Sorry about that Condo Bubble - We were wrong

We have become the Tale of Two Cities

This time around, many wonder whether a specific type of housing could falter while other categories remain strong. Most eyes are on the condo market in such a scenario. Toronto — now the largest condominium market in North America — is the epicenter for the concern and on Tuesday another set of statistics showed that market foundering once again. “A tale of two markets is exactly what we are dealing with. There are different things happening in each market,” said George Carras, president of RealNet Canada Inc., referring to the high-rise versus low-rise comparison. His research company just looked at new homes but he says it is a pretty decent proxy for what will happen to the existing homes market down the road. http://business.financialpost.com/2013/08/20/condominium-prices-falling-while-low-rise-homes-continue-to-soar/

So, to paraphrase Mr. Carras  we have become two distinct camps of inventory;  one of detached houses and the other condominium high rise apartments.  There are many facts, figures and percentages bantered about in this article that culminate in a completion rate of 19,000 units annually that must be absorbed into the market or they will be vacant and could BUBBLE OUT!

A drop in Toronto Condo prices would be preceded by Investors unable to RENT their units, therefore choosing to DUMP,  dispose of,  SHED at a Fire Sale Prices as additional inventory COMPETES Into the saturated market; BUT, This is absolutely in conflict with the continued increases in residential rental rates in condominium units...  because no one is building rental housing anymore.

The fact that condo rentals continue to outstrip actual resale transactions of condo units — just 4,689 condo apartments were sold via MLS in the second quarter — is a sign that “demand for condominiums in Toronto remains very stable,” said Shaun Hildebrand, vice president of the condo market research firm.“There’s this notion that investors could be bad for the condo market, but what we’ve seen so far is they’ve been providing an essential service — much-needed rental supply to a market that continues to see increasing demand for rental.”Many condo watchers believe the number of condos coming on the rental market is a strong indicator that investors intend to hold, rather than flip, their units and look to make gains over the longer term.http://www.thestar.com/business/real_estate/2013/08/19/rents_jump_4_per_cent_despite_surge_of_condos_on_market.html

So lets take a look at the money supply;

• Continued tightening of credit criteria
• Modest Rise in Interest Rates with more threatened
• Shortened Amortizations**

**THE NEED TO QUALIFY your borrowings on the five year posted rate, means that fewer prospective purchasers are entering the market. This means that as a landlord you are dealing with a minimum of 20% - 25% down on a rental unit that you will have and hold for a few ( we hope longer ) years.

The Toronto Real Estate Board's Market Watch bares out the fact that detached home buyers are moving to the surrounding 905's both Durham, Northumberland or Milton to avoid the higher prices at a ratio of 3:1   Go west young Man! [East and North]

The additional Toronto Land Transfer Tax [calculator] does not encourage staying in the 416 when the average Purchase Price of a detached home is $793 vs $597 in the 905.*
*http://www.torontorealestateboard.com/market_news/market_watch/2013/mw1307.pdf

IMHO There is a  Balancing of Values or equalization between condo complexes as buyers look at their perceived values and ongoing operational costs.  They examine amenities, walk scores, maintenance costs, examine the Status Certificate to understand special assessments, contemplated repairs, MIX (how many are two bedroom vs One bedroom and one bed plus den) and how much is in the Reserve Fund and hopefully find someone experienced to guide them.

Prices will adjust between neighbourhoods in a similar fashion. Values will be better in outlying areas and Toronto continues to grow and prosper as a destination for schools, business and lifestyle. Where is your Doctor's office?  Downtown. Will real estate Collapse? Sorry, They lied.   They need to keep your attention on the News at 11 or selling more papers.

Would you like to talk real estate   I'm at 647.218.2414 and answer my own phone.
Add your comments below.

When Did Real Estate become cheap?

1) Why do you buy real estate?

To Make Money

2) Why do you sell Real estate?

To Make Money

3) Why do I sell real estate?

To Make Money and provide for my family

My office is being repainted. A Number of bookshelves and display items were moved. One that resurfaced was my Listing Presentation Binder. You know; That Vinyl Bound three ring binder with all the plastic sleeves we took to your kitchen table, My History, My career in real estate, What my average sales percentages from asking price are, How many listings I expire unsold, why I am intimate with your community, why my company is well placed to service and handle your sale, Hard  copies of Advertising and Property Presentations. Stuff that Sellers should be asking a Listing Agent. 

I had worked on this book as a Presentation in progress as it spanned 10 years of experience and homes I had sold.

Amongst those sleeved papers were RECO rulings for other members crossing the line with Advertising, Non disclosures, Ethics Decisions and a Form that I signed with RE/MAX in 2000.  Yes.  13 years ago. The single page Agreement indicated that I would not advertise inducements to obtain business. That meant;

• No Kick Backs for Furniture 
• No $1,000 Gas Cards
• No Ipads
• No Cash Backs

This book has not been updated since 2006 when I moved to a Powerpoint Presentation for my Laptop, then updated again when I moved to the iPad.  I regularly receive calls from Sellers that want nothing to do with Marketing, Pricing, Presentation or Negotiation,  they just want the commission rate.  How much do you charge?

Buyers call and TELL ME! That unless I pay them 50% of the GROSS commission they will not purchase with me. I was recently told that [the buyers] are doing their own search and expecting the Listing Agent to cut his commission to make the deal happen.  The FOCUS should be on purchasing a property at a good value compared to the market conditions and recent sales, moving you from pre approval to a FIRM commitment to Finance and to prepare with you for your Statement of Adjustments and final closing.  You can look online for anything you like on my VOW but How will you know which house is a deal and which house is not? I provide the experience to interpret the data and help you move forward with confidence. 

Now we add some perspective. From another real estate source, we can glean that of 34,000 Licensed Real Estate Agents registered in Toronto worked on 80,000 transactions that happened in and around the GTA trading area. Of those registered 6,000 did not sell a home in 2012, while approximately 5,500 averaged one sale. The Author suggests that unless you are selling a minimum of 7- 12 units a year you are not necessarily earning enough to be a full time agent.

What promoted this post?   I received an offer to List for Free*

If the first opportunity to meet and represent your interests is attracted by a FIB, How will our future transaction progress? If the services I offer you have no value  How will I value the equity in your home?  When did selling a house become a BOGO, Two for One or Cash Back Offer? 

When did selling a House become cheap?

Add your comments