What Happens to Toronto Real Estate Prices During a Recession?

Published on 17th October 2019

There has been a lot of chatter about a looming 2020 global recession. I’ve heard people talk about how we’ve had a strong economic run for the last 12 years and we’re due for a recession. YouTube has even suggested videos to me called “Is a Recession Inevitable?”

Big Nose Dives, Big Waves? Technically, a recession is when you have at least 2 months of lower gross domestic product (GDP) declines, even if it’s the smallest of percentages. I think what a lot of people are worried about is whether we should expect to see another financial crisis that is similar to the one that we saw in 2008. If that happens, what will happen to real estate prices in Toronto?

In the past 13 years, there have only been 2 points in time where GTA prices took a fairly big nose dive. These periods are… continue reading by clicking here>>>> March 2009, right in the middle of the financial crisis, and the latest one occurring in May 2018, right after the foreign buyer tax was introduced. The chart below illustrates how rapidly prices fell during the last recession as compared to our foreign buyer tax implementation.

Coincidentally, the year-over-year change for both was 5.43%. If you are curious to see how much of a change it made on our real estate prices, then take a look at the chart below.

Although the financial crisis had a large impact on the global economy, it didn’t affect Toronto as much because we were a blossoming city. I’ll say it again here – our supply issue keeps getting bigger and bigger as the years progress. The biggest dip in prices occurred when the foreign buyer tax came into effect. This tells me that currency outside of North America has a bigger impact on our market than the US. So for our market to have similar effects, I would look to a financial meltdown in the Asian countries.

Where’s the Bottom? There is 100% merit in worrying about the real estate consequences if another recession comes about in 2020, but unless you buy at the absolute bottom and even if you do, your price difference is only 5.43%. The longer you wait, the greater the risk of prices continuing to escalate. As of right now in October 2019, we are just about to pass the absolute peak in composite home prices from May 2017 of $815K. That means it took about 18 months to recover from the worst price fluctuation in over a decade. We’re trending towards a tighter market and prices will likely continue to climb consistently.

The harder you try to time the market, the less money you’ll make. Remember, with real estate investing, you make money with “time IN the market, not TIMING the market”.

Who Wants a Crystal Ball? If you’re right about the recession and can time your purchase perfectly, then great, you may make an incremental 5%. If you’re wrong about timing the market, and even by a little bit, you could be losing LOTS of money. Just take a look at the trajectory of the “Greater Toronto Benchmark Price” graph above showing the fact that real estate prices have only been increasing over time. Don’t you wish you had bought something back in 2007 rather than worrying about that looming 2008 financial crisis back then?

That’s why I’ve been recommending for my investor clients to pick up a cash flow positive property and ride the time in the market. A cash flow positive property will be recession-proof because a tenant will be paying for all of the expenses and you won’t feel the pressure to sell your property if our market is severely affected by a recession. The market will rebound like we’ve seen in the past – it may take 6 months, maybe 12 months or maybe 18 months, but it’ll rebound and you’ll watch your property appreciate.

The Wrap – If this makes sense to you, then you’ll understand why I’m doubling down on the Toronto real estate market in the next 10 years. If you want to ride the next wave and move with the smart money, then make sure you email me at Zhen@PrimePropertiesTO.com. Don’t try to time the market, it’ll only cause you more stress. Just get in the market, set it and forget it!

Until Next Time – Happy Real Estate-ing!
Zhen

What the Election Means for Your Housing Issues

Published on 10th October 2019

I try to stay out of political conversations as much as possible, whether it be the Hong Kong protests that my family often talks about or all the current chatter about the upcoming Federal election. I just do my due diligence so that I know what the election would mean for me. I’m no climate expert, but I can tell you a lot about housing. So I’m going to use this week’s Insight Article to tell you each political party’s housing platform and explain what it could mean for you. Also just for fun, I’ll grade each party’s platform at the end as well.

Justin Trudeau and the Liberals

The Platform:

  • Expand First Time Home Buyer Incentive for Victoria, Vancouver and Toronto to $800,000 from $500,000
  • 1% vacancy tax on non-Canadian residents
  • Up to $40,000 interest-free loan for renovations
  • A few climate-related green initiatives for homes relating to Energy Star

The 2 most prominent points are the expansion of first time home buyer incentive for the more expensive cities and the 1% vacancy tax. The amount up to $800,000 will undoubtedly force a lot of the entry-level products to increase in price. It’ll open a huge floodgate for buyers who have been priced out of the market and let them back in. In the first 6 months of this incentive becoming effective, a spike in the activity and average price would be expected for the Toronto area. All of the condos and semi’s in Toronto will increase in price, in addition to all of the towns and semis in the 905. I would expect the average price to increase by about 4-5% as a result of this policy.

As for the 1% vacancy tax, we still have no definitive proof of how many properties are held empty by non-Canadian residents. There is definitely a handful, but likely not as much as most people would think. This policy feels more like a talking point for the Liberals because it’s a popular talking point among my local clients.

A $40,000 loan for renovations is nice – I can see that being useful for forcing appreciation in properties, but we’ll have to see what the terms on that program are.

Overall Mark: B+ for helping out the first time homeowners in the short-run but may negatively impact the market as a whole by driving prices up at a much more rapid pace in the long-run (due to the spike in demand after first time home buyers receive their incentives to buy a home). In any case, the Liberal platform does not address the supply issue.

Andrew Scheer and the Conservatives

The Platform:

  • Increase amortization periods on insured mortgages to 30 years for first time home buyers
  • Remove stress test for mortgage renewals

Increasing the amortization period for first time home buyers will effectively allow them to qualify for a larger mortgage because their debt ratios will be lower. If you take a look at the chart below, you can see that this new policy will allow you to do a 30-year amortization with 5% down and it could have a sizable difference in your monthly payments (approximately 11% difference in your monthly payment).

The other policy is the removal of the stress test for mortgage renewals. It’s not a removal of the stress test entirely (I honestly don’t think the stress test as a whole is going anywhere anytime soon). The removal applies only to mortgage renewals. It prevents your existing bank from locking you just because you cannot qualify under the new stress test rules with another bank. For example, a few years ago, you got a mortgage from Bank A before the stress test. In present day, you can no longer qualify for the same mortgage with other banks given the current stress test rules. As a result, you’re stuck at Bank A even if they increase the interest rate. You’re out of luck. This new policy will allow you to move your mortgage to a different bank without having to qualify again from scratch and having to go through the stress test again. It’s real purpose is to prevent banks from being shady and increasing interest rates for people who can no longer qualify elsewhere. This issue has actually been happening very low-key since 2018.

Overall Mark: A- because longer mortgage periods will allow first time home buyers to enter the market at a more steady pace, thereby slowly increasing demand and pricing, rather than a rapid spike with free cash incentives from the Liberals. This will allow for more stability of the housing market as a whole in the long term. However, the Conservative platform doesn’t address the supply issue either.

Jagmeet Singh and the NDP

The Platform:

  • Create 500,000 units for affordable housing in the next 10 years, at 50,000 units/year
  • Double Home Buyer’s Tax credit to $1,500
  • Remove GST/HST on new rental units
  • Re-introduce 30-year terms to CMHC for insured mortgages (Similar to Conservatives)
  • Add $5 billion dollars of spending to affordable housing in the first 18 months in office
  • Invest $40 million dollars over 4 years in a shelter enhancement program

This platform is like a beefed up version of the Conservatives’ platform. All of the effects of the 30-year amortization for first time home buyers apply to this NDP platform as well. All of the other proposed policies sound great as well as they are catered to affordable housing in addition to increasing supply. This should help alleviate some supply pressure from the entry-level condo market. The removal of GST/HST will also stimulate a lot more institutional money to build rental buildings to help alleviate the supply issue again. Very good intentions. My only concern about this is that the private sector (builders, developers and investors) can barely create 25,000 units per year in Toronto. As such, how would the NDP be able to promise to double that output to 50,000 units per year, and where is all of this money coming from for housing?

Overall Mark: B- but A+ for the intention of addressing affordability and supply, however, it seems there could be delivery issues in some areas of this platform.

Elizabeth May and the Green Party

The Platform:

  • Housing becomes a fundamental human right for all Canadians and permanent citizens
  • $1.5 billion into co-investment fund and rental assistance programs
  • Remove the first time home buyer incentive
  • Tax incentives for purpose-built rental
  • Remove GST when builder sells empty condos

These policies will ultimately slow down the housing market. The other 3 political parties are going forward with assisting Canadians with buying properties, but the Green Party is going in the opposite direction. Their policies are more geared towards helping those who are in need of shelter (100% approve of that).

Overall Mark: A+ for intentions but D- for not addressing the supply crisis for the middle-class segment in Canada.

The Wrap – I hope that was insightful and helped to shed some more light on the upcoming Federal election. Go out there and vote, because your vote makes a difference!

Until Next time, happy real estate-ing,
Zhen

Rental Supply Crisis

Published on 2nd October 2019

When I was a teenager, my mom used to tell me lessons over and over again in the hopes that I would listen and learn. However, despite many times of telling me the same thing (for instance “stop staying up so late watching TV”), I wouldn’t listen. Even though she meant well, I was just drawn to watching TV late at night before I slept, as with most teenagers. I never really understood why she repeatedly nagged me about sleeping early until I was in my 20’s and realized that falling asleep at my desk was not something I should be doing. Well, lesson learned the hard way… nobody to blame but my stubborn teenage self! These days, I always try to sleep as early as possible to get enough rest. Oh, how the times have changed!

Broken Records Don’t Lie – My point here is that sometimes we don’t understand why someone sounds like a broken record until their message just hits us in the face, metaphorically speaking, at some point down the road. Every time I write about the lack of rental supply or something related to it, I find myself coming back to the same thing. We have a major supply issue no matter how you slice it and dice it. I’m writing about the rental crisis yet again (sorry to be “that naggy parent”!) because I do hope there will be an understanding that with this rental crisis comes an opportunity for real estate investors to profit. Hopefully you will make this realization sooner rather than later. Don’t be that person 10 years in the future telling your kids, “I had a chance to invest in the Toronto Condo Market 10 years ago, but darn I didn’t do it and missed my chance”. Should’ve, could’ve, would’ve – don’t be that person.

Doubling Down Supply – With that being said, another major report titled “Big City Rental Blues: A Look at Canada’s Rental Housing Deficit” by RBC Economics basically labelled Toronto’s rental supply as a crisis. The report explains that we need to double our pace of creating new rental housing in order to meet Toronto’s future demand, which is essentially what I have been saying for the past 2 years.

If you want to read the full report, you can download it by CLICKING HERE

One of the most staggering statistics in the report is that we have a demand of 53,500 rental units that needs to be filled in order to reach equilibrium in the Toronto rental market. 53,500 is a LOT of units. The chart below shows how large of a discrepancy we have right now if we were to try to fix our rental crisis over a 2-year period.

Immigration Influx – Currently, Toronto is at an all-time high for construction and even then, we’re only producing approximately 22,000 units per year – that’s assuming no delays, and if you’re already a pre-construction investor, you know the possibility of a delay is very likely. So then what? In order to fill the demand backlog, perhaps we need to stop immigration and build for more than 2 years just to be at equilibrium. Well, realistically, that isn’t much of a solution. Immigration isn’t coming to a halt anytime soon. Canada only planned for 250,000 immigrants last year but we ended up with 319,000 in 2018. In 2019, we’re on pace for even higher immigration numbers. Of those 319,000 immigrants last year, 47% of them came to Ontario. Effectively, that means we’re had more than 150,000 people immigrate to Ontario, yet we’ve only been building 22,000 homes per year. Is it pretty obvious why we have a supply issue now? Houston, we clearly have a housing crisis.

No Vacancy – Another good point from the report indicates that in order to reach a balanced rental market, we need to be around 3% vacancy rates. Toronto’s vacancy rate has not been above 2% in over 5 years. Have a look at the chart below for our current vacancy rates. It’s absurd when your highest vacancy rate is 1.1% in the Peel Region. Literally all signs point to a major rental crisis!

TAX TIPS – Top 10 Things You Can Expense as an Investor

Published on 26th September 2019

You would be surprised to know how many times I get asked about accounting questions in my day-to-day life when I interact with clients. The two most common questions that I get from clients are the following:

1) Can I expense X (where X is some cost incurred)?

2) Should I incorporate?

So in today’s Insight Article, I’ll do my best to answer both questions for you. Let me preface this by saying that I am not a tax accountant, and even though my wife is a Chartered Accountant, it doesn’t mean you should take what I’m telling you as formal tax advice because everyone’s situation is different and there could be further stipulations attached to the following points. These are just the things that I have learned from my investing journey and talking with good tax accountants who are also investors. Consider this as heads up insight, and for you to consider in your real estate investing journey.

The Top Ten – So without further adieu, here are the top 10 things that you can write off as a real estate investor:

1) Interest – This is probably the biggest one. You can write off your mortgage interest, your Home Equity Line of Credit (HELOC) interest and essentially any interest you may have incurred as a result of investing in real estate. To write off your mortgage interest and your HELOC interest, you must keep very clear documents in case you are asked to prove that the interest is linked to an investment property. An example of what not to do is writing off HELOC interest on the portion used to fund your family vacation. That’s a no-no with the CRA, and you’ll be in trouble for doing so. Keep anything you do with interest or monies in real estate in a separate account, even if that means you have to pay some bank fees.

2) Property Management & Condo Fees – You can also write off any condo fees or costs associated with having a property manager to look after your property. Again, keep your invoices and statements to prove that you paid these fees. PRO TIP: If you’re bad with paperwork, use an app called Expensify or Everlance. You can just take a picture of your receipt and leave it on the cloud.

3) Accounting & Legal Fees – This one is fairly standard because any legal fees paid on closing or accounting fees you pay for taxes related to real estate investing can be expensed.

4) Property Taxes – Yes, you can write this off as well for investment properties. Keep those bills from the city!

5)Repairs & Maintenance – This one can be a little bit confusing but I will do my best to explain it. Any repairs that are deemed “upkeep” for your investment property can be expensed. These are repairs such as appliance repairs, general handyman repairs and even cleaning. They are all deemed as regular and routine in nature.

On the other hand, any repairs that are deemed to be “capital” in nature will be subject to different rules. These would be defined as expenses that are incurred to extend the useful life of your property, or in other words, the work done adds some sort of long-term benefit to the rental property. Some examples of such expenses that are capital in nature include kitchen renovations or putting in a brand new roof. You won’t be able to claim 100% write off on these expenses all upfront, but rather, think of these expenses as being written off little by little over time (i.e., amortization of the capital expense).

6) Insurance – You will always need fire insurance on your rental property to get a mortgage and guess what – you can write this off! There are also specialized insurance policies for short-term rentals, rental protection, vacancy protection and damage protection that will cost you a little more but could give you peace of mind. All of these insurance costs can be written off as well.

7) Utilities – If you are providing an all-inclusive unit for your tenants, whether that be long-term or short-term, you can write off the utility bill. This includes water, gas, hydro (electricity, not water, I know it’s confusing), internet bill and telephone bills.

8) Commissions – Any commissions that you pay to sell or lease your property can be written off on your tax return as well.

9) Advertising – If you opted to lease or sell your property on your own, you can write off any advertising costs associated with it such as classified ads on Kijiji, newspaper ads, Facebook ads, etc.

10) Travel Expenses – Any travelling related to the investment property can be written off. This includes gas for travelling to see your investment property. This is why I use Everlance because it tracks my mileage for me automatically.

To Incorporate or Not? Now for the second question, should you incorporate? This is a case-specific question, and for this one, you should definitely talk to a tax accountant. If you need a good real estate specific tax accountant, I would be more than happy to connect you to one. Generally speaking though, the answer is no because qualifying for a mortgage in a corporation would be more difficult and it requires a higher down payment. Furthermore, your tax efficiencies must outweigh the accounting and legal costs associated with incorporation. If you’re a non-T4 worker, then perhaps incorporation may be more worthwhile. Either way, speak to a tax accountant about your specific needs.

The Wrap – I hope this was helpful in providing you with some guidance on what you can and cannot expense as a real estate investor. From a top level, there are a number of benefits and liberties as a real estate investor. If you’re looking to get started with your first investment property, please reach out to me; my contacts will be below.

Until Next Time, Happy Real Estate-ing
Zhen
(416) 436 9436
Zhen@PrimePropertiesTO.com

Pre-Construction Condo Prices are Going UP!

Published on 18th September 2019

About 18 month’s ago, I wrote an Insight Article about how pre-construction condo prices are primed to increase. If you want to read the Article, you can find it HERE. Was I correct in writing that 18 months ago? Heck yeah!

Soaring to New Heights – We were just about to break the $1,000 per square foot milestone in the M5V postal code (Entertainment District) 18 months ago and today, that same area is easily over $1,300 per square foot. They say a picture is worth a thousand words, so here a price list of a building in the M5V area at the time of launch 18 months ago versus now.

The ridiculous thing is that these were “summer prices” and projects adjacent to this, such as The Well, sold out at $1,350 per square foot despite being further from the subway.

So, here we are in the Fall of 2019 and unfortunately, I have to write another version of this article. Let me preface this Insight Article by saying that I am not suggesting that prices can increase like this again (at the same rate), however, what I can say is that all of the same patterns which I saw 18 months ago still apply to today’s market.

Development Charges (“DC Rates”) – I wrote the 2018 version of this Insight Article because development charges quietly doubled overnight in February 2018. This was a low-key and sneaky move by the City of Toronto back in 2018, and the final half of that development charge increase is about to kick in. Have a look at the photo below. The red arrow is where we are right now and anything to the right is going to phase in within the next 15 months.

That’s another cool 30% increase in development charges alone! That cost is NOT being paid by the Builder nor the City. You guessed it – these fees are on us, the end-users and investors. We’re forking out this additional 30%!

Reverse Engineering – I want to give you an idea of how I reverse engineer what I think prices will be for a given project. So let me be real with you for a second. All of the Builders that I know are FOR PROFIT businesses and they must build to make money – that is a fact. However, the perception of greedy Builders is usually just false presumptions (although it could be true for some). As with any business though, Builders work with margins and bottom lines. From speaking to various Builders, the target profit margins on condo developments is roughly 15%. Seemingly, this may seem like a low profit margin percentage, but you have to remember that it’s 15% of a multi-million dollar project – the profit is huge!

So with that out of the way, let me show you how I reverse engineer the pricing.

By the Square Footage – On the left-hand side, you can see my rough estimates that make up the per square footage cost in 2018. For example, the cost Downtown was approximately $1,000 per square foot in 2018. On the right-hand side, I only increased the development charges by 30% as per the chart above, and you can already see that it increases the price that is passed down to the end consumer. For instance, the cost Downtown is now approximately $1,060 per square foot in 2019 after considering the increase in development charges.

In this next chart below, if I also (conservatively) increase the cost of land by 10% and construction costs by 20% (both of these costs have increased more than ever as per studies by the Altus Group), you can now see clearly as to why $1,350 is the new norm.

Now combine all of the above with the next 30% increase in development charges (in addition to possibly land and construction costs), and you can probably now understand why I’m writing this Article on why pre-construction condo prices are going up yet again. Don’t forget, this is all before ANY appreciation in the actual marketplace – this is all just taking into account the increase in costs.

There is More Room to Grow – How much more growth will we experience exactly? This will depend on how the market appreciates. If Trudeau gets his way in this year’s election and the first time home buyer incentive gets a turbo boost from the Liberals, then expect even more room to grow. That’s why I’ll be doubling down on Toronto investments over the course of the next 10 years. If this is something that you are interested in doing with me, do reach out, my contacts are below.

Until next time, Happy real estate-ing
Zhen
416-436-9436
zhen@primepropertiesto.com

Top 5 Fall Market 2019 Watch-outs!

Published on 11th September 2019

The Fall Market is now in full swing and I expect this activity to go strong until about late October to early November before the activity wanes again. Back by popular demand, here are the Top 5 things you need to know heading into 2019’s Fall market. Let’s start it off with #1.

1) Interest Rate
The Bank of Canada held interest rates on September 4th. Remember that time when I was saying that I just can’t see the interest rates going much higher even though everyone was calling for massive rate hikes after a measly two 25-basis point increases? That was 1 year ago when I made that prediction. Well now, it seems as though the media is going the other way and reporting on predicted rate cuts in the future instead. Oh how the tables have turned! We’ll have to see about that, but have a look at the chart below.

2) Numbers from August 2019
August 2019 numbers were published last week and they are a lot stronger than what most people were expecting. It’s similar to what I reported in July – low inventory and increasing activity, which has led to increasing demand in the micro-markets of Toronto. Pricing also saw a minor healthy increase in one of the slowest months of the year. When you combine all of these factors with a lower number of listings (decrease in inventory), demand will be expected to outpace supply. As a result, prices will eventually will creep back up much quicker than 3%. In case you missed September 2019’s Market Watch video, you can watch it here: LINK. I break down the numbers for September in much more detail.

3) CHMC First Time Home Buyer
The new first time home buyer incentive just kicked in, so expect Torontonians to take advantage of this at the $500K price point. This is the price point that will drive much of the activity in the downtown condo market. As such, expect the bachelors and 1-bedroom units in the core-adjacent areas to the increase in demand. These areas are Liberty Village, King West, Regent Park and even as far as Mimico. Furthermore, the RRSP usage for first time home buyers also got bumped up to $35K, which means that more money can be accessed to buy a first-time home.

4) Lack of Supply
I am expecting less supply during the Fall market as we’ve already seen 5+ months of continuously increased activity year-over-year with fewer listings year-over-year. Additionally, the months of inventory ratio just keeps shrinking slowly and I don’t expect this to change much in September.

5) Buyer Confidence
When you add the above Top 3 things to know for Fall 2019, you get increased buyer confidence in the real estate psychology game. Increased buyer confidence means more people, buyers specifically, looking at the market with less supply. This simply means that we can expect more multiple offers in those high demand product offerings. As a quick reminder, these include entry-level condos, downtown condos under $800K, 2-car garage townhomes and semis in the core and 905, and lastly, detached homes south of Bloor. These are the hottest product offerings and I expect this to continue.

The Wrap – Ultimately, buyers will keep buying and investors should also keep buying. Despite what everyone is saying, even if there is another minor dip in the coming 10 years, I honestly believe that Toronto has one last 10-year run in real estate before stabilizing as a city that average Toronotians cannot afford to own real estate. Then we will become like cities like Paris, London and Tokyo. If you are looking to jump in to benefit from the next 10 years of Toronto real estate prices, do not hesitate to contact me now. You can reach me at Zhen@PrimePropertiesTO.com or call 416-436-9436.

Until next time, Happy Real Estate-ing
Zhen

Money in Your Pockets – Top 3 Reasons to Sell in the Fall!

Published on 5th September 2019

Looking to sell your home but you missed this year’s Spring season? There is actually no need to panic because Spring is not the only prime selling time. Fall is another great opportunity to sell your home. All it takes is a little bit of prep work, some smart planning and the right tools to pull off an even bigger sale than in the Springtime. You can maximize your real-estate gains this fall and ultimately get more money in your pockets without waiting for the next Spring season to roll in. Here are our Top 3 reasons why selling your home in the Fall actually means more money in your pockets!

1) Less Competition

Most people list their homes come Spring, and that’s a given. However, it’s not always the best decision to list your home during the most popular selling seasons. By the time Autumn rolls around, most sellers have either sold their place or taken it off the market. The reduced inventory (lower supply) also means fewer options for buyers, and that in and of itself can potentially lead to a more competitive price for your home since there is less supply.

Below are a couple of charts that will help illustrate how the market performs. Pay attention to the numbers in orange.

The charts above clearly demonstrate that October yields some of the highest average selling prices in real estate over the last few years.

Year after year, homes have always sold for more money in October. After the busy Spring and early Summer market, prices will usually start to dip, will stay low throughout July, August, and September. It will spike once again in October during our Fall market. The month of December is usually one of the slowest months of the year (everybody is in vacation mode!). The market will stay very quiet during the Winter months (December, January, and February), as most people do not want to look at homes when temperatures are in the negatives, with snow sometimes as high as their waists.

Keep in mind that September is a critical time to properly prepare your home to be listed on the market in order to capitalize on the higher attainable price points in October. If you miss this boat, you’ll have to wait until the following Spring.

2) More Serious Buyer Pool

Buyers are in decision-making mode. The best thing about selling your house in the Fall is that you’re dealing with a more serious pool of buyers. By the time September comes around, serious buyers will be feeling the pressure to make their move before the holiday season or before the harsh winter weather hits. Knowing how to attract these buyers is very key to you selling your property for top dollar!

3) Stronger Buyer Demographics

Families are likely not going to be your potential buyers during this time of the year. Autumn is when both empty-nesters and Millennials begin looking for new properties. Many homes that work for a family can work just as well for empty-nesters, young professionals or couples who don’t have children.

Stage your house to appeal to this Fall buyer demographic. If you don’t know where to start, that’s where we step in – contact us to find out how our team of professional stagers can help you achieve the right look and to attract the right buyers. You get FREE professional home staging when you list with us – taking the stress out of your selling process!

The Wrap – Evidently, there are a lot of important things to consider when preparing your home for sale, and we’ve done this an abundance of times. If you want to know the secret sauce to getting top dollar for your home, give Amy on the PPTO Team a call at 416-670-7780 or email amy@primepropertiesto.com to schedule a quick yet highly insightful 10-minute chat. Cheers!

Amy Vu
Broker and Vice Chair of TREB Arbitration

Is the 905 Detached Market Still Alive?

Published on 29th August 2019

In last week’s Insight Article, I provided a breakdown of the somewhat shocking numbers of the 416 detached market and the neighbourhoods that are surprisingly more active than expected. In case you missed it, you can check out last week’s Insight Article here:

 

READ: Detached Prices DOWN, Sales UP… WEIRD STUFF!!

In this week’s Insight, and as promised from last week, I’ll break down those exact numbers for the 905 region.

Coverage Area – In case you weren’t aware, the 905 Region is actually larger than just the York Region (Markham, Vaughan & Richmond Hill) and Peel Region (Mississauga, Brampton & Caledon). The 905 Region extends as far out west as the Halton Region (Milton, Burlington, Halton Hills & Oakville), as far east as the Durham Region (Pickering, Oshawa, Ajax and many more), and as far north as the Simcoe Region (basically everything south of Highway 90, just before Barrie and cottage country). In a nutshell, the 905 Region covers a lot more ground than what most people think.

A Picture is Worth a Thousand Words – Here are is an infographic showing you the numbers year-to-date for detached homes in the 905 area.

Again, you can that see the volume of sales activity is basically through the roof. Red means an increase of over 10% in year-over-year sales, while blue means a decrease in the volume of sales. The fact that there are absolutely no blue areas means that last year, all across the board, the amount of sales was fantastic. However, similar to the 416, this doesn’t depict the full picture of what is exactly going on.

Although the sales activity has been up for all areas of the 905, the sales prices are down in more than half of the regions!

Looking at the infographic below, you can see that there are a lot more blue areas (which indicates a decrease in year-over-year sales price).

Again, this is because the confidence of the buyers are back and we’re stabilizing, but this doesn’t mean that the prices are going up. Many of the areas where we see a drop in prices are all of the areas that were deemed to be “unaffordable”. Unlike the 416, where we had pockets of sales volume surge despite “unaffordable” prices, the 905 Region simply doesn’t have the same demand and supply dynamics.

The 416 is closer to the core and has less detached homes, meaning more demand and less supply (i.e., people want to generally live close to the city, but there isn’t enough supply). The 905, on the other hand, has larger homes, but is further away from the downtown core. Ultimately, this means more supply and less demand in the 905 Region. As you can imagine now, the 416 and 905 Regions have the opposite supply and demand dynamics.

Across the 905, the City that is the most expensive saw the lowest amount of sales volume increases. This is no coincidence. This is because detached homes in these areas are the most expensive and affordability is the name of the game now. In the York Region, this would be the City of King, with average prices of $1.5 million (down 10%). In the Halton Region, this is the City of Oakville with average prices of $1.3 million (down 0.5%), and lastly in the Durham Region, this is the City of Pickering with average prices of $840K (up 0.3%).

Overall, the detached prices in the 905 haven’t really increased, with 60% of the cities still experiencing a decrease in prices despite the sales increasing. Simply put, the prices in the 905 are still not within reach for the “average” Torontonian. Until we see more credit (removal or reduction of the stress test), I expect the detached market in the 905 to continue behaving like this for the near future.

The Wrap – If you are in a detached home and are alarmed by this insight, do not worry – it is not the end of the world. There are many strategies that you can implement to take advantage of the fact that you STILL OWN a detached home in the GTA. To learn more about these strategies, reach out to me at Zhen@PrimePropertiesTO.com or give me a quick call at 416-436-9436.

Until Next time, Happy Real Estate-ing,
Zhen

Detached Prices DOWN, Sales UP… WEIRD STUFF!!

Published on 22nd August 2019

If you’ve followed my Insight Articles for a while now, you’ll know that whenever a very popular media headline catches my attention, I’ll always read the whole article (can’t say that for most people). However, 95% of the time, I’ll give the article a thumbs down for not providing the full picture of what is happening. Instead, the article is often just a catchy headline and nothing more. Once again, I’m seeing this headlining trend with the numbers that came in for the month of August. I reviewed what the numbers REALLY looked like when they came out in August and although sales are up, the picture painted isn’t as pretty as what the media outlets are writing about.

In case you missed it, here is my review of the August 2019 Market Watch.

Fall Fuel – Regardless, these headlines are going to add fuel to the upcoming Fall Market. Overall, sales are still below the 10-year average despite increasing over 20%. Yes, it sounds like an oxymoron, but it is true. Take a look at the Market Watch video above if that sounds weird to you.

Neighbourhood Numbers – However, here are some even weirder things that I wanted to show you about the detached market that you really ought to know. Remember how I was saying that every micro market (condos vs towns vs semis vs detached) has been operating at a different level in 2019, and that you should call us for expert advise (rather than just any random Realtor)? Well when it comes to detached homes, it gets even weirder because you must seek neighbourhood specific Realtors. Every neighbourhood is behaving differently this year. Even I was surprised with a few neighbourhoods when I saw the charts below.

The map on the top indicates the number of sales. Red is good (sales increasing), while the blue indicates areas that are seeing a decline in sales.

You can see that most neighbourhoods are red, which means that there has been over 10% increase in sales in most areas. However, that is compared to last year, which lines up with the 24% increase in sales from 2018 that everyone has been reporting on.

However, if you look at the map on the bottom, the price change year to date has been depicted. You can see that most are blue, which represents negative growth.

WEIRD RIGHT!? Sales are up, but prices are down in the detached market. Here’s the kicker – most areas are in the negative in the 416, but the houses south of Bloor from the downtown core to Dufferin and east to Coxwell are up 15%. These houses all have bidding wars due to the lack of supply. In addition, these houses are not what I would call “affordable” starting from the $1.5M+ price tag. Here’s a visual depiction of the areas that I’m talking about.

The other strong neighbourhood is C11, which is the area between the DVP and Sunnybrook Hospital between Bayview & Don Mills (as seen below).

There are many “affluent” neighbourhoods in this area and they all experienced over 11% increase (coming up to the $2M average price tag). Again, this is not what I would deem as the “affordable” part of the market.

Buy, Buy, Buy – I truly believe that most people, who are able to purchase these properties, are seeing the value in buying them now when the prices are just at that inflection point of going up. If you want to be in a good neighbourhood close to downtown, this is your chance now. The buyer psychology is getting stronger. If you’re looking for a home in these neighbourhoods, reach out to me at Zhen@PrimePropertiesTO.com because you’ll need a Realtor who can speak today’s real estate market language.

The other areas that are not nearly as weird are the yellow areas on the map (see below):

The Others – These are your northwest Toronto properties and a region of Scarborough. Prices haven’t gone down in these neighbourhoods because you can still get a detached home in Toronto for around $1M. These areas will slowly undergo a gentrification process, especially the northwest area of Toronto as builders have all picked up land in these areas to build condos. Expect to see many projects coming out in this area in the next year or two.

The Wrap – As you can see the detached market is very different in each neighbourhood. In next week’s Insight Article, I’ll break down the 905 in this exact manner.

Until Next Time, Happy Real Estate-ing,
Zhen

Baby Boomers: Is It Their Fault?

Published on 15th August 2019

Baby Boomers (a.k.a., those born between 1946 and 1964) generally don’t like Millennials (1991 – 1996), and Millennials generally don’t like Baby Boomers… unless of course you’re related. I’ve heard so many conversations about how these generations ruined one another. Millennials are often thought to be lazy and ungrateful, while many think Baby Boomers had it much easier. Thankfully, that’s not actually what I intend to talk about in this Insight Article, but Internet memes on this subject always seem to provide a chuckle or two.

 

 

 

Sorry, Scapegoat – The conversations that are going around right now is that Baby Boomers are staying put with their housing in Toronto, thereby causing detached housing to be more unaffordable for Millennials. So the question then becomes – are baby boomers at fault for the lack of supply?

I wouldn’t necessarily put all pf the blame all on the Baby Boomers, but obviously it undeniably does contribute to the lack of supply. One generation shouldn’t expect another generation to pave the way for another. The lack of supply is ultimately a result of many factors. If a scapegoat were to be identified for this issue, then I would blame the City for making it difficult to build detached homes. Simply put, there is way too much red tape over the construction of new homes right now.

No Reason to Sell – I have many Baby Boomer clients who own real estate, and realistically, it makes no sense for them to sell their $1 million+ (fully paid off) detached home. Yes, it is true that they may have bought it for a third or half of today’s market price (Millennials could be jealous of that fact alone), and have made a lot of money from the market appreciation alone. However, that doesn’t necessarily mean that they should sell unless they absolutely need to.

Allow me to illustrate 2 real life examples of why Baby Boomers do not need to sell.

Example #1 – A Baby Boomer couple bought a 3,000 square foot detached Oakville home for $500K. It’s now worth about $1.5 million. They are looking to smart-size (i.e., downsize) to a condo with no stairs. They’re accustomed to 3,000 square feet worth of living space with a backyard. A similar 3,000 square foot condo is not within their price range. To buy an 800 square foot 2-bedroom condo in North York, it would cost them about $800K with only 1 parking spot. Plus, there isn’t even an option to get a second parking spot. In their mind, that tiny $800K condo is more expensive than the house that they bought many years ago… at ⅓ the size! Why would they sell their house in Oakville only to downgrade their lifestyle… all just because of stairs? They ended up not selling nor buying. They stayed put in their Oakville home because it just made sense to stay put.

Example #2 – A Baby Boomer couple owns a home in Brampton and are looking to downsize into a condo because the kids have left the nest. Both of them are still working but liked the idea of smart-sizing. Instead of selling their current Brampton home, they were open to the idea of buying another property and turning their primary home into a rental property. As the mortgage on the Brampton home was very low, renting the property at market rent essentially covered the cost of the new condo. If you’re okay with tenants and can qualify for another mortgage (for Baby Boomers, this is fairly easy with the massive equity already in your home), then why not. Now they have a new tenant (which was leased only in 1 day) and a new condo for essentially just getting another mortgage (of which mortgage costs are essentially covered by the tenants – what a great deal!). Ultimately, their Brampton home was never sold, just leased.

In most of the circumstances that I consult on, very rarely does it make sense to sell any home that a Baby Boomer would have bought many years ago. Oftentimes, the better option is to stay put and/or buy another property. However, reader beware, this strategy would be advantageous for the Baby Boomer, but for the rest of us, these options don’t end up resulting in any supply to the market at all.

The Wrap – So are it the Baby Boomers in fact at fault for the supply issue? To put it in simple terms, no it’s not their fault. Their choice to not sell their current homes is unfortunately the best solution for them financially, and nobody should blame them for not selling. It is undeniably hard for Millennials to get into the detached market. Will it get easier? Probably not. I honestly think most Millennials will be renting for life and so will all subsequent generations. Prime real estate doesn’t exchange hands much in very established cities around the world. Toronto is for sure getting there.

If you’re a Baby Boomer who is consider the idea of smart-sizing but unsure of your options, then reach out to us at PPTO and we can have a quick chat to discuss a strategy that works for you.

Until Next Time, Happy Real Estate-ing