Toronto Real Estate Trends – The Numbers

Toronto Real Estate Numbers 

A recent article has broken down the numbers after this record breaking summer.  Click Here to read the article.  

1. $880,433Toronto Real Estate

You read that number correctly, that is the average selling price of a detached home in Toronto according to the Toronto Real Estate Board (TREB).  That is up 11% from the same period last year, and is on the verge of becoming the second city where the average price of a detached home is over $ 1 million.  

2. 130 properties under construction

Despite the number of newly constructed condominiums that have added to the Toronto skyline, there are currently 130 new properties under construction. For the past several years, Toronto has had more skyscrapers under construction than any other city in North America. As a point of reference, New York City currently has only 91 high-rise buildings under construction.

3. 39,000 realtors

This number likely doesn’t come as a shock.  With the housing boom of late, and the price of Toronto real estate continuing to rise month over month, the number of realtors has increased by 20,000 compared to 10 years ago.  Statistically, this is one realtor for every 140 people in the GTA.  

4. 7.9 times income

Housing prices have increased at an alarming rate.  Incomes, unfortunately, have not increased at the same pace.  This has meant that housing prices have surged ahead of income. Over the past 17 years, incomes have risen at a 2.8% compounded annual rate, while house prices have gone up a little over 2 times that amount –  5.8%. In other words, house prices have more than doubled over that period, while incomes are up by just a bit more than half.

Just to put things in perspective – in 1997, the average house price in Toronto of $211,307 was approximately 4.9 times the median gross household income of $43,560. Today, the average price of $550,725 puts houses at about 7.9 times the average household income, which is $69,934.

5. 43% of income

To buy a house today, a Toronto resident would have spend about 43% of their gross income on housing assuming current average real estate prices, a five-year term, mortgage rates amortized over 25 years, and a 5% down payment. That’s well within historical averages and below the 50% figure breached during Toronto’s 1989 real estate bubble.

However, even a small rise in interest rates could push leveraged buyers over the edge. If mortgage rates were to rise just 2%, the typical new home buyer would have to dedicate 53% of their gross income to housing. That could push thousands of borrowers into default.  

6. 37 times rental income

The cost of owning a house in Toronto is also looking stretched relative to renting. According to the most recent numbers from the International Monetary Fund (IMF), Toronto real estate prices are valued at 37 times annual rental revenue. Historically, Toronto’s housing market has traded between 15 and 20 times rental income.

These valuations are raising alarm bells amongst institutional investors. Thomas Schwartz, President and CEO of Canadian Apartment Properties REIT (TSX: CAR.UN) told investors earlier this month, “I think it’s driven primarily by the fact there’s a lot of capital chasing apartments, a lot of it is private capital. People are using shorter term funding. I’m not sure they’re looking at the CapEx in quite the same way we do. And again, at this point, I’m just not comfortable making the deals that are being made out there.”

7. 3.7% cap rate

In late 2013, the Financial Post reported Toronto’s upscale Bayview Village shopping mall fetched $500 million and sold for a capitalization rate said to be in the 3.6% to 3.7% range. The cap rate — the rate of return based on what a property is expected to generate in rental income — is considered to be near a record low. According to Colliers International, cap rates in the Greater Toronto Area are approaching record lows across all property types.

These valuations are encouraging smart-money investors to search elsewhere for deals. H&R Real Estate Investment Trus(TSX: HR.UN), one of Canada’s largest REITs, has been snapping up U.S. properties where cap rates are less rich. In June, the firm announced one of its largest deals yet agreeing to participate as a 50% joint venture in developing a landmark luxury residential rental development in Long Island City, New York.

8. 17% investor owned

Earlier this month, the Canada Mortgage and Housing Corporation released a snapshot of the condo markets in Toronto and Vancouver and found that only 17% of units are investor-owned. However, the survey drew criticism for leaving out any measure of foreign investors living abroad. According to The Globe and Mail, 40% of Toronto condos are owned by investors. Other private sector estimates put this figure even higher.

Olivia Chow: Land transfer Tax Increase to Fund School Nutrition

With the mayoral race heating up in Toronto, and the candidates trying to convince voters that they are best for the job, Toronto mayoralty candidate Olivia Chow recently proclaimed that if elected, she will raise the city’s land transfer tax by one per cent to fund a school nutrition program. Types of Ownership

Now, before everyone in Toronto gasps, according to Ms. Chow, the proposed increase will only apply to transactions that exceed $2 million.  She added that Chow said the tax would apply to only a fraction of annual real-estate transactions in Toronto. Since September 2013, 473 homes and 56 condos sold for more than $2 million.  According to Chow, her plan will make the system “more progressive.” She said people paying more than $2 million for a home can afford an increase in the land transfer tax. Chow says the increase will raise about $20 million a year.

For those that aren’t familiar, click here for more information about Land Transfer Tax.  A quick refresher, Toronto’s Municipal Land Transfer Tax (MLTT) is paid by a purchaser of a home or business in the city. Toronto is the only municipality in Canada with a MLTT and it’s paid in addition to the provincial land transfer tax, which is slightly higher.

As it stands today, the purchaser of a house with a $2,000,000 sale price would pay $72,200 in land transfer taxes, specifically, $35,725.00 for the Toronto Land Transfer Tax and $36,475.00 for the Ontario Land Transfer Tax.  

EDIT:  Her plan is actually for a 1 percentage point hike, not just a 1 per cent hike — which is a substantial difference.

People buying a $2,000,000 home would pay 56 per cent more than they do now, $55,725 instead of $35,725. Which would bring the total Land Transfer Tax to $92,740.00 compared to the $72,200 they would currently be paying. 

My prediction is that if this (or something like it) were to pass, it would hurt the just over $2,000,000.00 (namely the $2-2.2 million) real estate market, as people in that market would likely try to only spend $1,999,999.00 to avoid the extra $20,000.00 in closing costs.  Or it would drive people out of the city into often larger, more luxurious homes for the same 2 million dollar plus price tag, but likely with more land and/or home. 

The Oct. 27 election is now less than two months away.  Some of you may recall my previous blog post regarding the possibility of eliminating or reducing the MLTT (click here). 

One thing is certain, this remains a hot button election issue.  Do you think Toronto should increase or decrease the municipal land transfer tax? Or, should they keep it the way it is?

Whatever your opinion on the issue, for those that live in Toronto, let your voice be heard, and vote on October 27th.

Toronto Real Estate – House v. Condominium Which has been the Better Investment?

A recent article by Tasmin McMahon in Mcleans Magazine looked into whether historically  houses or condominiums were a better investment by neighborhood.

The article compares the prices across different Toronto neighborhoods since 1996 (accounting for inflation). under construction

So what was happening in the various neighborhoods.  While it is obvious that the supply of houses (particularly detached) in Toronto is finite, and condominiums continue to be built, some neighborhoods have been better to the condominium owner than the house owners. 

Click here for the full article and comparison.  In addition to some great interactive maps which show how the prices have changed in various Toronto neighborhoods particularly comparing the housing and condominium markets.

“It would be easy to expect that a rising tide lifts all boats: when buyers flock to neighbourhoods for the amenities and the transit, prices of all types of housing should rise at roughly the same rate, even if condos cost much less than detached homes.

Clearly that isn’t the case in most parts of the city. “

It was surprising to see, and certainly something worth considering if you are planning on investing in the future.  Overall, houses have increased more than condominiums, however, it  the article shows, it depends where.

However, it goes without saying that  investments are never guaranteed, and past performance never guarantees future performance.

Toronto Real Estate – Resale Homes Jump another 10% in July

Toronto Real Estate – Average Price of Detached Home climbs to $880,433

Despite many market analysts saying that the sky is falling in Toronto’s real estate market – it showed no sign of slowing down in July.  As noted in the recent CBC article by Susan Pigg:

” Toronto’s hot real estate market showed no signs of slowing down in July, as the number of home resales surged 10 per cent from the same month a year earlier.”

According to the Toronto Real Estate Board  9,198 homes were bought and sold in the GTA in July, making it the second best July sales result on record.  

“Sales were up strongly for most major home types and market conditions actually tightened, with sales growth outpacing listings growth. The result was average price growth well above the rate of inflation,” said board president Paul Etherington

Toronto Real Estate Prices - Climbing

The average sales price was up 7.5 per cent to $550,700, with the biggest increase occurring in the average selling price of.detached houses.

  • Detached homes have  increased 11% year-over-year to an average of $880,433.  
  • Condominium prices in Toronto increased 4.7 %to $379,000. 

The MLS home price index, which measures the rate at which housing prices change over time by tracking price changes in “typical” homes, showed similar strength. In the Greater Toronto Area, the composite resale home changed hands for $513,400, up 7.9 per cent from a year earlier.   

What do you think — Is this a housing bubble about to pop, or just a new reality?  There are no easy answers, and certainly there are people who vehemently believe both sides of the coin. 

Challenges of Selling a Stigmatized Property – Buyer Beware Calgary murder home’s MLS listing

What is a stigmatized property?

A stigmatized property is a place that buyers or tenants may shun for example because it was the location of a crime, or a property which may be haunted.

Currently, only Quebec is the only place in Canada where disclosure laws oblige a seller to reveal a past murder.  In the United States most states require sellers to disclose a suicide or murder that occurred on the property within the past three years. stigmatized property

Selling a Stigmatized Property.

Recently, a home was put on the market in Calgary.  This wouldn’t be much of a story, except, this home happens to be the site of a stabbing spree in April 15th where five students died.  The listing itself makes no mention of the murder.

The MLS listing states the following:

“The location of this property could not be better and it awaits your personal touch to turn it into something GREAT!” 

“With ample space inside, while located on a MASSIVE lot in a great community, this property has tons of potential for the right person/investor.

“It has a few updates, but needs some work to turn it into the gem it can be.

“It possesses the AMAZING basics you cannot add on later: location, great structure, huge corner lot and big beautiful trees. Complete with 4 bedrooms, this property has all the right bones for you and your family.”

The memorials for the five murdered students are still on the property. In case you are interested, the house which is located in the Brentwood area of Calgary was listed for $489,000.00.

However, this stigma can affect property values?  I would say yes, however, if you didn’t know about it, and paid full “value”, you could be in for a shock when you try to sell down the road.

The onus is on purchasers to ask the right question.  Caveat Emptor or buyer beware applies.  While the sellers have no obligation to volunteer the information, they are not permitted to lie when asked a direct question.  Asking the right questions becomes very important.  Keep in mind, that the agent themselves may not know that the property may be stigmatized.

Neighbours on the other hand can be a great tool when trying to find out information about a property.

Do you think that sellers should have to disclose if a murder or suicide occurred on the property or whether the property is haunted?

Supreme Court of Canada won’t hear TREB Appeal

Canada’s top court has decided that it will not hear the appeal of a case regarding whether the Toronto Real Estate Board must provide access to certain listing information, such as the property’s last sale price and its time on the market.

Currently the Toronto Real Estate Board (TREB) blocks its 35,000 members from publishing sale prices on their websites, this policy is being challenged by the Federal Competition Commissioner. keyboard-with-sphere-1438726-m

Part of the reason why its being challenged is that TREB  prohibits its members from posting historical data on their virtual office websites.  Many real estate agents now have virtual offices, and are using the internet as their “hub”.  If people ask for the information, often the real estate agents will provide it.  However, as it stands, they cannot post it online for the world to see.  The Federal Competition Commissioner has alleged this rule is anti-competitive.

In May 2011, the Competition Bureau filed an application with the competition tribunal to have the rule struck down. But the tribunal ruled against the bureau in April 2013, saying it had failed to prove its case.

TREB appealed the decision to the Federal Court of Appeal and won. In February, 2014, the federal court ordered a new tribunal hearing. TREB asked the Supreme Court to review the case, however, leave was denied.

So now it will be up to the new hearing at the federal appeal court.

What do you think?  Should TREB be allowed to block its agents from posting historical data on their websites?

Toronto Real Estate – As Affordable As A French Castle

Yes you read the title correctly.  

No, you don’t need to readjust your monitors.  The title is indeed correct.  

castleI recently came across an article from ivillage by Emma Leith.  The title of the Article Says it all “Realty Check:  A House in Toronto is Now as Affordable as a French Castle.”  I highly recommend that you take a look.  It shows how far approximately £740,561 (approximately 1.3 Million Canadian Dollars) will  get you as compared to the recent fixer upper in Lawrence Park.  Particularly after this home in Lawrence Park stirred controversy after receiving 72 offers and selling for 195% of the asking price.  Yes, that happened.  

Now, I am assuming that you have looked at the the 9 castles that you could purchase for approximately 1.3 Million Canadian dollars (or less).

In an attempt to make you (or myself)  feel better, I should say that as noted in the article, these castles likely need work (but the home on Lawrence Park was a fixer upper as well).  

While these castles are in the countryside and not in Paris, some of them are breathtaking.  I am partial to the B&B. Who am I kidding, I would gladly take any of them as long as they have electricity. 

So for those that are trying to jump into Toronto Real Estate, but have had always had dreams of living in a castle, now your drams could come true –  same price.  

Which castle would you choose?

 

 

 

Toronto Real Estate: April Saw Prices Continue to Increase

Average Price of Single Home in Toronto increases by 13%

Supply and Demand.  In a capitalist society, in theory, this is what dictates prices.  It makes sense, less supply, higher prices; too much supply decreases prices.Toronto Real Estate

This concept, a shortage of listings, is what is being blamed for the steady rise of Toronto real estate prices.   In fact, in April active listings were down 8.4%. 

Here are the April numbers according to TREB:

  • The average sale price of a detached home in the City of Toronto was$965,670.
  • The average sale price of a semi is $702,332
  • In the 905 –the average sale price was $645,179

You will recall my recent blog post  that in the first half of April, according to TREB the average price of a single family detached home in Toronto was $1,012,172.00.

What or who is to blame for the shortage of supply. 

Some people blame the double Land Transfer Tax.  Others blame the fact that while the price of your current home has appreciated, so has the competition, so there is nowhere to move.  The third theory is that frenzied purchasers are desperate to buy a home before they are “priced out” of the market.  Likely, it’s a mix of all three.  What is certain, is that real estate prices in Toronto continue to rise, and this summer will likely see a continued increase in prices.

Toronto is catching up to Vancouver, which has the highest real estate values in the Country.    

Should Toronto Eliminate the Municipal Land Transfer Tax?

Toronto Real Estate – Land Transfer Tax

The City collects revenue from property taxation. Toronto real estate Transactions with closing dates after February 1, 2008 were charged a Municipal Land Transfer Tax (MLTT).

According to a recent article by Susan Pigg at the Toronto Star, a Report commissioned by the Ontario Real Estate Association claims that municipal home and sales levy has led to a 2.3 Billion dollar drop in economic activity and repealing it would create 12,000 new jobs in the next 5 years.  

“It’s bad for our economy and bad for homebuyers,” says Costa Poulopoulos, president of the Ontario Real Estate Association.  (Who, for full disclosure’s sake, commissioned the report.)

Toronto Real Estate land transfer tax

According to the Study,  Toronto has seen an estimated decline of more than 38,000 home transactions since the tax was imposed in 2008, making home ownership more expensive and Toronto the only city in Canada where homebuyers are double-taxed: they have to pay both a municipal and a provincial land transfer tax on the purchase of a home.

Furhter, the report states that the loss of sales has translated into a roughly $2.3-billion drop in economic activity in Toronto since 2008, and a $1.2-billion reduction in GDP. There would be nearly 15,000 more jobs in sectors from real estate to law to furniture and appliances stores without the Toronto-only land transfer tax.

The economic analysis was done by Altus Group Economic Consulting.  The study relied heavily on two previous studies: a 2012 C.D. Howe Institute report that estimated the impact of the tax on housing transactions, as well as a 2013 study for the Canadian Real Estate Association that examined the economic impact of a typical house transaction in Ontario.

Altus researchers then took those reports one step further, looking back and also ahead at the economic fallout of the tax.

The study went on to note that the economic damage is much bigger than the gain for the city, the average revenue the municipal land transfer tax generated each year since 2008 has been $270.2 million.

The annual take now is about $350 million a year, thanks largely to soaring house prices. That’s close to double the amount collected in 2008.

Toronto Mayor Rob Ford had long vowed to eliminate the municipal land transfer tax.  However, when faced with strong resistance to getting rid of the revenue stream for the city, he talked about reducing it by 5 or 10 per cent instead. He has yet to follow through with either eliminating or reducing the Toronto Land Transfer Tax.  A recent Toronto Star Article suggested that it should be made an election issue for the upcoming mayoral election.  

Land transfer taxes now add up to more than $14,000 in upfront costs on a $550,000 home purchase in Toronto — about $7,500 of that being the provincial tax and $6,700 the city tax.

“This research proves that the (municipal tax) is doing more harm than good where our economy is concerned,” said Poulopoulos. “It gets in the way of the economic spinoff that occurs when homes are purchased and sold.”
The real estate umbrella group commissioned the study, hoping to make repealing the tax both a municipal and a provincial election concern, and to get out front of the issue before any other Ontario municipalities, such as Missississauga, move to implement their own version of the tax.  The study is being released along with a new Ipsos Reid survey that found 85% of Toronto residents think the tax makes it harder to become homeowners, and 72% said the upfront costs would come at the expense of spending on other economic generators, such as renovations, furniture or new appliances for their new home.

Will Toronto Eliminate the Municipal Land Transfer Tax?

At the end of the day, whether it be repealed or decreased will likely be a decision of the new mayor of Toronto.  It will be interesting as the mayoral race progressing to see where they all stand on the issue.

Will it happen?  Who knows.  We were already promised by the current mayor that the tax would be eliminated.

Toronto Condominiums – Ceiling Heights Lowered on some projects

The Sky is Falling – Be Prepared to Duck

How Toronto Condominium Developers are Saving Space

Now we aren’t talking about Chicken Little, but it comes as no surprise to people who have been seeing new Condominium developments over the years that on average,  units are getting smaller.  

RealNet Canada Inc. released its latest stats for new condos in Toronto… and the numbers showed that the average size of a unit has shrunk to about 797 square feet, from closer to 900 square feet five years ago.

However, as noted in a recent Globe and Mail article, there is a new trend that is slowly creeping into new Condominium developments.  The ceiling heights are being lowered.  Toronto Condominium construction

When purchasing a Condominium pre-construction, you often only see two dimensional floor plans which will show you how large the unit will be.  What people often fail to consider, is the height of the ceilings.  Particularly if you are not aware of what a “normal” ceiling height ought to be. 

According to Matthew Slutsky, president of BuzzBuzzHome, “Nine feet is normal, 10 is luxury,” he says. “It’s gone up, eight used to be the norm about a decade ago. Around 2007 to 2008 it started to change to 9 being the standard.”

Why would developers be lowering ceiling heights?

When you think about it, it makes sense.  If a project is approved for a certain height, and they take six inches off per floor over 18 storeys, they can add another floor.  This allows developers to add condominium units, without making them smaller than they already are. 

What does that mean for you?

Nobody likes surprises when it comes to real estate.  If you don’t know to look for ceiling heights in the agreement, you may not turn your mind to the issue. This demonstrates why it is so important to have a real estate lawyer review your Agreement of Purchase and Sale.  

When you purchase a new condominium from a builder you have 10 days to have the document reviewed.  For more information about the 10 day cooling off period, click here.

Make sure you know what you are getting into.  Protect yourself.  

 

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