is strong, unless of course you have a business to operate out of the main floor yourself. Most of the properties derive the bulk of their income form the main floor lease and it would be difficult to immediately make up that rent if the tenant splits. It is much easier to find a residential tenant than a commercial one. Remember too that every user is going to want to build to suit, so that cost is likely cost you months of free rent. Also, most of these properties are on busy main streets, so keep that in mind if you intend to live in it.
Some of my clients have asked where the commercial market is going since each month my comments seem to be more focused on the residential resale side of the equation. Unlike houses in the prime areas of the core, I think that the prices of commercial properties may start to come down a little. It is believed that REITs (real estate investment trusts) are great indicators of where the commercial market is going. Experts say that the overall commercial prices have already started to drop and there may have been as much as a 5% decline last year, with potentially more of a drop to follow. This is quite interesting because there is no indication that this is happening yet on the residential side.
So does that mean that a storefront with two units above it will be a better buy this year than a regular triplex? Quite often I will highlight duplexes or triplexes that trade for over-asking and comment on how the investment value gets thrown out the window.
I’d like to look at some of last year’s activity that may shed light on what’s happening with these kinds of properties:
Here are all the sales in C01 west of Yonge Street south of Bloor, specifically categorized as stores with apartments or offices above. These include shops on Bathurst, Ossington, Dundas West, Queen West, College St and others.
Field Count Mean
(Average) Median Mode Low High
List Price 37 $860,951 $689,000 n / a $325,000 $4,100,000
Original Price 37 $884,735 $699,900 $799,000 $325,000 $4,700,000
Sold Price 37 $825,486 $680,000 n / a $325,000 $3,900,000
% List 37 96.27 97 98 82 117
Taxes 36 $8,877 $6,648 n / a 2226.7 $55,000
Bedrooms 0 n / a n / a n / a n / a n / a
Washrooms 17 3.6 4 n / a 1 6
Days On Market 37 61 44 n / a 3 232
Note that only six of the thirty-seven sales were over a million dollars. The largest sale which would skew the numbers up was a whole block of College near Spadina that sold for $4M. Most sales are in the five to six range but they tend to be further west towards Dufferin. Obviously to closer to Yonge, the more expensive the buildings become.
Here’s the same analysis for mixed-use buildings on the east side of the DVP. These would include sales on the Danforth, Broadview, Gerrard, Pape, Coxwell St. Clair East & many on Queen Street East.
Field Count Mean
(Average) Median Mode Low High
List Price 61 $566,926 $469,000 $549,000 $245,000 $1,499,900
Original Price 61 $575,039 $485,000 n / a $259,000 $1,499,900
Sold Price 61 $528,146 $444,000 n / a $231,000 $1,350,000
% List 61 93.66 95 95 64 106
Taxes 60 $8,251 $7,910 $3,642.84 $1,500 $25,554
Bedrooms 0 n / a n / a n / a n / a n / a
Washrooms 26 3.3 3 3 1 8
Days On Market 61 53 41 n / a 7 255
The average sales prices are lower than on the west side. The highest sales here are Queen St in the Beach and prime larger buildings on the Danforth. Again the average for a small building with one apartment above seems to around $500K.
I think that the bottom line is if a mixed-use building is throwing off better numbers than a completely residential multiplex and has good lease(s) in place, then it should be considered seriously. I prefer all residential just from a rentability point of view but remember that investment real estate is all about the returns. If cap rates start to get noticeably stronger on mixed-use buildings, I will start steering more of my clients in that direction. It hasn’t happened yet, but as I pointed out earlier, it may.
I’d like to wish you all a Happy Valentine’s Day, especially to all the single folks out there that feel snubbed at this time. If you’re single go out and buy something for yourself – I suspect you can probably afford it more anyway. Enjoy the cold too folks because it doesn’t look like it is going anywhere fast.
P.A.
Monday, December 31, 2007
January Income Property Newsletter
Happy New Year everyone! I’d like to personally wish and your family all the best. May all your hopes and dreams come true in 2008 and may you have a truly memorable year.
This month’s newsletter is in two parts. The first part is my annual prognosis for this New Year and what we might expect to see in the Toronto income property market. In the second half I will highlight the ups and downs of the income property market in 2007, illustrating a few sales that still boggle my mind.
The Toronto real estate market stayed strong in 2007 setting another record breaking year. Multiple offers were the norm for quality income properties in the Central Toronto core, with sellers continuing to hold the upper hand. Regardless of cap rate or investment return, duplexes and triplexes traded on land value and the price of comparable single family homes in the same neighbourhoods. For most of the year I discussed in my newsletters the likelihood of this market sustaining itself and how it seemed to be impervious to many of the dilemmas happening stateside. The real estate market in many American cities crashed in 2007 leading experts to ponder how long before a ripple effect would happen in Canada.
My opinion is that the income property market in Toronto for 2007 is going to continue to be strong and not look too different than what we have seen over the past few years. The demand for quality properties in Tier 1 locations will carry on and sellers will still see top dollar for well priced properties. Despite the situation in many key U.S towns, I believe that Toronto is different and there is still room for prices to even go up more. Remember that Canadian house price gains have paled by comparison to other major cities. Toronto showed upwards of 60% increases in prices in certain areas. While this may seem like a dramatic spike, consider that prices in London England went up 270%. In many U.S. cities which are now showing signs of trouble, prices more than doubled. That didn’t happen here. Yes, there were some big numbers but they were still modest compared to some other markets in North America.
The reason why the U.S. market is tanking primarily has to do with poor lending practices. The sub-prime mortgage market has been exposed and it is now clear that many unqualified people were given mortgages. That didn’t happen up here either. Anyone who didn’t have at least a 20% deposit had to insure their mortgage which left lenders (primarily banks) with limited options on the types of mortgages they could offer. As such, riskier borrowers were not given no money down, 100% financed products en masse. Sub-prime mortgages in Canada were less than 5% the total number of granted mortgages. Quite simply, mortgage delinquencies in Canada have been (and I expect will continue to be) far less than in the U.S. In fact, Canadian mortgage growth is running at a 17 year high despite continued talk of a credit crunch.
There are also macro-economic forces to look at when contemplating the real estate market in Toronto. It is too early to tell what the implications of our soaring dollar over the past few months will be, but I think that it will hit the manufacturing sector long before we see it adversely affect the housing market. Also, take a look at all the condo development in Toronto in 2007. Condo sales in Toronto now outpace every type of real estate – this demand has quite a lot of legs left I believe. Consider that agents and consumers are camping out for days in order to get first crack at some of the new projects. Foreign investors like Toronto, that’s for sure. If we were on the verge of a slow-down, it’s not likely that this fervent development would be at an all-time high. Our downtown has dramatically changed over the past few years with all the new condo developments and experts seem to agree that this phenomenon will continue for the foreseeable future.
I personally would like to see a little more reasonableness go back into the Toronto income property market. I have based my business on duplexes and triplexes and it continues to be hard to make a case for cap rates under six. If the market does slow down a touch, (selfishly speaking) it would be great for me. All of my investors, renovators and speculators could come out of the woodwork as it would be safe to come out and play again. Yet unfortunately I don’t see that happening in the short term. I suspect that the bulk of my business will continue to be with owner-occupiers as this still makes the most sense for buying an income property.
I’d now like to present my annual wrap-up of income property sales in the Toronto Central core for last year. As far as I know, there isn’t a formal breakdown of residential resale income-producing properties available elsewhere. What I have done is taken four key geographic areas and looked at all the 2007 sales with three or more kitchens. Unfortunately, this eliminates all the proper duplexes but I don’t like to count houses with basement apartments as income properties, thus the minimum three kitchens. So please take this as a rough, highly unscientific approach to income property sales.
Downtown C01, C08 (South of Bloor) Sales under $600,000
Field Count Mean
(Average) Median Mode Low High
List Price 99 $497,790 $499,000 $599,900 $272,900 $599,900
Original Price 99 $501,234 $499,000 $599,900 $290,000 $649,000
Sold Price 99 $506,709 $520,000 n / a $270,000 $725,000
% List 99 101.73 99 98 92 124
Taxes 97 $3,317 $3,307 n / a $1,570 $4,702.65
Bedrooms 99 4.2 4 4 2 8
Washrooms 99 3.1 3 3 2 5
Days On Market 98 26 14 9 1 185
Downtown C01, C08 (South of Bloor) Sales over $600,000
Field Count Mean
(Average) Median Mode Low High
List Price 66 $814,591 $709,450 $649,000 $609,000 $1,499,000
Original Price 66 $826,977 $747,000 n / a $609,000 $1,499,000
Sold Price 66 $786,968 $700,000 n / a $550,000 $1,350,000
% List 66 97.2 97 96 77 122
Taxes 63 $5,174 $4,401 $3,564.38 $2,064.69 $9,901.51
Bedrooms 66 5.2 5 4 3 9
Washrooms 66 4.1 4 4 2 8
Days On Market 66 27 13 8 2 147
East E01, E02, E03 (Riverdale, Leslieville,The Beach), Sales under $400,000
Field Count Mean
(Average) Median Mode Low High
List Price 67 $333,633 $339,000 n / a $224,900 $399,900
Original Price 67 $336,679 $339,900 n / a $224,900 $418,000
Sold Price 67 $328,015 $326,500 n / a $230,000 $430,300
% List 67 98.51 97 96 86 119
Taxes 63 $2,494 $2,407 n / a $1,577.76 $3,681.01
Bedrooms 67 3.8 3 3 2 9
Washrooms 67 3.3 3 3 2 6
Days On Market 66 29 16.5 n / a 1 102
East E01, E02, E03 (Riverdale, Leslieville,The Beach), Sales over $400,000
Field Count Mean
(Average) Median Mode Low High
List Price 100 $574,543 $529,000 n / a $405,000 $1,400,000
Original Price 100 $621,014 $534,200 n / a $405,000 $4,899,000
Sold Price 100 $567,870 $520,400 n / a $352,000 $1,375,000
% List 100 98.87 98 99 72 123
Taxes 99 $4,281 $3,736 n / a $2,305.08 $16,015
Bedrooms 100 4.3 4 4 1 9
Washrooms 100 3.7 3 3 2 11
Days On Market 96 25 15 7 1 177
Midtown C04, C09, C10 (All sales)
Field Count Mean
(Average) Median Mode Low High
List Price 42 $771,250 $699,950 n / a $388,000 $1,499,000
Original Price 42 $775,345 $699,950 n / a $388,000 $1,499,000
Sold Price 42 $764,824 $698,000 n / a $380,000 $1,467,000
% List 42 98.98 97.5 n / a 85 143
Taxes 42 $5,755 $4,935 n / a $2,770 $14,000
Bedrooms 42 5.1 5 4 2 9
Washrooms 42 4.2 4 3 3 11
Days On Market 41 26 15 n / a 1 156
West side W01 (All sales)
Field Count Mean
(Average) Median Mode Low High
List Price 95 $578,478 $559,000 $599,900 $200,000 $1,149,000
Original Price 95 $584,092 $569,900 n / a $200,000 $1,149,000
Sold Price 95 $582,304 $551,000 n / a $250,000 $1,450,000
% List 95 100.52 99 98 88 132
Taxes 94 $4,107 $3,812 $3,780.41 $1,800 $14,743
Bedrooms 94 4.5 4 4 2 9
Washrooms 94 3.6 3 3 2 8
Days On Market 94 30 13 9 1 241
Here are some of the mind-benders of 2007, all the result of crazy multiple offer situations. I was actually in on a good number of these properties but I didn’t win them for my clients so I don’t mind showing you how crazy it can actually get out there. Remember it’s not often about the bottom line investment. When someone finds a property that they like, sometimes returns are discarded. Take a look at these:
22 Rachael (3 Suites in Rosedale): Asking $995K. Sold $1.425M
430 Markham (4 suites in Annex): Asking $899K. Sold $1.1M
2 Lonsdale (3 suites in Midtown): Asking $969K. Sold $1.121M
52 Grace (3 suites in Annex): Asking $549K. Sold $653K.
167 Shaw (4 suites in Little Italy): Asking $589K. Sold $725K
29 Kintyre (3 suites in Leslieville): Asking $439K. Sold $541K
118 Marion (5 suites in Roncesvalles Village): Asking $829K. Sold $965K
There were countless other income properties that traded for over-asking price. My point here is to show you that so long as people are prepared to pay six figures over list price then there’s a long way to go before the market starts to sour.
I look forward to keeping in touch with you over the upcoming months. If this is your year to think about an income property or you know of someone who may be interested, please send along my name. Your referrals are always greatly appreciated.
Take care everybody.
P.A.
Happy New Year everyone! I’d like to personally wish and your family all the best. May all your hopes and dreams come true in 2008 and may you have a truly memorable year.
This month’s newsletter is in two parts. The first part is my annual prognosis for this New Year and what we might expect to see in the Toronto income property market. In the second half I will highlight the ups and downs of the income property market in 2007, illustrating a few sales that still boggle my mind.
The Toronto real estate market stayed strong in 2007 setting another record breaking year. Multiple offers were the norm for quality income properties in the Central Toronto core, with sellers continuing to hold the upper hand. Regardless of cap rate or investment return, duplexes and triplexes traded on land value and the price of comparable single family homes in the same neighbourhoods. For most of the year I discussed in my newsletters the likelihood of this market sustaining itself and how it seemed to be impervious to many of the dilemmas happening stateside. The real estate market in many American cities crashed in 2007 leading experts to ponder how long before a ripple effect would happen in Canada.
My opinion is that the income property market in Toronto for 2007 is going to continue to be strong and not look too different than what we have seen over the past few years. The demand for quality properties in Tier 1 locations will carry on and sellers will still see top dollar for well priced properties. Despite the situation in many key U.S towns, I believe that Toronto is different and there is still room for prices to even go up more. Remember that Canadian house price gains have paled by comparison to other major cities. Toronto showed upwards of 60% increases in prices in certain areas. While this may seem like a dramatic spike, consider that prices in London England went up 270%. In many U.S. cities which are now showing signs of trouble, prices more than doubled. That didn’t happen here. Yes, there were some big numbers but they were still modest compared to some other markets in North America.
The reason why the U.S. market is tanking primarily has to do with poor lending practices. The sub-prime mortgage market has been exposed and it is now clear that many unqualified people were given mortgages. That didn’t happen up here either. Anyone who didn’t have at least a 20% deposit had to insure their mortgage which left lenders (primarily banks) with limited options on the types of mortgages they could offer. As such, riskier borrowers were not given no money down, 100% financed products en masse. Sub-prime mortgages in Canada were less than 5% the total number of granted mortgages. Quite simply, mortgage delinquencies in Canada have been (and I expect will continue to be) far less than in the U.S. In fact, Canadian mortgage growth is running at a 17 year high despite continued talk of a credit crunch.
There are also macro-economic forces to look at when contemplating the real estate market in Toronto. It is too early to tell what the implications of our soaring dollar over the past few months will be, but I think that it will hit the manufacturing sector long before we see it adversely affect the housing market. Also, take a look at all the condo development in Toronto in 2007. Condo sales in Toronto now outpace every type of real estate – this demand has quite a lot of legs left I believe. Consider that agents and consumers are camping out for days in order to get first crack at some of the new projects. Foreign investors like Toronto, that’s for sure. If we were on the verge of a slow-down, it’s not likely that this fervent development would be at an all-time high. Our downtown has dramatically changed over the past few years with all the new condo developments and experts seem to agree that this phenomenon will continue for the foreseeable future.
I personally would like to see a little more reasonableness go back into the Toronto income property market. I have based my business on duplexes and triplexes and it continues to be hard to make a case for cap rates under six. If the market does slow down a touch, (selfishly speaking) it would be great for me. All of my investors, renovators and speculators could come out of the woodwork as it would be safe to come out and play again. Yet unfortunately I don’t see that happening in the short term. I suspect that the bulk of my business will continue to be with owner-occupiers as this still makes the most sense for buying an income property.
I’d now like to present my annual wrap-up of income property sales in the Toronto Central core for last year. As far as I know, there isn’t a formal breakdown of residential resale income-producing properties available elsewhere. What I have done is taken four key geographic areas and looked at all the 2007 sales with three or more kitchens. Unfortunately, this eliminates all the proper duplexes but I don’t like to count houses with basement apartments as income properties, thus the minimum three kitchens. So please take this as a rough, highly unscientific approach to income property sales.
Downtown C01, C08 (South of Bloor) Sales under $600,000
Field Count Mean
(Average) Median Mode Low High
List Price 99 $497,790 $499,000 $599,900 $272,900 $599,900
Original Price 99 $501,234 $499,000 $599,900 $290,000 $649,000
Sold Price 99 $506,709 $520,000 n / a $270,000 $725,000
% List 99 101.73 99 98 92 124
Taxes 97 $3,317 $3,307 n / a $1,570 $4,702.65
Bedrooms 99 4.2 4 4 2 8
Washrooms 99 3.1 3 3 2 5
Days On Market 98 26 14 9 1 185
Downtown C01, C08 (South of Bloor) Sales over $600,000
Field Count Mean
(Average) Median Mode Low High
List Price 66 $814,591 $709,450 $649,000 $609,000 $1,499,000
Original Price 66 $826,977 $747,000 n / a $609,000 $1,499,000
Sold Price 66 $786,968 $700,000 n / a $550,000 $1,350,000
% List 66 97.2 97 96 77 122
Taxes 63 $5,174 $4,401 $3,564.38 $2,064.69 $9,901.51
Bedrooms 66 5.2 5 4 3 9
Washrooms 66 4.1 4 4 2 8
Days On Market 66 27 13 8 2 147
East E01, E02, E03 (Riverdale, Leslieville,The Beach), Sales under $400,000
Field Count Mean
(Average) Median Mode Low High
List Price 67 $333,633 $339,000 n / a $224,900 $399,900
Original Price 67 $336,679 $339,900 n / a $224,900 $418,000
Sold Price 67 $328,015 $326,500 n / a $230,000 $430,300
% List 67 98.51 97 96 86 119
Taxes 63 $2,494 $2,407 n / a $1,577.76 $3,681.01
Bedrooms 67 3.8 3 3 2 9
Washrooms 67 3.3 3 3 2 6
Days On Market 66 29 16.5 n / a 1 102
East E01, E02, E03 (Riverdale, Leslieville,The Beach), Sales over $400,000
Field Count Mean
(Average) Median Mode Low High
List Price 100 $574,543 $529,000 n / a $405,000 $1,400,000
Original Price 100 $621,014 $534,200 n / a $405,000 $4,899,000
Sold Price 100 $567,870 $520,400 n / a $352,000 $1,375,000
% List 100 98.87 98 99 72 123
Taxes 99 $4,281 $3,736 n / a $2,305.08 $16,015
Bedrooms 100 4.3 4 4 1 9
Washrooms 100 3.7 3 3 2 11
Days On Market 96 25 15 7 1 177
Midtown C04, C09, C10 (All sales)
Field Count Mean
(Average) Median Mode Low High
List Price 42 $771,250 $699,950 n / a $388,000 $1,499,000
Original Price 42 $775,345 $699,950 n / a $388,000 $1,499,000
Sold Price 42 $764,824 $698,000 n / a $380,000 $1,467,000
% List 42 98.98 97.5 n / a 85 143
Taxes 42 $5,755 $4,935 n / a $2,770 $14,000
Bedrooms 42 5.1 5 4 2 9
Washrooms 42 4.2 4 3 3 11
Days On Market 41 26 15 n / a 1 156
West side W01 (All sales)
Field Count Mean
(Average) Median Mode Low High
List Price 95 $578,478 $559,000 $599,900 $200,000 $1,149,000
Original Price 95 $584,092 $569,900 n / a $200,000 $1,149,000
Sold Price 95 $582,304 $551,000 n / a $250,000 $1,450,000
% List 95 100.52 99 98 88 132
Taxes 94 $4,107 $3,812 $3,780.41 $1,800 $14,743
Bedrooms 94 4.5 4 4 2 9
Washrooms 94 3.6 3 3 2 8
Days On Market 94 30 13 9 1 241
Here are some of the mind-benders of 2007, all the result of crazy multiple offer situations. I was actually in on a good number of these properties but I didn’t win them for my clients so I don’t mind showing you how crazy it can actually get out there. Remember it’s not often about the bottom line investment. When someone finds a property that they like, sometimes returns are discarded. Take a look at these:
22 Rachael (3 Suites in Rosedale): Asking $995K. Sold $1.425M
430 Markham (4 suites in Annex): Asking $899K. Sold $1.1M
2 Lonsdale (3 suites in Midtown): Asking $969K. Sold $1.121M
52 Grace (3 suites in Annex): Asking $549K. Sold $653K.
167 Shaw (4 suites in Little Italy): Asking $589K. Sold $725K
29 Kintyre (3 suites in Leslieville): Asking $439K. Sold $541K
118 Marion (5 suites in Roncesvalles Village): Asking $829K. Sold $965K
There were countless other income properties that traded for over-asking price. My point here is to show you that so long as people are prepared to pay six figures over list price then there’s a long way to go before the market starts to sour.
I look forward to keeping in touch with you over the upcoming months. If this is your year to think about an income property or you know of someone who may be interested, please send along my name. Your referrals are always greatly appreciated.
Take care everybody.
P.A.
Tuesday, December 04, 2007
Monthly Newsletter: December 2007 (go to www.plex.ca for graphs)
As we approach the holidays, I’d like to take a look at what has been happening in the Toronto real estate market this year. Next month I’ll do my yearly wrap-up of income property sales by region and price, but for now I want to share some macro YTD sales statistics as provided by the Toronto Real Estate Board.
The Toronto Real Estate Board reported a record breaking 7,915 sales of single family homes in October 2007. This represents a 15 percent increase over the sales volume reported for September and a 15 percent increase over the sales volume reported for October 2006. This has helped fuel our best sales year ever.
This chart graphically depicts the number of single family homes sold in the years 1980 through to 2006. The volume of sales in the Toronto area experienced peaks in 1986 and 1988 followed by slow years during the early 1990's. Sales volume picked up from 1996 onwards. Sales of resale homes in 2005 were the highest recorded, although 2007 have already surpassed that.
This chart presents average price trends for houses in the Toronto area during the last 26 years. House prices clearly peaked in 1989 and then dropped until 1996. House prices have been steadily increasing during the last few years although not at the dramatic rates seen during the late 1980s. The average price reported for 2006 was 29 percent higher than the previous peak in 1989.
The average selling price so far for 2007 is $373,998 - approximately 6 percent higher than the average selling price for 2006 of $351,941.
There are certain neighbourhoods where prices have gone up even more dramatically. In Riverdale, where I live, in some cases prices have gone up over 40%. A semi-detached that may have traded for $350K five years ago could sell today for over $500K. This is the case for income properties too – that is why there are so many sales that don’t make sense insofar as the returns go. Duplexes and triplexes in good condition on marquee streets tend to be priced more on comparable sales than on the numbers. Since you can see overall sales still trending upward, it is difficult to say exactly when prices may stabilize such that the bottom line returns start to be more competitive again with other types of investments.
Next month we’ll see how the above market activity has been specifically reflected in the Toronto income property market. To all my friends and clients, I’d like to wish you and your family a very merry X-mas and happy holidays.
P.A.
As we approach the holidays, I’d like to take a look at what has been happening in the Toronto real estate market this year. Next month I’ll do my yearly wrap-up of income property sales by region and price, but for now I want to share some macro YTD sales statistics as provided by the Toronto Real Estate Board.
The Toronto Real Estate Board reported a record breaking 7,915 sales of single family homes in October 2007. This represents a 15 percent increase over the sales volume reported for September and a 15 percent increase over the sales volume reported for October 2006. This has helped fuel our best sales year ever.
This chart graphically depicts the number of single family homes sold in the years 1980 through to 2006. The volume of sales in the Toronto area experienced peaks in 1986 and 1988 followed by slow years during the early 1990's. Sales volume picked up from 1996 onwards. Sales of resale homes in 2005 were the highest recorded, although 2007 have already surpassed that.
This chart presents average price trends for houses in the Toronto area during the last 26 years. House prices clearly peaked in 1989 and then dropped until 1996. House prices have been steadily increasing during the last few years although not at the dramatic rates seen during the late 1980s. The average price reported for 2006 was 29 percent higher than the previous peak in 1989.
The average selling price so far for 2007 is $373,998 - approximately 6 percent higher than the average selling price for 2006 of $351,941.
There are certain neighbourhoods where prices have gone up even more dramatically. In Riverdale, where I live, in some cases prices have gone up over 40%. A semi-detached that may have traded for $350K five years ago could sell today for over $500K. This is the case for income properties too – that is why there are so many sales that don’t make sense insofar as the returns go. Duplexes and triplexes in good condition on marquee streets tend to be priced more on comparable sales than on the numbers. Since you can see overall sales still trending upward, it is difficult to say exactly when prices may stabilize such that the bottom line returns start to be more competitive again with other types of investments.
Next month we’ll see how the above market activity has been specifically reflected in the Toronto income property market. To all my friends and clients, I’d like to wish you and your family a very merry X-mas and happy holidays.
P.A.
Wednesday, October 31, 2007
Toronto Income Property Newsletter - November 2007
Here’s some good news after the approval of the new Toronto Land Transfer Tax in October. According to the National Post, the Canada Mortgage & Housing Corp. (CMHC) has decided to let Canadians buy investment properties with no down payment. Apparently they have quietly introduced changes that lower the down-payment threshold for an investment property. Canadians who qualify will be able to purchase an income property and or several more with no money down. The mortgage insurance for the new product is 7.25% of the total amount of the loan.
“These enhancements will ensure continued supply of affordable rental accommodation across Canada,” said Pierre Serre, vice-president of insurance products with CMHC.
I haven’t been able to find out too much more information so far. Their website isn’t reporting anything on this yet but obviously I will be watching this very closely.
The reaction to the newly imposed Toronto Land Transfer Tax has been mixed. The Toronto Real Estate Board worked very hard to oppose this tax as did many local real estate agents. TREB took a strong position to oppose this tax as unfair in principle and refused to compromise. As a direct result of this strong position they feel that City Council was forced to make a number of amendments to the City’s original proposal, including rebates for first-time buyers, a reduced rate, and grandfathering for existing transactions.
On the other hand, some folks feel that the market can absorb this tax and it will ultimately help in the City’s current cash shortfall. There are others who claim that despite how much realtors may have opposed the tax, aren’t we often indirectly responsible for driving up the prices of homes through things like blind multiple offers or camping out at new condo developments to make a quick commission?
Since I sell income properties I have to look at this tax in terms of adding to the overall cost of the building at closing, thereby reducing my anticipated returns. Will this tax stop people from purchasing duplexes or triplexes for investment? I think if your margin is so tight that this new tax (which at most will be 2%) makes the difference then it probably isn’t too great an investment to begin with.
For those of you who are unfamiliar with how the new Toronto Land Transfer tax will work, it is like this:
There will be a second land transfer tax, on top of the provincial land transfer tax, at the following rates:
For residential homes there is an easy-to-use residential calculator is available at www.NoHomeBuyingTax.com): The rates are as follows:
0.5% of the amount of the purchase price up to and including $55,000
1% of the amount of the purchase price between $55,000 and $400,000
2% of the amount of the purchase price above $400,000
For commercial and industrial properties the rates are:
0.5% of the amount of the purchase price up to and including $55,000
1% of the amount of the purchase price between $55,000 and $400,000
1.5% of the amount between $400,000 and $40 million
1% of the amount above $40 million
First time home buyers of new and re-sale homes will receive a rebate of the Toronto land transfer tax of up to $3,725 (this equals a 100% rebate on homes purchased for up to $400,000). Teranet will be collecting the Toronto land transfer tax for the City of Toronto. Once the City’s first-time buyer policy is reflected in Teranet’s collection system, first-time buyer transactions will be exempt from the Toronto land transfer tax at the time of registration. Until that time, first-time buyer transactions will be charged the Toronto land transfer tax, which will then be rebated by the City of Toronto. The City has indicated that the necessary changes to Teranet’s system will be implemented in the “spring of 2008”.
This all goes into effect February 1st next year.
I read a story the other day that stated that construction projects in downtown Toronto are at the highest rate ever! Think about that for a second. When you are constantly hearing about the dollar and real estate issues in the U.S., you have to wonder if this city can ultimately sustain all this development and leave all the participatory investors unscathed. There are now four high-end hotels going up (the Ritz, Trump, Four Seasons & Shangri-la). It seems like a bit of a glut of top-notch accommodation to me – especially when we’ve gone this long without any. There are a lot of condo projects going up in the core as well but so long as they’re hitting their pre-sale numbers, I suppose the developers are happy and will continue to seek out new locales.
That’s it for now. We’re now less than two months to Christmas and wrapping up another year. Boy, does time fly fast. I look forward to putting out my Live for Free book (see cover below) and getting into the world of self-publishing in 2008. It will also definitely be another interesting year for real estate in Toronto.
See you next month.
P.A.
Monday, October 01, 2007
Monthly Newsletter: October 2007
Last month I addressed the mortgage crisis in the U.S. and how it may ultimately affect our real estate market. I made the point that although certain American cities have been experiencing serious downtowns, up here in Toronto we are still seeing record-breaking months. In September I was involved in six multiple offer situations which suggests that demand is still very strong for quality properties. Income properties in the central core that show well and are in desirable locations are still trading at a steady clip and at all-time high prices.
I don’t want to sound like a broken record coming back to you each month posing the question how long can this continue? Interest rates are staying put and in fact during the month of September the Fed actually lowered them a touch. This led to a whole lot of speculation as to whether the same would happen in Canada. Many financial analysts have gone on record saying that the Toronto market is unique and has the ability to continue on this trajectory for quite some time. But does everyone think that this is the case.
A friend of mine sent me this article from the Globe’s Report on Business that I’d like to highlight since the thoughts are from Bank of Canada Governor David Dodge. Have a look as to what the person with the most power to influence lending rates has to say:
OTTAWA AND VANCOUVER — Bank of Canada Governor David Dodge is raising a red flag about housing prices in Canada, saying that increasingly loose lending rules may be helping overheat the country's real estate market.
While Mr. Dodge did not draw any direct parallels with the subprime mortgage crisis that has gripped the economy of the United States and sparked a credit crunch around the world, he signalled that his long-standing concerns about mortgages with increasingly easy terms have not been addressed.
“One worries about the structure of the mortgage market, that we may be actually aiding, facilitating a rise in the price of houses that is really not warranted,” he told reporters after a speech in Vancouver.
In his comments to reporters Tuesday, Mr. Dodge further warned that housing prices outside of the fast-growing cities of Western Canada may be rising too quickly. Housing prices in Vancouver, Edmonton, Calgary and Regina have soared, but that growth is to be expected from an expanding economy and population. More troubling is the picture elsewhere, Mr. Dodge said.
“But I guess what has worried us a little bit more, is that even if you extract from those centres, what we're seeing is house prices rising faster, probably at up to twice as fast as the rate of inflation,” Mr. Dodge said.
“We're worried about that, and we'll continue to worry about that.”
Mr. Dodge did not name any housing markets, but the most recent figures from the Statistics Canada new housing price index indicate a number of markets are in the range of growth he pegged as problematic: Halifax, with a 6.8-per-cent increase; Hamilton, 4.3 per cent; London, 5 per cent; Greater Sudbury and Thunder Bay, 4.5 per cent; Winnipeg 15.7 per cent.
Last year, Mr. Dodge met with executives from Canadian Mortgage and Housing Corp. (CMHC) to complain about new incentives by the housing agency to encourage interest-only mortgages and mortgages with amortization periods of up to 35 years. CMHC said at the time that it had addressed all of Mr. Dodge's concerns. CMHC said it had no comment yesterday, but the governor's comments suggest his concerns remain.
Since then, Canadian housing prices have soared, and consumer demand in general has surpassed most analysts' expectations with its endurance. At the same time, Mr. Dodge says he is re-evaluating his thinking about how risky and sophisticated credit structures affect the Canadian and global economy.
The credit crunch that has seized global markets since August and caused a tightening of credit in Canada was partially caused by a lack of understanding on the part of central bankers, Mr. Dodge said. The world's central bankers failed to realize the magnitude of the easy money made available over the past few years through sophisticated market structures, and as a result, central banks kept interest rates too low. For Canada, the too-low rates were offset by the appreciating Canadian dollar, he added. But going forward, central bankers will have to better take into account the pricing and availability of credit, when setting monetary policy, he cautioned.
Generally, he expressed confidence that the Canadian economy is supple and strong enough to handle a dollar at par with the U.S. currency and tightening credit conditions at the same time.
“The adjustment is continuing, and in the end the Canadian economy will emerge as a rather strong economy, even if there are difficulties,” he told reporters.
“We're in the process of adjusting and the growth of the economy will not necessarily be as strong as it was in the second quarter but it will continue [to grow] rather strongly.”
The Canadian economy grew an annualized pace of 3.4 per cent in the second quarter, but economists have been scaling back their expectations for the rest of this year and next, and warning of a growing risk of recession in the United States. Within the past year and a half, Canadians have increasingly chosen longer mortgage amortization terms than the average 25 years. Terms of 30, 35 and even 40 years have become much more popular, particularly among home buyers taking out high-ratio mortgages in which they are putting down less than 20 per cent of the purchase price, according to a recent Royal Bank report.
It is interesting that he didn’t specifically mention Toronto and doesn’t seem to be terribly concerned with the declining American dollar bringing our exchange rate to par. It’s amazing that only five years ago, in January 2002, our loonie hit a record low of 61.79 US cents.
Helping the dollar's rise over the past few months was a Statistics Canada report that the economy grew by 0.2 percent in July, the same rate as in June. While the rising currency has been a boon to cross-border and online shoppers, it has also hurt Canada's manufacturing sector, concentrated in Ontario and Quebec, and anyone else competing for sales in the U.S. There have been nearly 250,000 manufacturing-related jobs have been cut over the past three years in an attempt to reduce costs.
"The sectors that obviously get hurt the most are the ones most linked to the United States. The forest products sector has certainly been very hurt by this, (also) the smaller auto parts companies," said Scotiabank economist Carlos Gomes.
We’ll keep a close watch on these economic forces as there eventually may be some consequences to our local market. We’ll just have to wait and see.
Have a great month everybody and Happy Thanksgiving!
P.A.
Last month I addressed the mortgage crisis in the U.S. and how it may ultimately affect our real estate market. I made the point that although certain American cities have been experiencing serious downtowns, up here in Toronto we are still seeing record-breaking months. In September I was involved in six multiple offer situations which suggests that demand is still very strong for quality properties. Income properties in the central core that show well and are in desirable locations are still trading at a steady clip and at all-time high prices.
I don’t want to sound like a broken record coming back to you each month posing the question how long can this continue? Interest rates are staying put and in fact during the month of September the Fed actually lowered them a touch. This led to a whole lot of speculation as to whether the same would happen in Canada. Many financial analysts have gone on record saying that the Toronto market is unique and has the ability to continue on this trajectory for quite some time. But does everyone think that this is the case.
A friend of mine sent me this article from the Globe’s Report on Business that I’d like to highlight since the thoughts are from Bank of Canada Governor David Dodge. Have a look as to what the person with the most power to influence lending rates has to say:
OTTAWA AND VANCOUVER — Bank of Canada Governor David Dodge is raising a red flag about housing prices in Canada, saying that increasingly loose lending rules may be helping overheat the country's real estate market.
While Mr. Dodge did not draw any direct parallels with the subprime mortgage crisis that has gripped the economy of the United States and sparked a credit crunch around the world, he signalled that his long-standing concerns about mortgages with increasingly easy terms have not been addressed.
“One worries about the structure of the mortgage market, that we may be actually aiding, facilitating a rise in the price of houses that is really not warranted,” he told reporters after a speech in Vancouver.
In his comments to reporters Tuesday, Mr. Dodge further warned that housing prices outside of the fast-growing cities of Western Canada may be rising too quickly. Housing prices in Vancouver, Edmonton, Calgary and Regina have soared, but that growth is to be expected from an expanding economy and population. More troubling is the picture elsewhere, Mr. Dodge said.
“But I guess what has worried us a little bit more, is that even if you extract from those centres, what we're seeing is house prices rising faster, probably at up to twice as fast as the rate of inflation,” Mr. Dodge said.
“We're worried about that, and we'll continue to worry about that.”
Mr. Dodge did not name any housing markets, but the most recent figures from the Statistics Canada new housing price index indicate a number of markets are in the range of growth he pegged as problematic: Halifax, with a 6.8-per-cent increase; Hamilton, 4.3 per cent; London, 5 per cent; Greater Sudbury and Thunder Bay, 4.5 per cent; Winnipeg 15.7 per cent.
Last year, Mr. Dodge met with executives from Canadian Mortgage and Housing Corp. (CMHC) to complain about new incentives by the housing agency to encourage interest-only mortgages and mortgages with amortization periods of up to 35 years. CMHC said at the time that it had addressed all of Mr. Dodge's concerns. CMHC said it had no comment yesterday, but the governor's comments suggest his concerns remain.
Since then, Canadian housing prices have soared, and consumer demand in general has surpassed most analysts' expectations with its endurance. At the same time, Mr. Dodge says he is re-evaluating his thinking about how risky and sophisticated credit structures affect the Canadian and global economy.
The credit crunch that has seized global markets since August and caused a tightening of credit in Canada was partially caused by a lack of understanding on the part of central bankers, Mr. Dodge said. The world's central bankers failed to realize the magnitude of the easy money made available over the past few years through sophisticated market structures, and as a result, central banks kept interest rates too low. For Canada, the too-low rates were offset by the appreciating Canadian dollar, he added. But going forward, central bankers will have to better take into account the pricing and availability of credit, when setting monetary policy, he cautioned.
Generally, he expressed confidence that the Canadian economy is supple and strong enough to handle a dollar at par with the U.S. currency and tightening credit conditions at the same time.
“The adjustment is continuing, and in the end the Canadian economy will emerge as a rather strong economy, even if there are difficulties,” he told reporters.
“We're in the process of adjusting and the growth of the economy will not necessarily be as strong as it was in the second quarter but it will continue [to grow] rather strongly.”
The Canadian economy grew an annualized pace of 3.4 per cent in the second quarter, but economists have been scaling back their expectations for the rest of this year and next, and warning of a growing risk of recession in the United States. Within the past year and a half, Canadians have increasingly chosen longer mortgage amortization terms than the average 25 years. Terms of 30, 35 and even 40 years have become much more popular, particularly among home buyers taking out high-ratio mortgages in which they are putting down less than 20 per cent of the purchase price, according to a recent Royal Bank report.
It is interesting that he didn’t specifically mention Toronto and doesn’t seem to be terribly concerned with the declining American dollar bringing our exchange rate to par. It’s amazing that only five years ago, in January 2002, our loonie hit a record low of 61.79 US cents.
Helping the dollar's rise over the past few months was a Statistics Canada report that the economy grew by 0.2 percent in July, the same rate as in June. While the rising currency has been a boon to cross-border and online shoppers, it has also hurt Canada's manufacturing sector, concentrated in Ontario and Quebec, and anyone else competing for sales in the U.S. There have been nearly 250,000 manufacturing-related jobs have been cut over the past three years in an attempt to reduce costs.
"The sectors that obviously get hurt the most are the ones most linked to the United States. The forest products sector has certainly been very hurt by this, (also) the smaller auto parts companies," said Scotiabank economist Carlos Gomes.
We’ll keep a close watch on these economic forces as there eventually may be some consequences to our local market. We’ll just have to wait and see.
Have a great month everybody and Happy Thanksgiving!
P.A.
Monday, September 10, 2007
September 2007 Income Property Newsletter
Happy Labour Day everybody. I hope you all enjoy this last long weekend of the summer. It’s then back to work, back to school and back to a lot more income properties coming up for sale. The Toronto market has enjoyed a great summer with August being another record-setting month, so there’s no reason to expect September and October will be any different.
All the talk in the news over the past few weeks has been about the mortgage crisis and declining real estate markets in the U.S. A lot of people are asking if and when the real estate market up here in Toronto will start to follow suit. It is a difficult question to answer since our market has shown no signs of slowing down at all. Most experts can’t say definitively what will happen but many suggest that interest rates will continue to stay low in order to avoid more panic and stress to already troubled American markets.
It seems like overnight a problem that was limited to a small segment of the U.S. housing market has mushroomed into talk of a worldwide economic slowdown. In a nutshell, here’s how this situation came about. After the dot-com boom, the economy was in a funk and the US Federal Reserve decided to drastically cut interest rates to try and stimulate growth. These low interest rates started a housing frenzy in many major North American cities. Suddenly (and with no real explanation at all) practically anybody who wanted to get a mortgage could get one. Lenders started fighting hand over fist to sign up more and more people to loan money to. The kicker is that they even leant to people with abysmal credit ratings who didn’t even have any cash for a down payment. These “subprime” borrowers hit the market in droves and were all papered up. It was something like 600 billion dollars that was given out. These loans were then sold off in part to massive pension funds, equity investors, etc. many from Europe and other parts of the world. Somehow getting a piece of the pie seemed more important than the inherent risk.
Now fast forward to 2007. Not surprisingly many subprime mortgage lenders have begun to experience delinquent payments. Borrowers, many up to their eyeballs in debt, and with no equity to lose are just starting to walk away from their homes leaving the lender stuck with them. That’s why the markets are beginning to crash. The investors are bailing because there’s just too much risk in their portfolio. More than 120 subprime borrowers in the US have gone out of business. Go figure: they’re now concerned about someone who has no income living in a house that’s worth less than the mortgage on it.
I read that last week that a major Toronto finance company had $250 million worth of granted loans but no investors to put up the money. A coalition of Canadian financial firms had to come to the rescue so that the effect of the credit crunch in the U.S. doesn’t spread into Canada too quickly.
I also believe that the lenders up here were a little more cautious. I’m not saying that all were 100% prudent in their decision-making but I don’t think it was quite the same free-for-all as it was in some States. Only time will tell, but if we are in fact on the verge of a global economic slowdown, then it will affect us eventually.
In October there is going to be a provincial election in Ontario and then Toronto City Council will be revisiting the proposed land transfer tax again. The real estate industry loudly spoke out the first time around and many feel it was one of the most influential voices in getting the tax delayed.
For background on the proposed Toronto land transfer tax you can view TREB’s detailed submission and visit www.NoHomeBuyingTax.com. Some of TREB’s key messages are provided below:
• A second land transfer tax, on top of the existing provincial land transfer tax, is an unfair way to solve the City of Toronto’s financial challenges.
• Provincial action is a key part of the solution to Toronto’s financial challenges. The provincial government must adequately support Toronto. Expecting the City to, instead, penalize homebuyers with a 100% increase to land transfer taxes is not fair.
• The City of Toronto must ensure that its house is in order and all creative solutions have been considered.
• A Toronto land transfer tax will hurt Toronto’s economy, which will have serious implications for the provincial economy.
• By making it more expensive to live in Toronto, a Toronto land transfer tax would contradict the provincial government’s plans to prevent urban sprawl.
• A Toronto land transfer tax hurts those who can least afford it, such as first-time buyers and seniors
• When impacts on mortgage interest and insurance are considered, a Toronto land transfer tax could ultimately cost over $15,000 for the average buyer.
• No other Canadian jurisdiction has two land transfer taxes
• With the proposed Toronto land transfer tax, Toronto would have the highest land transfer taxes in Canada and the second highest in North America
The last thing I’d like to discuss this month is average rents. There are many statistics out there outlining what an average one bedroom rents for in the GTA. Most of these figures come from large apartment building associations or rental tribunals and I find that they don’t really accurately represent the market for duplexes and triplexes in the core. In other words, a one bedroom in a mid-town duplex is quite a different equation than a one bedroom in a high rise in the east or west ends. I usually give my clients the following guidelines for income properties in downtown residential neighbourhoods:
Basements usually start at around $600 - $700 for a bachelor and then go into the $850 - $1000 range for a one bedroom. It is rare to see a basement rent over a grand unless it has many bedrooms, is partially above grade or is in a really nice part of town. I have seen basements rent for less than $600 but they have been very small. Remember a room in a rooming house could be as high as $500 a month these days.
One bedroom suites can be as low as $800 for rental grade (a very basic accommodation) and go up to $1300 or $1400 if they are really nice. Obviously things like parking, access to backyards, condition of appliances, etc will have an upward influence on the rent. Average one bedroom price would be in the $1100 to $1200 range.
Two bedrooms usually start at around $1200 a month and go as high as $2000 a month if they are really nice. Take all the duplexes along Avenue Rd that have the same typical two-bedroom layout – by and large they usually rent for around $1500. A bi-level apartment may get a little more. Once again if the condition is top-notch then it approaches the upper limit. In the high end neighbourhoods the rents can even go higher but some of these suites are absolutely stunning.
When we look at income properties it is always important to gauge if the existing rents are at, above or below market. It’s great if the rent is sustainable but sometimes I see places that I think may be getting too much. Ideally the current rents are below market so that you know they will have the opportunity to go up at some point down the road.
That’s it for this month. I’m sure that by my next newsletter the fall market will be back in full swing. As always if you need any specific market info for duplexes or triplexes in your part of town please send me a line and I’ll get you the data your need right away.
P.A.
Happy Labour Day everybody. I hope you all enjoy this last long weekend of the summer. It’s then back to work, back to school and back to a lot more income properties coming up for sale. The Toronto market has enjoyed a great summer with August being another record-setting month, so there’s no reason to expect September and October will be any different.
All the talk in the news over the past few weeks has been about the mortgage crisis and declining real estate markets in the U.S. A lot of people are asking if and when the real estate market up here in Toronto will start to follow suit. It is a difficult question to answer since our market has shown no signs of slowing down at all. Most experts can’t say definitively what will happen but many suggest that interest rates will continue to stay low in order to avoid more panic and stress to already troubled American markets.
It seems like overnight a problem that was limited to a small segment of the U.S. housing market has mushroomed into talk of a worldwide economic slowdown. In a nutshell, here’s how this situation came about. After the dot-com boom, the economy was in a funk and the US Federal Reserve decided to drastically cut interest rates to try and stimulate growth. These low interest rates started a housing frenzy in many major North American cities. Suddenly (and with no real explanation at all) practically anybody who wanted to get a mortgage could get one. Lenders started fighting hand over fist to sign up more and more people to loan money to. The kicker is that they even leant to people with abysmal credit ratings who didn’t even have any cash for a down payment. These “subprime” borrowers hit the market in droves and were all papered up. It was something like 600 billion dollars that was given out. These loans were then sold off in part to massive pension funds, equity investors, etc. many from Europe and other parts of the world. Somehow getting a piece of the pie seemed more important than the inherent risk.
Now fast forward to 2007. Not surprisingly many subprime mortgage lenders have begun to experience delinquent payments. Borrowers, many up to their eyeballs in debt, and with no equity to lose are just starting to walk away from their homes leaving the lender stuck with them. That’s why the markets are beginning to crash. The investors are bailing because there’s just too much risk in their portfolio. More than 120 subprime borrowers in the US have gone out of business. Go figure: they’re now concerned about someone who has no income living in a house that’s worth less than the mortgage on it.
I read that last week that a major Toronto finance company had $250 million worth of granted loans but no investors to put up the money. A coalition of Canadian financial firms had to come to the rescue so that the effect of the credit crunch in the U.S. doesn’t spread into Canada too quickly.
I also believe that the lenders up here were a little more cautious. I’m not saying that all were 100% prudent in their decision-making but I don’t think it was quite the same free-for-all as it was in some States. Only time will tell, but if we are in fact on the verge of a global economic slowdown, then it will affect us eventually.
In October there is going to be a provincial election in Ontario and then Toronto City Council will be revisiting the proposed land transfer tax again. The real estate industry loudly spoke out the first time around and many feel it was one of the most influential voices in getting the tax delayed.
For background on the proposed Toronto land transfer tax you can view TREB’s detailed submission and visit www.NoHomeBuyingTax.com. Some of TREB’s key messages are provided below:
• A second land transfer tax, on top of the existing provincial land transfer tax, is an unfair way to solve the City of Toronto’s financial challenges.
• Provincial action is a key part of the solution to Toronto’s financial challenges. The provincial government must adequately support Toronto. Expecting the City to, instead, penalize homebuyers with a 100% increase to land transfer taxes is not fair.
• The City of Toronto must ensure that its house is in order and all creative solutions have been considered.
• A Toronto land transfer tax will hurt Toronto’s economy, which will have serious implications for the provincial economy.
• By making it more expensive to live in Toronto, a Toronto land transfer tax would contradict the provincial government’s plans to prevent urban sprawl.
• A Toronto land transfer tax hurts those who can least afford it, such as first-time buyers and seniors
• When impacts on mortgage interest and insurance are considered, a Toronto land transfer tax could ultimately cost over $15,000 for the average buyer.
• No other Canadian jurisdiction has two land transfer taxes
• With the proposed Toronto land transfer tax, Toronto would have the highest land transfer taxes in Canada and the second highest in North America
The last thing I’d like to discuss this month is average rents. There are many statistics out there outlining what an average one bedroom rents for in the GTA. Most of these figures come from large apartment building associations or rental tribunals and I find that they don’t really accurately represent the market for duplexes and triplexes in the core. In other words, a one bedroom in a mid-town duplex is quite a different equation than a one bedroom in a high rise in the east or west ends. I usually give my clients the following guidelines for income properties in downtown residential neighbourhoods:
Basements usually start at around $600 - $700 for a bachelor and then go into the $850 - $1000 range for a one bedroom. It is rare to see a basement rent over a grand unless it has many bedrooms, is partially above grade or is in a really nice part of town. I have seen basements rent for less than $600 but they have been very small. Remember a room in a rooming house could be as high as $500 a month these days.
One bedroom suites can be as low as $800 for rental grade (a very basic accommodation) and go up to $1300 or $1400 if they are really nice. Obviously things like parking, access to backyards, condition of appliances, etc will have an upward influence on the rent. Average one bedroom price would be in the $1100 to $1200 range.
Two bedrooms usually start at around $1200 a month and go as high as $2000 a month if they are really nice. Take all the duplexes along Avenue Rd that have the same typical two-bedroom layout – by and large they usually rent for around $1500. A bi-level apartment may get a little more. Once again if the condition is top-notch then it approaches the upper limit. In the high end neighbourhoods the rents can even go higher but some of these suites are absolutely stunning.
When we look at income properties it is always important to gauge if the existing rents are at, above or below market. It’s great if the rent is sustainable but sometimes I see places that I think may be getting too much. Ideally the current rents are below market so that you know they will have the opportunity to go up at some point down the road.
That’s it for this month. I’m sure that by my next newsletter the fall market will be back in full swing. As always if you need any specific market info for duplexes or triplexes in your part of town please send me a line and I’ll get you the data your need right away.
P.A.
Thursday, August 02, 2007
Wow, is it hot! We’re heading into the August long weekend and there’s no mistaking that we’re in the middle of the summer. There’s been so much talk lately about climate change and how weather patterns are becoming more erratic. It’s supposed to be hot in August, but it seems like the past couple of years have been particularly warm. It’s feels as hot here as it did in the Israeli Desert near the Dead Sea last month. It’s still a great time of year to go tripping through income properties though.
Congratulations to Plex Sales Rep. Jay Snider and his wife Lea on the birth of their first son. Jay’s down in Los Angeles, still active in real estate and renovating homes. He keeps his eye on the Toronto market and still keeps in touch with his gang up here in Toronto. All the best Jay and we all look forward to seeing you soon.
I’m pleased to finally unveil the newly updated Plex website this month. It has been redesigned with a much easier to use interface and new convenient drop down menus. Take a look at our new homepage:
We have also made the information sections easier to read and now allow direct access to the often-used Toolkit from the homepage. Most importantly is the addition of two new “Featured Properties’ links. We have added small commercial buildings and mixed-use retail properties. Many of you have expressed interest in keeping up with the storefront properties market. We will also be adding “Flip Properties” next month. These are all the distressed properties that need major renovations and may offer some sort of profit potential.
I’d like to thank Everth Fletes for all his help in the redesign. He’s also currently putting the finishing touches of the “Live for Free” book that I will be releasing in the Fall. Everth is a consummate professional and I highly recommend him for any design/communications project that you may have. For more details, please check out www.seakore.com.
Even though we’re still in the dead of summer, the Toronto real estate market continues to surge along. There is still plenty of activity and multiple offers continue week after week. There was one home in the Beach last week that traded for $600,000 over the asking price. Either the house was poorly priced, or someone really, really wanted it. I’d guess it was the latter.
The income properties at the moment are a little soft, but I find that that can often change in a heartbeat. There will be more of them by September for sure, especially since most new renters will have moved in. Look for owner-occupied duplexes and triplexes to continue to be in high demand for the duration of the year. The rental properties in top neighbourhoods that show really well, particularly the ones with nice owners’ suites, will certainly continue to get top dollar. If the market does slow down at some point, I think that these kinds of properties will have the best chance to retain their value since in most cases they partially (if not fully) fund themselves.
I’m sure that many of you heard that the proposed Municipal Land Transfer Tax has been delayed. I believe the rational is to see what happens after the Provincial election in October, but don’t be surprised if this tax still comes to pass.
That’s about all I have for this month - short and sweet. Next month I will be providing
Congratulations to Plex Sales Rep. Jay Snider and his wife Lea on the birth of their first son. Jay’s down in Los Angeles, still active in real estate and renovating homes. He keeps his eye on the Toronto market and still keeps in touch with his gang up here in Toronto. All the best Jay and we all look forward to seeing you soon.
I’m pleased to finally unveil the newly updated Plex website this month. It has been redesigned with a much easier to use interface and new convenient drop down menus. Take a look at our new homepage:
We have also made the information sections easier to read and now allow direct access to the often-used Toolkit from the homepage. Most importantly is the addition of two new “Featured Properties’ links. We have added small commercial buildings and mixed-use retail properties. Many of you have expressed interest in keeping up with the storefront properties market. We will also be adding “Flip Properties” next month. These are all the distressed properties that need major renovations and may offer some sort of profit potential.
I’d like to thank Everth Fletes for all his help in the redesign. He’s also currently putting the finishing touches of the “Live for Free” book that I will be releasing in the Fall. Everth is a consummate professional and I highly recommend him for any design/communications project that you may have. For more details, please check out www.seakore.com.
Even though we’re still in the dead of summer, the Toronto real estate market continues to surge along. There is still plenty of activity and multiple offers continue week after week. There was one home in the Beach last week that traded for $600,000 over the asking price. Either the house was poorly priced, or someone really, really wanted it. I’d guess it was the latter.
The income properties at the moment are a little soft, but I find that that can often change in a heartbeat. There will be more of them by September for sure, especially since most new renters will have moved in. Look for owner-occupied duplexes and triplexes to continue to be in high demand for the duration of the year. The rental properties in top neighbourhoods that show really well, particularly the ones with nice owners’ suites, will certainly continue to get top dollar. If the market does slow down at some point, I think that these kinds of properties will have the best chance to retain their value since in most cases they partially (if not fully) fund themselves.
I’m sure that many of you heard that the proposed Municipal Land Transfer Tax has been delayed. I believe the rational is to see what happens after the Provincial election in October, but don’t be surprised if this tax still comes to pass.
That’s about all I have for this month - short and sweet. Next month I will be providing
Tuesday, July 03, 2007
Monthly Newsletter: July 2007
Happy Canada Day everyone! This is one of my favourite long weekends as it signifies that the prime summer months are upon us and that we are at the half-way point in the year. It gives you pause to reflect on the year thus far as well as give yourself time to think about what you intend to accomplish for the duration of 2007. It also allows us to celebrate being Canadian. Having just come back from holidays in Israel and then Amsterdam (one of my favourite cities in the world), it’s still nice to come back home to Toronto. I’ve traveled extensively and Canada is still the number one country in the world. We are very lucky to be able to live here so we should celebrate it with passion.
What’s so great about Toronto and the rest of Canada? For me there are a number of things. Toronto is one of the most multicultural places in the world. I like that, maybe because I’m part Indian, part Portuguese and was born in the U.K. It’s great to live in a town with so many ethnicities that share the same space. Our restaurants are honestly second to none. I live on the Danforth where you can sample some of the finest meals available in the city. A million people who descend upon the area for “Taste of the Danforth” in August can’t be wrong. We have relatively low crime rates compared to other major North American cities. And of course, the land that is Canada is one of the largest and most geographically diverse on the globe. Drive from Banff through the Rockies at one end of the country or along Sydney’s maritime coast on the other and you’ll see what I mean. I also like the fact that we have four seasons so we get to experience the coldest of the cold as well as the hottest of the hot. Hanging out on the Mediterranean Sea was great for a week, but honestly that constant desert type heat all the time would be a bit too much for me.
We do pay a considerable amount of income tax here though and some experts question how good our standard of living really is. There was a very interesting article in Macleans a few weeks back that discussed why when unemployment rates are so low and the dollar is booming (which is great when you go on holidays by the way), that many Canadians are just scraping by. Canada’s net worth has reached an all-time high of $4.9 trillion and oil exports have been steadily increasing, yet it doesn’t seem like the average Canadian is really that much further ahead.
For the vast majority of workers, personal disposable incomes, while increasing have actually failed to keep pace with economic growth over the past five years. Prices of goods and services have risen at a rate higher than the gains in salaries. Just look at the price of gas! Driven by rising commodity prices, “gasoline and electricity rates have gone up way faster than inflation and incomes” states Jeffrey Gandz of the Ivey School of Business. Good paying manufacturing and production jobs have all but disappeared. Unemployment may be at an all-time low but people with lower paying salaries often need to work two jobs to make ends meet.
In addition to oil, the real estate market in most major Canadian cities has seen unprecedented growth over the last few years. Homes have gotten steadily less affordable since 2000 – in Toronto a two-storey home can consume nearly half of your household income. My dad bought his first house in Toronto many years ago for under $30,000. I deal with first time buyers regularly who have to pony up a half a million just to get into a nice centrally-located income property. So a lot of people in Toronto have to go into debt big-time just to keep a roof over their head. The low interest rates that allowed so many people to get into the game will eventually start to rise and some of these folks will squeezed, and hard! If the dollar is up and the economy is booming, yet you are paying tons of interest on your mortgage and the cost of goods and services are higher than they’ve ever been, then you are simply aren’t going to be able to get ahead that easy. Now I don’t know if the situation is any better in other similar sized American cities, but going forward this is a problem that’s likely going to worsen. Despite this I still would rather struggle in Toronto than anywhere else.
Speaking of how hard it is to try and get ahead when real estate prices are so high, I’d now like to briefly chat about the new Toronto land transfer tax that is going to be implemented. A few months ago I talked about a new home buying tax was being proposed to help the Municipal government deal with some of its shortfalls. It was met with a TON of resistance, but that doesn’t matter because Mr. Miller still seems to be moving forward with it. Since I already gave you my thoughts on how ridiculous this tax is, I thought I would share with you the official position of the Toronto Real Estate Board: The following press release was issued last week:
The Toronto Real Estate Board has told the City of Toronto that its proposal to charge a second land transfer tax treats home buyers unfairly. TREB’s comments were made in a formal presentation to the City’s Executive Committee earlier this week. If the City moves forward with the proposal, the average Toronto home buyer will pay another $4,200 in land transfer tax. That is a 100 per cent increase, and would give Toronto the highest land transfer taxes in Canada and the second highest in North America.
“A second land transfer tax discriminates against home buyers. The City doesn’t provide any land transfer related services, so this tax is just a way of forcing home buyers to pay for services for everyone. That, simply, is unfair,” said Dorothy Mason, President of the Toronto Real Estate Board.
TREB also pointed out that the proposed second land transfer tax is most unfair to those who can least afford it – people who have small down payments and, therefore, can only qualify for a mortgage by also paying for mortgage insurance. “Many home buyers will have no choice but to take money from their down payment to pay this tax, which would mean extra mortgage interest and higher mortgage insurance premiums. For the most vulnerable, this means that the second land transfer tax will actually cost over $15,000. The City will literally be forcing people to take out a mortgage to pay a tax. That is unfair,” Mason said.
TREB also noted that Toronto residents and businesses can’t even expect that the new money the City collects from this tax will result in any improved services. The Mayor and City staff has admitted that the money the City takes from home buyers will be used to fill the holes in the City’s current budget, not to expand or improve services. It’s not fair that home buyers will be paying more for the same service”, Mason said. TREB plans to continue opposing the implementation of a second land transfer tax in Toronto. “A second land transfer tax will make the dream of home ownership more difficult to achieve. Toronto’s REALTORS are protecting the interests of home buyers by strongly opposing the City’s proposal. Just in the last week, hundreds of REALTORS and the public have sent emails to the Mayor and all City Councillors telling them that his tax is a bad idea. We plan to keep up the fight,” said Mason.
I suggest that you all stayed tuned to this one as it will directly affect all of us who buy real estate in Toronto in the future.
Before I sign off, I would like to just share a few observations about income property activity so far this year in the GTA. After the first six months of sales in 2007, there has been little to distinguish between this and the prior two or three years. Sales are still brisk. Prices are still high. Rents are still stable despite the huge increases in prices in some neighbourhoods. In other words, forget about looking to cap rates to get a sense of where the best market opportunities are, especially for owner-occupied income properties. In the nicest neighbourhoods properties with rental suites are still trading at unheard of multiples.
When I do my analyses, I look at all properties that have minimum three kitchens. My assumption is that with three kitchens there must be some sort of rental component to the property. Now sometimes we find European homes that are for one family that might have only two washrooms but have a kitchen on each floor. Even though these are not proper income properties per se, they often do have the ability to be converted to into units. As I have mentioned before, this doesn’t allow me to adequately categorize duplexes, since most listings that show two kitchens are often just houses with basement apartments. I’ve been saying to TREB for years that if a house has two equal size rental units then it should be mandatory that it be classified on MLS as duplex. They don’t seem to agree though.
Here are the income property (3 kitchens) sales statistics for C01, Bloor Street down to the water and west of Yonge which encompasses most of Central Toronto:
Field Count Mean
(Average) Median Mode Low High
List Price 72 $594,111 $571,450 n / a $340,000 $1,399,000
Original Price 72 $601,825 $584,450 n / a $349,000 $1,499,000
Sold Price 72 $593,021 $559,000 $610,000 $335,000 $1,350,000
% List 72 100.01 98 n / a 82 123
Taxes 71 $3,819 $3,481 n / a $1,570 $8,924
Bedrooms 72 4.6 4 4 2 9
Washrooms 72 3.4 3 3 2 8
Days On Market 72 28 15 n / a 2 185
Here are the income property stats for E01, E02 & E03, the east districts including Riverdale, the Danforth, Leslieville and the Beach:
Field Count Mean
(Average) Median Mode Low High
List Price 94 $492,937 $434,450 n / a $234,900 $2,699,000
Original Price 94 $543,386 $434,450 n / a $234,900 $4,899,000
Sold Price 94 $487,282 $431,144 $340,000 $230,000 $2,811,000
% List 94 98.5 98 99 72 123
Taxes 92 $3,656 $2,958 n / a 1645.1 $16,015
Bedrooms 94 4.3 4 4 1 9
Washrooms 94 3.5 3 3 2 11
Days On Market 89 26 13 7 1 172
The next chart is quite interesting. In the midtown areas of C09, C10 & C11 there were only a handful of income property sales in the past six months. Note how high the average prices are:
Field Count Mean
(Average) Median Mode Low High
List Price 10 $890,900 $911,500 $995,000 $599,000 $1,399,000
Original Price 10 $890,900 $911,500 $995,000 $599,000 $1,399,000
Sold Price 10 $916,310 $864,000 $985,000 $599,100 $1,467,000
% List 10 102 98 n / a 92 143
Taxes 10 $6,713 $6,514 n / a $4,104.45 $12,637.36
Bedrooms 10 6 6 8 3 8
Washrooms 10 4.6 4 4 3 8
Days On Market 10 37 26.5 n / a 7 156
(Calculations are performed excluding zero-values)
Finally here are the income property stats for W01, which encompasses High Park and the parts of the west side:
List Price 53 $562,558 $526,999 $519,900 $200,000 $1,100,000
Original Price 53 $566,126 $529,000 n / a $200,000 $1,100,000
Sold Price 53 $567,894 $531,370 $540,000 $250,000 $1,450,000
% List 53 100.72 98 98 88 132
Taxes 52 $3,977 $3,631 $3,888.42 $1,869 $8,684
Bedrooms 52 4.4 4 4 2 9
Washrooms 52 3.6 3 3 2 8
Days On Market 53 32 13 8 1 241
As you can see with the exception of midtown there have been many sales of income properties and the average prices as I alluded to above has been in excess of $500,000. Consider that many single family homes in these same areas trade for the same of even more, so it’s still good to get some revenue out of these steadily increasing properties.
Next month I will finally be unveiling our new look website and will be releasing “Live for Free” in a book format so that I can continue to spread the good word about income properties. Enjoy the sun and if you are traveling this summer, have a safe, fun and relaxing journey.
P.A.
Happy Canada Day everyone! This is one of my favourite long weekends as it signifies that the prime summer months are upon us and that we are at the half-way point in the year. It gives you pause to reflect on the year thus far as well as give yourself time to think about what you intend to accomplish for the duration of 2007. It also allows us to celebrate being Canadian. Having just come back from holidays in Israel and then Amsterdam (one of my favourite cities in the world), it’s still nice to come back home to Toronto. I’ve traveled extensively and Canada is still the number one country in the world. We are very lucky to be able to live here so we should celebrate it with passion.
What’s so great about Toronto and the rest of Canada? For me there are a number of things. Toronto is one of the most multicultural places in the world. I like that, maybe because I’m part Indian, part Portuguese and was born in the U.K. It’s great to live in a town with so many ethnicities that share the same space. Our restaurants are honestly second to none. I live on the Danforth where you can sample some of the finest meals available in the city. A million people who descend upon the area for “Taste of the Danforth” in August can’t be wrong. We have relatively low crime rates compared to other major North American cities. And of course, the land that is Canada is one of the largest and most geographically diverse on the globe. Drive from Banff through the Rockies at one end of the country or along Sydney’s maritime coast on the other and you’ll see what I mean. I also like the fact that we have four seasons so we get to experience the coldest of the cold as well as the hottest of the hot. Hanging out on the Mediterranean Sea was great for a week, but honestly that constant desert type heat all the time would be a bit too much for me.
We do pay a considerable amount of income tax here though and some experts question how good our standard of living really is. There was a very interesting article in Macleans a few weeks back that discussed why when unemployment rates are so low and the dollar is booming (which is great when you go on holidays by the way), that many Canadians are just scraping by. Canada’s net worth has reached an all-time high of $4.9 trillion and oil exports have been steadily increasing, yet it doesn’t seem like the average Canadian is really that much further ahead.
For the vast majority of workers, personal disposable incomes, while increasing have actually failed to keep pace with economic growth over the past five years. Prices of goods and services have risen at a rate higher than the gains in salaries. Just look at the price of gas! Driven by rising commodity prices, “gasoline and electricity rates have gone up way faster than inflation and incomes” states Jeffrey Gandz of the Ivey School of Business. Good paying manufacturing and production jobs have all but disappeared. Unemployment may be at an all-time low but people with lower paying salaries often need to work two jobs to make ends meet.
In addition to oil, the real estate market in most major Canadian cities has seen unprecedented growth over the last few years. Homes have gotten steadily less affordable since 2000 – in Toronto a two-storey home can consume nearly half of your household income. My dad bought his first house in Toronto many years ago for under $30,000. I deal with first time buyers regularly who have to pony up a half a million just to get into a nice centrally-located income property. So a lot of people in Toronto have to go into debt big-time just to keep a roof over their head. The low interest rates that allowed so many people to get into the game will eventually start to rise and some of these folks will squeezed, and hard! If the dollar is up and the economy is booming, yet you are paying tons of interest on your mortgage and the cost of goods and services are higher than they’ve ever been, then you are simply aren’t going to be able to get ahead that easy. Now I don’t know if the situation is any better in other similar sized American cities, but going forward this is a problem that’s likely going to worsen. Despite this I still would rather struggle in Toronto than anywhere else.
Speaking of how hard it is to try and get ahead when real estate prices are so high, I’d now like to briefly chat about the new Toronto land transfer tax that is going to be implemented. A few months ago I talked about a new home buying tax was being proposed to help the Municipal government deal with some of its shortfalls. It was met with a TON of resistance, but that doesn’t matter because Mr. Miller still seems to be moving forward with it. Since I already gave you my thoughts on how ridiculous this tax is, I thought I would share with you the official position of the Toronto Real Estate Board: The following press release was issued last week:
The Toronto Real Estate Board has told the City of Toronto that its proposal to charge a second land transfer tax treats home buyers unfairly. TREB’s comments were made in a formal presentation to the City’s Executive Committee earlier this week. If the City moves forward with the proposal, the average Toronto home buyer will pay another $4,200 in land transfer tax. That is a 100 per cent increase, and would give Toronto the highest land transfer taxes in Canada and the second highest in North America.
“A second land transfer tax discriminates against home buyers. The City doesn’t provide any land transfer related services, so this tax is just a way of forcing home buyers to pay for services for everyone. That, simply, is unfair,” said Dorothy Mason, President of the Toronto Real Estate Board.
TREB also pointed out that the proposed second land transfer tax is most unfair to those who can least afford it – people who have small down payments and, therefore, can only qualify for a mortgage by also paying for mortgage insurance. “Many home buyers will have no choice but to take money from their down payment to pay this tax, which would mean extra mortgage interest and higher mortgage insurance premiums. For the most vulnerable, this means that the second land transfer tax will actually cost over $15,000. The City will literally be forcing people to take out a mortgage to pay a tax. That is unfair,” Mason said.
TREB also noted that Toronto residents and businesses can’t even expect that the new money the City collects from this tax will result in any improved services. The Mayor and City staff has admitted that the money the City takes from home buyers will be used to fill the holes in the City’s current budget, not to expand or improve services. It’s not fair that home buyers will be paying more for the same service”, Mason said. TREB plans to continue opposing the implementation of a second land transfer tax in Toronto. “A second land transfer tax will make the dream of home ownership more difficult to achieve. Toronto’s REALTORS are protecting the interests of home buyers by strongly opposing the City’s proposal. Just in the last week, hundreds of REALTORS and the public have sent emails to the Mayor and all City Councillors telling them that his tax is a bad idea. We plan to keep up the fight,” said Mason.
I suggest that you all stayed tuned to this one as it will directly affect all of us who buy real estate in Toronto in the future.
Before I sign off, I would like to just share a few observations about income property activity so far this year in the GTA. After the first six months of sales in 2007, there has been little to distinguish between this and the prior two or three years. Sales are still brisk. Prices are still high. Rents are still stable despite the huge increases in prices in some neighbourhoods. In other words, forget about looking to cap rates to get a sense of where the best market opportunities are, especially for owner-occupied income properties. In the nicest neighbourhoods properties with rental suites are still trading at unheard of multiples.
When I do my analyses, I look at all properties that have minimum three kitchens. My assumption is that with three kitchens there must be some sort of rental component to the property. Now sometimes we find European homes that are for one family that might have only two washrooms but have a kitchen on each floor. Even though these are not proper income properties per se, they often do have the ability to be converted to into units. As I have mentioned before, this doesn’t allow me to adequately categorize duplexes, since most listings that show two kitchens are often just houses with basement apartments. I’ve been saying to TREB for years that if a house has two equal size rental units then it should be mandatory that it be classified on MLS as duplex. They don’t seem to agree though.
Here are the income property (3 kitchens) sales statistics for C01, Bloor Street down to the water and west of Yonge which encompasses most of Central Toronto:
Field Count Mean
(Average) Median Mode Low High
List Price 72 $594,111 $571,450 n / a $340,000 $1,399,000
Original Price 72 $601,825 $584,450 n / a $349,000 $1,499,000
Sold Price 72 $593,021 $559,000 $610,000 $335,000 $1,350,000
% List 72 100.01 98 n / a 82 123
Taxes 71 $3,819 $3,481 n / a $1,570 $8,924
Bedrooms 72 4.6 4 4 2 9
Washrooms 72 3.4 3 3 2 8
Days On Market 72 28 15 n / a 2 185
Here are the income property stats for E01, E02 & E03, the east districts including Riverdale, the Danforth, Leslieville and the Beach:
Field Count Mean
(Average) Median Mode Low High
List Price 94 $492,937 $434,450 n / a $234,900 $2,699,000
Original Price 94 $543,386 $434,450 n / a $234,900 $4,899,000
Sold Price 94 $487,282 $431,144 $340,000 $230,000 $2,811,000
% List 94 98.5 98 99 72 123
Taxes 92 $3,656 $2,958 n / a 1645.1 $16,015
Bedrooms 94 4.3 4 4 1 9
Washrooms 94 3.5 3 3 2 11
Days On Market 89 26 13 7 1 172
The next chart is quite interesting. In the midtown areas of C09, C10 & C11 there were only a handful of income property sales in the past six months. Note how high the average prices are:
Field Count Mean
(Average) Median Mode Low High
List Price 10 $890,900 $911,500 $995,000 $599,000 $1,399,000
Original Price 10 $890,900 $911,500 $995,000 $599,000 $1,399,000
Sold Price 10 $916,310 $864,000 $985,000 $599,100 $1,467,000
% List 10 102 98 n / a 92 143
Taxes 10 $6,713 $6,514 n / a $4,104.45 $12,637.36
Bedrooms 10 6 6 8 3 8
Washrooms 10 4.6 4 4 3 8
Days On Market 10 37 26.5 n / a 7 156
(Calculations are performed excluding zero-values)
Finally here are the income property stats for W01, which encompasses High Park and the parts of the west side:
List Price 53 $562,558 $526,999 $519,900 $200,000 $1,100,000
Original Price 53 $566,126 $529,000 n / a $200,000 $1,100,000
Sold Price 53 $567,894 $531,370 $540,000 $250,000 $1,450,000
% List 53 100.72 98 98 88 132
Taxes 52 $3,977 $3,631 $3,888.42 $1,869 $8,684
Bedrooms 52 4.4 4 4 2 9
Washrooms 52 3.6 3 3 2 8
Days On Market 53 32 13 8 1 241
As you can see with the exception of midtown there have been many sales of income properties and the average prices as I alluded to above has been in excess of $500,000. Consider that many single family homes in these same areas trade for the same of even more, so it’s still good to get some revenue out of these steadily increasing properties.
Next month I will finally be unveiling our new look website and will be releasing “Live for Free” in a book format so that I can continue to spread the good word about income properties. Enjoy the sun and if you are traveling this summer, have a safe, fun and relaxing journey.
P.A.
Tuesday, May 01, 2007
Real Estate News & Views / Toronto Income Property Report
The Toronto real estate market continues to chug along as we head into the warmer months. There was a 2% reported drop in year-on-year activity for March but without knowing the final numbers yet for April, it seems like this great five year spike in Toronto prices is still holding. Quality income properties, where the cap rates are respectable (minimum 7%), still seem to be selling very quickly if they are priced correctly. Buildings with jazzed up owner’s suites are also still moving fast in the more desirable neighbourhoods. In some cases perhaps buyers are looking to convert back to single family residences but, for the most part, great owner-occupy buildings continue to always be in demand.
I don’t want to sound like a broken record, month after month, stating that the market is great and our prices are holding while other markets are crumbling. But that’s what’s happening! Remember though that this market has been particular good if you are a seller. The high prices and lower returns really don’t do a lot of my investment clientele any favours. If the prices start to subside a little bit and the demand curve falls more in line with supply then I’ll be busier than ever. A lot of investors have been cautious in the current climate and with my blessing have stayed the last few years out. If cap rates start to approach double digits again then many more investor buyers will come out of the woodwork.
The natural question is when will we return to that state, if at all? I don’t have the answer – no one does – but I’d say look to the condo market dropping to be your first sign of trouble. When the new projects that have been traditionally selling out on preview night slow down, then that would be an indication that demand is finally starting to subside. The first time buyers have fuelled this growth and there has been unparalled development in this segment. Will it continue like this, unabated for the foreseeable future? Somehow I doubt it. But when condo sales start to calm down then I think we’ll be closer to a time where income properties will start to make more sense on the numbers.
I have quite a cross section of readers. Many of you are seasoned investors with many years of experience in the landlord business. I also do get a lot of feedback from readers who are just getting into real estate. Sometimes the topics I talk about are only really relevant to one side of my audience, so this month’s column is going to be split into two parts. First if you are looking to get into the income property market in Central Toronto I will present a series of pointers to help you out in the searching and buying process. The second part is for all you income property owners out there – I have presented a “good landlord” checklist. Most of this information I have pulled form the Plex website which I wrote some years ago. Despite market conditions, the advice is still very relevant today. This gave me the opportunity to look at the info on our website and prepare for the launch of our new site later on this summer. Stay tuned for more news on that.
FOR PEOPLE GETTING INTO THE INCOME PROPERTY MARKET:
If you are a first time buyer of a duplex, triplex or multi-unit apartment building in the GTA here are a few steps that you ought to follow to ensure your chances for success:
i. Define Your Investment Goals
Each time you review a listing or visit a property you should ask yourself would this property meet my fiscal objectives? Some of the specific factors that you should consider are: suitability of neighbourhood for renters, the current vacancy rate, economic conditions and your own propensity to stick it out with the property long-term.
ii. Identify Your Needs & Desires
Determine what you’d like to have versus what you must have. These include obvious items like location, type of investment property and whether you have a penchant for doing renovations if necessary.
iii. Know Your Financial Readiness
The financial questions that you have to ask yourself before you get started include:
• How much money can you afford to put towards a deposit on your income property?
• How much of a debt obligation you are prepared to undertake? What is the maximum that you will be able to borrow?
• What is your net monthly payment comfort level? Set a maximum dollar amount and do not exceed this threshold when searching for properties
iv. Establish a Relationship with a Lender
This is very important because there a myriad of financial products on the market today. The mortgage business has become one of Canada’s fastest growing segments. You can get no money down options, 40 year amortizations and there are specific programs for self-employed people that don’t show a lot income on their tax returns. I often say that how we finance a purchase is just as important as how much we pay for the property.
v. Develop a Purchase Strategy
There are many ways to proceed here. I obviously recommend using a realtor like myself for getting into income properties. My knowledge comes from countless hours in the field looking at rental properties, which I think is the best way to truly gain a proper understanding of the market. Once you have found a qualified agent to assist you, then it is important to develop a strong plan of attack. Start by having your agent search your local real estate board's listings as often as possible. There are many different ways in which income properties are listed on the Multiple Listing Service (MLS) so ensure that your agent is are being thorough in conducting searches. Look for listings with multiple kitchens and bathrooms and always check both residential and commercial listings. Challenge your agent to determine an innovative campaign to find you the right income property. If you don't find what you are looking for you may ask them to call income property owners of certain target buildings in your area - you never know when an owner may be thinking of selling. In addition, you may want to place classified ads outlining your specific investment criteria.
FOR LANDLORDS:
Once you have purchased a property and have gotten it all rented out, here a few pointers that may help your continued success with your venture.
i. State of the premises:
This may sound obvious, but under no circumstances should you let your property fall into a state of disrepair. If your tenants are paying each month, on time, then you have an obligation to keep everything in good working order. If something breaks down, fix it. Also, please try and keep up on maintenance items. Make sure the snow gets shoveled, the eaves get cleaned, the grass gets cut, etc. A tidy property is better all around for both you and your tenants.
ii. Rent Increases & the Residential Tenancies Act
You are allowed to raise your tenants rent 2.6% a year. Keep up on your allowable limit and try and stay familiar with you rights and obligations under the tenancies Act. If are unfamiliar with this, please take a look at:
http://www.ontariotenants.ca/law/act.phtml
iii. Fire Issues
As a landlord you are obligated to ensure that your rental property meets fire code guidelines. The best way to ensure that your building is compliant is to hire a retrofit consultant who will give you a laundry list of all the things that need to be done. I recommend Paul Schuster at www.pcfirecode.com.
iv. Eliminating Expenses
Sometimes you are limited on how much rent you can get way with, so the best way to improve your profitability is to cut on expenses. Things like separate hydro meters help but ensuring that your building isn’t wasting energy can go a long way to saving you money in the long term.
That’s it for this month. I’m sure many of you heard the government’s announcement that CMHC is now only required for purchases with less than 20% down (it used to be 25%). It’s a small victory … but we’ll take it!
Take care everybody.
P.A.
The Toronto real estate market continues to chug along as we head into the warmer months. There was a 2% reported drop in year-on-year activity for March but without knowing the final numbers yet for April, it seems like this great five year spike in Toronto prices is still holding. Quality income properties, where the cap rates are respectable (minimum 7%), still seem to be selling very quickly if they are priced correctly. Buildings with jazzed up owner’s suites are also still moving fast in the more desirable neighbourhoods. In some cases perhaps buyers are looking to convert back to single family residences but, for the most part, great owner-occupy buildings continue to always be in demand.
I don’t want to sound like a broken record, month after month, stating that the market is great and our prices are holding while other markets are crumbling. But that’s what’s happening! Remember though that this market has been particular good if you are a seller. The high prices and lower returns really don’t do a lot of my investment clientele any favours. If the prices start to subside a little bit and the demand curve falls more in line with supply then I’ll be busier than ever. A lot of investors have been cautious in the current climate and with my blessing have stayed the last few years out. If cap rates start to approach double digits again then many more investor buyers will come out of the woodwork.
The natural question is when will we return to that state, if at all? I don’t have the answer – no one does – but I’d say look to the condo market dropping to be your first sign of trouble. When the new projects that have been traditionally selling out on preview night slow down, then that would be an indication that demand is finally starting to subside. The first time buyers have fuelled this growth and there has been unparalled development in this segment. Will it continue like this, unabated for the foreseeable future? Somehow I doubt it. But when condo sales start to calm down then I think we’ll be closer to a time where income properties will start to make more sense on the numbers.
I have quite a cross section of readers. Many of you are seasoned investors with many years of experience in the landlord business. I also do get a lot of feedback from readers who are just getting into real estate. Sometimes the topics I talk about are only really relevant to one side of my audience, so this month’s column is going to be split into two parts. First if you are looking to get into the income property market in Central Toronto I will present a series of pointers to help you out in the searching and buying process. The second part is for all you income property owners out there – I have presented a “good landlord” checklist. Most of this information I have pulled form the Plex website which I wrote some years ago. Despite market conditions, the advice is still very relevant today. This gave me the opportunity to look at the info on our website and prepare for the launch of our new site later on this summer. Stay tuned for more news on that.
FOR PEOPLE GETTING INTO THE INCOME PROPERTY MARKET:
If you are a first time buyer of a duplex, triplex or multi-unit apartment building in the GTA here are a few steps that you ought to follow to ensure your chances for success:
i. Define Your Investment Goals
Each time you review a listing or visit a property you should ask yourself would this property meet my fiscal objectives? Some of the specific factors that you should consider are: suitability of neighbourhood for renters, the current vacancy rate, economic conditions and your own propensity to stick it out with the property long-term.
ii. Identify Your Needs & Desires
Determine what you’d like to have versus what you must have. These include obvious items like location, type of investment property and whether you have a penchant for doing renovations if necessary.
iii. Know Your Financial Readiness
The financial questions that you have to ask yourself before you get started include:
• How much money can you afford to put towards a deposit on your income property?
• How much of a debt obligation you are prepared to undertake? What is the maximum that you will be able to borrow?
• What is your net monthly payment comfort level? Set a maximum dollar amount and do not exceed this threshold when searching for properties
iv. Establish a Relationship with a Lender
This is very important because there a myriad of financial products on the market today. The mortgage business has become one of Canada’s fastest growing segments. You can get no money down options, 40 year amortizations and there are specific programs for self-employed people that don’t show a lot income on their tax returns. I often say that how we finance a purchase is just as important as how much we pay for the property.
v. Develop a Purchase Strategy
There are many ways to proceed here. I obviously recommend using a realtor like myself for getting into income properties. My knowledge comes from countless hours in the field looking at rental properties, which I think is the best way to truly gain a proper understanding of the market. Once you have found a qualified agent to assist you, then it is important to develop a strong plan of attack. Start by having your agent search your local real estate board's listings as often as possible. There are many different ways in which income properties are listed on the Multiple Listing Service (MLS) so ensure that your agent is are being thorough in conducting searches. Look for listings with multiple kitchens and bathrooms and always check both residential and commercial listings. Challenge your agent to determine an innovative campaign to find you the right income property. If you don't find what you are looking for you may ask them to call income property owners of certain target buildings in your area - you never know when an owner may be thinking of selling. In addition, you may want to place classified ads outlining your specific investment criteria.
FOR LANDLORDS:
Once you have purchased a property and have gotten it all rented out, here a few pointers that may help your continued success with your venture.
i. State of the premises:
This may sound obvious, but under no circumstances should you let your property fall into a state of disrepair. If your tenants are paying each month, on time, then you have an obligation to keep everything in good working order. If something breaks down, fix it. Also, please try and keep up on maintenance items. Make sure the snow gets shoveled, the eaves get cleaned, the grass gets cut, etc. A tidy property is better all around for both you and your tenants.
ii. Rent Increases & the Residential Tenancies Act
You are allowed to raise your tenants rent 2.6% a year. Keep up on your allowable limit and try and stay familiar with you rights and obligations under the tenancies Act. If are unfamiliar with this, please take a look at:
http://www.ontariotenants.ca/law/act.phtml
iii. Fire Issues
As a landlord you are obligated to ensure that your rental property meets fire code guidelines. The best way to ensure that your building is compliant is to hire a retrofit consultant who will give you a laundry list of all the things that need to be done. I recommend Paul Schuster at www.pcfirecode.com.
iv. Eliminating Expenses
Sometimes you are limited on how much rent you can get way with, so the best way to improve your profitability is to cut on expenses. Things like separate hydro meters help but ensuring that your building isn’t wasting energy can go a long way to saving you money in the long term.
That’s it for this month. I’m sure many of you heard the government’s announcement that CMHC is now only required for purchases with less than 20% down (it used to be 25%). It’s a small victory … but we’ll take it!
Take care everybody.
P.A.
Monday, April 02, 2007
Monthly Income Property Newsletter - April 2007
Spring is in the air. This next quarter is traditionally one of the busiest times for the real estate business and the income property business specifically. As the weather gets warmer, more and more folks turn their attention to potentially moving or getting renovations done for a future sale. People always like to move in the summer so that they are somewhat settled by the fall.
There have been some crazy sales out there over the past month. One house in Riverdale asking $899K traded for over $1.1M. There are many more instances of houses trading for a lot over asking price, suggesting that multiple offers on well presented properties are still the norm. The established neighbourhoods like the Annex, Kingsway, Leaside, the Beach, etc. are still reaching record high numbers on single-family homes. So if anyone is thinking that the market is starting to slow down in favour of buyers over sellers, I respectfully think you’re mistaken. In many major U.S. cities, yes. In Toronto, no.
On the investment side it’s been a little trickier. When properties are only managing only a 4 or 5 cap rate, I advise my investment clients to keep a low profile. Naturally potential capital appreciation is always a lure but it has been difficult to make spreads on properties that are going in multiple offers. It’s the smart folks out there that are moving into their income properties that are fuelling the current market. As always if you are going to move into a property and you don’t absolutely need all the available space, why not let out a portion of it. Take a look at the properties on the sidebar to get a sense of the duplex and multiplex market in Toronto. If you would like more detailed information on the income property market in specific neighbourhoods, please send me an e-mail and I’ll send you all the relevant sales for you to get a better idea.
The baby boom is definitely also affecting income property sales in Toronto as I have seen more and more older couples downsize from bigger homes north of Steeles and come into the city to look for a nice income property to live in. It makes a lot of sense if you travel a lot or may be away for extended periods to have a good tenant on the scene to keep an eye on your home. Naturally, the rent cheque on the first of the month doesn’t hurt either.
A few months ago I talked about some new initiatives tabled by the city, specifically the notion of licensing landlords. Well there at it again! Just recently Toronto mayor Miller proposed a municipal land transfer tax for all new real estate transactions in the future. Remember that we already have a provincial land transfer tax and not all provinces in Canada even have that. So rather than raising property taxes, the idea is that everyone who buys property will have to pay the land transfer tax twice. This is a double whammy. Experts suggest that this new tax will result in a 45% increase in the existing land transfer taxes, which must be paid in full upon completion of the transaction. I hope that they understand that they are putting an unfair burden on people who buy real estate. Essentially, those buyers of new homes, condos, income properties, etc. are subsidizing those folks who rent or stay in their homes forever. The extra money that will be generated will be spent on services that will be enjoyed by all citizens so I can’t understand why the burden won’t be shared equally and why people who purchase real estate would have to bear the brunt of this. I have personally bought quite a few properties over the past years so I certainly don’t relish the idea of having to pay two land transfer taxes going forward. To my knowledge Toronto will be the only city in Canada that has this double taxation in a market where prices are already higher than anywhere else in the country.
The other issue that is really starting to heat up again is the allowing of consumers direct access to the MLS. Some lawmakers in the U.S. are declaring it anti-competitive to only allow licensed realtors onto the system. This past week the RCMP started looking into the operations of the Canadian Real Estate Association trying to uncover unfair practices along the same lines. If a homeowner feels that they can do an adequate job marketing and showing their property, why should they have to pay upwards of 2.5% of the home’s value to a listing agent? It’s a very interesting argument. Many realtors fell that we have to fight tooth and nail to protect our trademarks which ultimately protect our interests. Regardless of how you fell about this issue, I can promise you one thing: this controversy isn’t going to get resolved for some time. We are at the beginning of what will turn into a long, long legal battle. Once lawyer’s for both sides are able to fully digest the ramifications of opening up the MLS, it will takes years, if not decades before any of this gets sorted out. This is the 21st century and technology has altered the fundamental business mechanics of many industries. Remember that there are a lot of agents out there (including myself) who earn their livelihood trading properties. I expect many real estate boards will work vociferously to protect the livelihoods of their members and will keep this issue tied up in the courts for a long time before any solutions or widespread changes occur.
As always when there are many sides to an issue like the two above, many of you may have different thoughts which I’d love to hear. So please drop me a line at paul@plex.ca if you have anything to add. Happy Easter everyone and enjoy your long weekend!
Spring is in the air. This next quarter is traditionally one of the busiest times for the real estate business and the income property business specifically. As the weather gets warmer, more and more folks turn their attention to potentially moving or getting renovations done for a future sale. People always like to move in the summer so that they are somewhat settled by the fall.
There have been some crazy sales out there over the past month. One house in Riverdale asking $899K traded for over $1.1M. There are many more instances of houses trading for a lot over asking price, suggesting that multiple offers on well presented properties are still the norm. The established neighbourhoods like the Annex, Kingsway, Leaside, the Beach, etc. are still reaching record high numbers on single-family homes. So if anyone is thinking that the market is starting to slow down in favour of buyers over sellers, I respectfully think you’re mistaken. In many major U.S. cities, yes. In Toronto, no.
On the investment side it’s been a little trickier. When properties are only managing only a 4 or 5 cap rate, I advise my investment clients to keep a low profile. Naturally potential capital appreciation is always a lure but it has been difficult to make spreads on properties that are going in multiple offers. It’s the smart folks out there that are moving into their income properties that are fuelling the current market. As always if you are going to move into a property and you don’t absolutely need all the available space, why not let out a portion of it. Take a look at the properties on the sidebar to get a sense of the duplex and multiplex market in Toronto. If you would like more detailed information on the income property market in specific neighbourhoods, please send me an e-mail and I’ll send you all the relevant sales for you to get a better idea.
The baby boom is definitely also affecting income property sales in Toronto as I have seen more and more older couples downsize from bigger homes north of Steeles and come into the city to look for a nice income property to live in. It makes a lot of sense if you travel a lot or may be away for extended periods to have a good tenant on the scene to keep an eye on your home. Naturally, the rent cheque on the first of the month doesn’t hurt either.
A few months ago I talked about some new initiatives tabled by the city, specifically the notion of licensing landlords. Well there at it again! Just recently Toronto mayor Miller proposed a municipal land transfer tax for all new real estate transactions in the future. Remember that we already have a provincial land transfer tax and not all provinces in Canada even have that. So rather than raising property taxes, the idea is that everyone who buys property will have to pay the land transfer tax twice. This is a double whammy. Experts suggest that this new tax will result in a 45% increase in the existing land transfer taxes, which must be paid in full upon completion of the transaction. I hope that they understand that they are putting an unfair burden on people who buy real estate. Essentially, those buyers of new homes, condos, income properties, etc. are subsidizing those folks who rent or stay in their homes forever. The extra money that will be generated will be spent on services that will be enjoyed by all citizens so I can’t understand why the burden won’t be shared equally and why people who purchase real estate would have to bear the brunt of this. I have personally bought quite a few properties over the past years so I certainly don’t relish the idea of having to pay two land transfer taxes going forward. To my knowledge Toronto will be the only city in Canada that has this double taxation in a market where prices are already higher than anywhere else in the country.
The other issue that is really starting to heat up again is the allowing of consumers direct access to the MLS. Some lawmakers in the U.S. are declaring it anti-competitive to only allow licensed realtors onto the system. This past week the RCMP started looking into the operations of the Canadian Real Estate Association trying to uncover unfair practices along the same lines. If a homeowner feels that they can do an adequate job marketing and showing their property, why should they have to pay upwards of 2.5% of the home’s value to a listing agent? It’s a very interesting argument. Many realtors fell that we have to fight tooth and nail to protect our trademarks which ultimately protect our interests. Regardless of how you fell about this issue, I can promise you one thing: this controversy isn’t going to get resolved for some time. We are at the beginning of what will turn into a long, long legal battle. Once lawyer’s for both sides are able to fully digest the ramifications of opening up the MLS, it will takes years, if not decades before any of this gets sorted out. This is the 21st century and technology has altered the fundamental business mechanics of many industries. Remember that there are a lot of agents out there (including myself) who earn their livelihood trading properties. I expect many real estate boards will work vociferously to protect the livelihoods of their members and will keep this issue tied up in the courts for a long time before any solutions or widespread changes occur.
As always when there are many sides to an issue like the two above, many of you may have different thoughts which I’d love to hear. So please drop me a line at paul@plex.ca if you have anything to add. Happy Easter everyone and enjoy your long weekend!
Monday, February 26, 2007
Monthly Newsletter March 2007
This month I’d like to start by announcing some exciting changes at Plex Realty Corp. Over the next few months I will slowly be transitioning our operation to the downtown core, much closer to our client base and most of the available income property inventory. As of March 1st, we will be moving our office to interim premises in Riverdale. My partner and I sold our office building in Leaside before the holidays and have been feverishly preparing for this move. We have seen this area transition over the past few years that we have been here and thought that the time was right to cash out. We are in the real estate game after all, so the thinking was that we had improved our building to the point where the price we’d receive today is as much as we’d ever see, so it was time to make this move. This is a strategy that I often discuss with my landlord clients after they spend significant dollars in renovations – it falls under the “time value of money” rule. Essentially money in your pocket today is worth more than money in your pocket tomorrow - so I was happy to put into practice what I so often preach.
I look forward to being a little closer to the downtown core and to not have to do the drive back out east everyday. Our phone number will stay the same (416-422-4882) as will our e-mail contact information. You can always reach me directly at paul@plex.ca or info@plex.ca. Stay tuned for even more changes that we’re contemplating over the months ahead.
Last month I spoke about how income property sales in the Central core were off to a brisk start. It seems like February has been just as strong. Toronto Real Estate Board Members reported 3,240 sales during the first half of February, within two per cent of last February's pace, TREB President Dorothy Mason reported today.
“This is very solid performance in line with some of the strongest results we've had, especially given the record January we just experienced,” Mrs. Mason said. “Consumers are showing that the colder months are a great time to get in to the market or make a switch to a different home.” Mrs. Mason noted that the overall health of the market is very good.
“Activity is accelerating nicely as we move towards spring,” Mrs. Mason said. The first half of February saw nearly 80 per cent more transactions than the first half of January, and that bodes well for the next few months.”
The average price of a resale home climbed in the first half of February, registering at $358,533, up three per cent from the $348,804 recorded during the same timeframe last year. Meanwhile, days on market rose to 35 from 34 in February 2006, and the average list-to-sale price ratio remained stable at 98%. Toronto's Riverdale neighbourhood (E03) saw overall transactions increase by 38 per cent compared to mid-February of last year, fueled by strong sales of townhomes. That is very interesting to me since I bought in Riverdale over the holidays and have been renovating new premises there to move into. I think that certain key neighbourhoods like Riverdale, the Annex and the Beach will always be in demand and quality properties (especially income-generating ones) will be able to maintain their value.
One issue that I’d like to address this month has to do with tenants and pets. Please bear in mind that I’m a cat lover – any of you who have ever gone house-hunting with me knows how much I like to fuss over the cats that I find in rental units. A landlord client asked me the other day if he could deny a tenant who was looking to get a dog. Do you as a landlord have the right to request a tenant to get rid of their pet? The short answer is no. Only if the pet is dangerous, causes allergic reactions or causes problems for other tenants or the landlord, that a tenant must get rid of their pet or consider moving elsewhere as per a formal Landlord application to terminate tenancy based on animals. Even if you signed a lease with a "no pets" clause, if the pet is not a problem for anybody they can not enforce it; such no pet clauses are invalid under the law. Also remember that a tenant does not have to move or get rid of the pet unless you issue a written order to do so. I read a story a few weeks ago about a snake getting loose in a downtown apartment building and causing all sorts of panic amongst residents – I think this would be one of the rare cases where you could request that the pet be removed and not be given any resistance.
Another topic that I’d like to address this month is what your heating obligations are during these cold winter months. I have clients at the moment with an upper tenant who is not satisfied with their temperature, claiming that their suite is too cold. The temperatures are set under municipal bylaws. If the tenant is not the cause for the cold temperatures, such as by keeping windows open, or by setting a thermostat to a lower temperature, then the landlord has a responsibility to maintain a minimum temperature as set by the municipality. If the landlord is not meeting the minimums, a renter may put in a complaint to the city's Building and Inspections department or their local city councillor. In Toronto the temperature must be a minimum of 21C (70 Fahrenheit) from September 15 to June 1 according to Chapter 497-2 of the Toronto Municipal Code under bylaw 499-2000.
Last month I talked about how the City of Toronto was contemplating a licensing system for landlords. I got a lot of interesting e-mails from many of you out there with your thoughts on the matter. I do appreciate all your comments and always welcome your thoughts on anything I might write about. At a minimum, it makes me happy to know that many of you are actually reading these newsletters. Next month I will fill you on how our move is unfolding and introduce you to some changes to the Plex website (http://www.plex.ca/) that we’re currently working on.
Stay warm everyone and please drive carefully in the snow.
This month I’d like to start by announcing some exciting changes at Plex Realty Corp. Over the next few months I will slowly be transitioning our operation to the downtown core, much closer to our client base and most of the available income property inventory. As of March 1st, we will be moving our office to interim premises in Riverdale. My partner and I sold our office building in Leaside before the holidays and have been feverishly preparing for this move. We have seen this area transition over the past few years that we have been here and thought that the time was right to cash out. We are in the real estate game after all, so the thinking was that we had improved our building to the point where the price we’d receive today is as much as we’d ever see, so it was time to make this move. This is a strategy that I often discuss with my landlord clients after they spend significant dollars in renovations – it falls under the “time value of money” rule. Essentially money in your pocket today is worth more than money in your pocket tomorrow - so I was happy to put into practice what I so often preach.
I look forward to being a little closer to the downtown core and to not have to do the drive back out east everyday. Our phone number will stay the same (416-422-4882) as will our e-mail contact information. You can always reach me directly at paul@plex.ca or info@plex.ca. Stay tuned for even more changes that we’re contemplating over the months ahead.
Last month I spoke about how income property sales in the Central core were off to a brisk start. It seems like February has been just as strong. Toronto Real Estate Board Members reported 3,240 sales during the first half of February, within two per cent of last February's pace, TREB President Dorothy Mason reported today.
“This is very solid performance in line with some of the strongest results we've had, especially given the record January we just experienced,” Mrs. Mason said. “Consumers are showing that the colder months are a great time to get in to the market or make a switch to a different home.” Mrs. Mason noted that the overall health of the market is very good.
“Activity is accelerating nicely as we move towards spring,” Mrs. Mason said. The first half of February saw nearly 80 per cent more transactions than the first half of January, and that bodes well for the next few months.”
The average price of a resale home climbed in the first half of February, registering at $358,533, up three per cent from the $348,804 recorded during the same timeframe last year. Meanwhile, days on market rose to 35 from 34 in February 2006, and the average list-to-sale price ratio remained stable at 98%. Toronto's Riverdale neighbourhood (E03) saw overall transactions increase by 38 per cent compared to mid-February of last year, fueled by strong sales of townhomes. That is very interesting to me since I bought in Riverdale over the holidays and have been renovating new premises there to move into. I think that certain key neighbourhoods like Riverdale, the Annex and the Beach will always be in demand and quality properties (especially income-generating ones) will be able to maintain their value.
One issue that I’d like to address this month has to do with tenants and pets. Please bear in mind that I’m a cat lover – any of you who have ever gone house-hunting with me knows how much I like to fuss over the cats that I find in rental units. A landlord client asked me the other day if he could deny a tenant who was looking to get a dog. Do you as a landlord have the right to request a tenant to get rid of their pet? The short answer is no. Only if the pet is dangerous, causes allergic reactions or causes problems for other tenants or the landlord, that a tenant must get rid of their pet or consider moving elsewhere as per a formal Landlord application to terminate tenancy based on animals. Even if you signed a lease with a "no pets" clause, if the pet is not a problem for anybody they can not enforce it; such no pet clauses are invalid under the law. Also remember that a tenant does not have to move or get rid of the pet unless you issue a written order to do so. I read a story a few weeks ago about a snake getting loose in a downtown apartment building and causing all sorts of panic amongst residents – I think this would be one of the rare cases where you could request that the pet be removed and not be given any resistance.
Another topic that I’d like to address this month is what your heating obligations are during these cold winter months. I have clients at the moment with an upper tenant who is not satisfied with their temperature, claiming that their suite is too cold. The temperatures are set under municipal bylaws. If the tenant is not the cause for the cold temperatures, such as by keeping windows open, or by setting a thermostat to a lower temperature, then the landlord has a responsibility to maintain a minimum temperature as set by the municipality. If the landlord is not meeting the minimums, a renter may put in a complaint to the city's Building and Inspections department or their local city councillor. In Toronto the temperature must be a minimum of 21C (70 Fahrenheit) from September 15 to June 1 according to Chapter 497-2 of the Toronto Municipal Code under bylaw 499-2000.
Last month I talked about how the City of Toronto was contemplating a licensing system for landlords. I got a lot of interesting e-mails from many of you out there with your thoughts on the matter. I do appreciate all your comments and always welcome your thoughts on anything I might write about. At a minimum, it makes me happy to know that many of you are actually reading these newsletters. Next month I will fill you on how our move is unfolding and introduce you to some changes to the Plex website (http://www.plex.ca/) that we’re currently working on.
Stay warm everyone and please drive carefully in the snow.
Monthly Newsletter February 2007
The Toronto real estate market has roared back to life and sales of income properties in the Central core are hopping once again. After an early slow down in December and a bit of a late start in January, the amount of trades have steadily rose back to up to levels that we’ve become used to over the past few years. The demand for quality income properties, especially the live-in variety, has not subsided like many of us thought it might. It very much remains a sellers’ market with many sales still going above asking price. I have been in several multiple offer situations over the past two weeks. This is the sure-fire sign that the market is back from the holidays and as strong as ever. Take a look at the properties listed at the sidebar. As you can see, many were priced at perceived market value yet still managed to sell for significantly higher prices.
My prognosis for the spring is that this will simply keep up. I just locked in a new mortgage for five years at a rate under 5% - this in my mind makes for a very favourable borrowing climate. Experts are saying that rates may even drop before they start to creep up again. So long as this is the case, people will be able to carry their properties for less, thereby being able to stretch their after-tax earnings further. I wouldn’t even be surprised if we experience a few record breaking months this year as we have in the past few years.
In a recent news release from the Toronto Real Estate Board, it was announced that the first half of January yielded 1,592 resale home transactions in the Toronto Area, a six per cent increase over the same time period a year ago, . “The strong activity we saw in December has carried through into the new year,” TREB president Dorothy Mason said. “Though these are very preliminary results, it is definitely an encouraging sign for the market to be so active this time of year.” Toronto’s Downtown East (C08) neighbourhood saw 32 per cent more homes change hands compared to mid-January of last year. This is very interesting because this is one district that did not see an unusually high number of income properties trade in January.
This month I’d like to discuss an interesting to topic that will affect many of you reading this. Toronto’s City Council has been toying around with the idea of implementing a licensing system for all landlords. You need a license to drive a car or go fishing so why not make it mandatory that if you are going to have tenants you must be “approved”? In my humble opinion, this is one of the silliest things that I’ve heard proposed in some time.
Councillor Howard Moscoe, who chairs the city's new licensing and standards committee, is proposing the creation of four categories of buildings, based on the state of maintenance and repair – A, B, C, and D. The owner of an A building would pay a modest fee to the city of perhaps $10 a unit per year, while the owner of a D building would be hit with a $400 charge per unit. The goal is to encourage D owners to fix up their properties and qualify for lower fees. When he first floated his proposal earlier this month, Moscoe (Ward 15, Eglinton-Lawrence) said he is targeting landlords with large holdings. "I want to create an incentive for landlords to want to be A buildings."
It seems to me to be just another cash grab by the City. Toronto introduced a retrofit standard and they have done a very poor job policing it and making sure that buildings measure up to this standard. 95% of income properties do not meet retrofit code, so really what’s the point? The City also introduced Current Value Assessment for municipal property taxes a few years back – the idea being that similar types of properties would pay similar tax amounts. Well, unfortunately this hasn’t happened either. They don’t have the manpower to chase down all the illegal construction done without permits let alone try and figure out who has accessory apartments in their homes.
Does this mean that a house with a basement apartment has to be licensed? I would certainly expect not. I really wonder what kind of criteria a landlord would have to meet. Would people be turned down as landlords for any reason or would this be an inalienable right available to all of us, just like healthcare? There are too many questions and not enough answers.
A spokesman for one landlord association seems to agree with me and has also questioned the need for citywide regulations. "We are willing to find a reasonable solution, but a full-fledged licensing regime is not the answer," said Brad Butt, president of the Greater Toronto Apartment Association. I agree with this 100%. He said the city should start bearing down on landlords who are "not maintaining rental-housing properly." At city hall, one advocacy group called for a system that would place rent payments in an escrow account until a landlord makes needed repairs. I’m sure we will be hearing more of this in the upcoming months and I promise to keep you up on what our fair City decides with this proposed legislation.
Lastly, The Toronto Real Estate Board has just released their 2006 Rental Market Report. If you have a moment, you can have a look at it at:
http://communications.torontomls.net/statistics/rental/pdf/rental_report0107.pdf
I find this report quite interesting. Please note that the figures are garnered predominantly from condo rentals on MLS. This naturally only represents a fraction of the actual rentals but statistically it does present some interesting numbers – particularly on average rents. If you are a landlord and would like to get a better sense of the rental market, then this will be quite relevant. It is exceptionally valuable if you have purchased rental condos. In my opinion, it is difficult to make condos work as good cash-on-cash investments unless you have significant equity in the purchase. I’m not aware of any studies that look at duplexes, triplexes, etc. and try to cull any meaningful statistics like the rental report – one day I might have initiate something like that on my own. For the time I’ll have to keep it all in my head.
Next month I’ll be talking more about the income property market as well as letting you in on some very exciting changes at that are starting to unfold at Plex Realty, including a move closer to downtown to better service our client base. Stay tuned for the details.
P.A.
The Toronto real estate market has roared back to life and sales of income properties in the Central core are hopping once again. After an early slow down in December and a bit of a late start in January, the amount of trades have steadily rose back to up to levels that we’ve become used to over the past few years. The demand for quality income properties, especially the live-in variety, has not subsided like many of us thought it might. It very much remains a sellers’ market with many sales still going above asking price. I have been in several multiple offer situations over the past two weeks. This is the sure-fire sign that the market is back from the holidays and as strong as ever. Take a look at the properties listed at the sidebar. As you can see, many were priced at perceived market value yet still managed to sell for significantly higher prices.
My prognosis for the spring is that this will simply keep up. I just locked in a new mortgage for five years at a rate under 5% - this in my mind makes for a very favourable borrowing climate. Experts are saying that rates may even drop before they start to creep up again. So long as this is the case, people will be able to carry their properties for less, thereby being able to stretch their after-tax earnings further. I wouldn’t even be surprised if we experience a few record breaking months this year as we have in the past few years.
In a recent news release from the Toronto Real Estate Board, it was announced that the first half of January yielded 1,592 resale home transactions in the Toronto Area, a six per cent increase over the same time period a year ago, . “The strong activity we saw in December has carried through into the new year,” TREB president Dorothy Mason said. “Though these are very preliminary results, it is definitely an encouraging sign for the market to be so active this time of year.” Toronto’s Downtown East (C08) neighbourhood saw 32 per cent more homes change hands compared to mid-January of last year. This is very interesting because this is one district that did not see an unusually high number of income properties trade in January.
This month I’d like to discuss an interesting to topic that will affect many of you reading this. Toronto’s City Council has been toying around with the idea of implementing a licensing system for all landlords. You need a license to drive a car or go fishing so why not make it mandatory that if you are going to have tenants you must be “approved”? In my humble opinion, this is one of the silliest things that I’ve heard proposed in some time.
Councillor Howard Moscoe, who chairs the city's new licensing and standards committee, is proposing the creation of four categories of buildings, based on the state of maintenance and repair – A, B, C, and D. The owner of an A building would pay a modest fee to the city of perhaps $10 a unit per year, while the owner of a D building would be hit with a $400 charge per unit. The goal is to encourage D owners to fix up their properties and qualify for lower fees. When he first floated his proposal earlier this month, Moscoe (Ward 15, Eglinton-Lawrence) said he is targeting landlords with large holdings. "I want to create an incentive for landlords to want to be A buildings."
It seems to me to be just another cash grab by the City. Toronto introduced a retrofit standard and they have done a very poor job policing it and making sure that buildings measure up to this standard. 95% of income properties do not meet retrofit code, so really what’s the point? The City also introduced Current Value Assessment for municipal property taxes a few years back – the idea being that similar types of properties would pay similar tax amounts. Well, unfortunately this hasn’t happened either. They don’t have the manpower to chase down all the illegal construction done without permits let alone try and figure out who has accessory apartments in their homes.
Does this mean that a house with a basement apartment has to be licensed? I would certainly expect not. I really wonder what kind of criteria a landlord would have to meet. Would people be turned down as landlords for any reason or would this be an inalienable right available to all of us, just like healthcare? There are too many questions and not enough answers.
A spokesman for one landlord association seems to agree with me and has also questioned the need for citywide regulations. "We are willing to find a reasonable solution, but a full-fledged licensing regime is not the answer," said Brad Butt, president of the Greater Toronto Apartment Association. I agree with this 100%. He said the city should start bearing down on landlords who are "not maintaining rental-housing properly." At city hall, one advocacy group called for a system that would place rent payments in an escrow account until a landlord makes needed repairs. I’m sure we will be hearing more of this in the upcoming months and I promise to keep you up on what our fair City decides with this proposed legislation.
Lastly, The Toronto Real Estate Board has just released their 2006 Rental Market Report. If you have a moment, you can have a look at it at:
http://communications.torontomls.net/statistics/rental/pdf/rental_report0107.pdf
I find this report quite interesting. Please note that the figures are garnered predominantly from condo rentals on MLS. This naturally only represents a fraction of the actual rentals but statistically it does present some interesting numbers – particularly on average rents. If you are a landlord and would like to get a better sense of the rental market, then this will be quite relevant. It is exceptionally valuable if you have purchased rental condos. In my opinion, it is difficult to make condos work as good cash-on-cash investments unless you have significant equity in the purchase. I’m not aware of any studies that look at duplexes, triplexes, etc. and try to cull any meaningful statistics like the rental report – one day I might have initiate something like that on my own. For the time I’ll have to keep it all in my head.
Next month I’ll be talking more about the income property market as well as letting you in on some very exciting changes at that are starting to unfold at Plex Realty, including a move closer to downtown to better service our client base. Stay tuned for the details.
P.A.
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