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Not sure if that applies to everyone. We are prepared to buy right now, but have decided not to for a variety of reasons. Personally, we are not comfortable with the prices, the real estate "games", nor are we consumed with housing lust or envy. We will likely eventually buy a home, but only if (or when) the stars are properly aligned. The whole scene gives me major heebie-jeebies right now. Yes, there are downsides to renting, as there are downsides to owning a massive mortgage debt and being responsible for the maintenance of a home, but there are many upsides, too. And right now, those upsides trump any of the downsides.
I'm curious what would make you change you mind. Is it just the mortgage? I mean that's an excellent reason not to buy, but I was just wondering.

In my case I just got sick of renting and bought a pre-construction townhouse downtown... but that was way back in 1999. Moved in a couple years later. And then about 5 years later I got sick of living downtown, partially because it was a small place and partially because downtown was noisy and getting even more overcrowded for my tastes, so I moved out of downtown (but stayed in the 416), into a house with a nice yard.

BTW, back in 1999, I thought prices were high, but not that high. Then in 2007 I thought prices were very high and ready for a pullback. But, I bought anyway in both instances, just because I wanted to. I lucked out, but it makes me wonder if the prices truly are going to plateau or pull back in the near term, or will continue a trek upwards for a few more years yet.

Of note, this thread was started in 2009, almost 5 years ago. And it was not the first thread of its kind on this forum.
 
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This is the first bank economist report I’ve seen which looks beyond the typical “over supply†housing theory and discusses real life dynamics of the market. Up to now, they haven't understood why prices continue higher, only that it must be a housing bubble.

Limited supply from green belt legislation, higher demographic demand for downtown living, and a new normal for low “real†interest rates (nominal rates less inflation) will continue to produce a healthy Toronto real estate market for many more years to come.


http://research.cibcwm.com/economic_public/download/eisep14.pdf



I’ll Take Manhattan
by Avery Shenfeld

Where I live, calls for house prices to come
down to earth are like predictions for a
Stanley Cup win by the Toronto Maple Leafs.
We hear them every year, followed in short
order by the “wait until next year†refrain.
Are the current prophets of house price
doom any different?

Research by my colleague Benjamin Tal (see
pages 8-11) does suggest a vulnerability to a
correction in some elements of the housing
market. New supply in condos, borrower
fatigue, and eventually, higher mortgage
rates, are the likely catalysts. But unless one
were to call for, say, a 30% national price
correction, we’ll never reach the levels that
we were worried about a few years back,
when a 20% tumble was feared from an
initially lower starting point.

One reason is that it’s increasingly clear that
we are in an era of lower interest rates. The
present value of the steady stream of rental
payments avoided through home ownership
is twice as high if discounted by a rate half
its historic level. Still, from current low
levels, even a 100-bp rise in rates would be
a meaningful hit to affordability.

But our analysis at the micro level reveals
another key factor. The lion’s share of the
appreciation has been delivered by the upper
end of the price spectrum: not only in the
costliest cities (Vancouver, Toronto) but in
their urban cores, rather than lower priced
alternatives in the burbs or elsewhere in
Canada (Chart).

While perhaps stretched to the limit, that
gap actually provides a rationale for the
puzzling durability of the price rally: central
Toronto and Vancouver increasingly look
like Manhattan. The nearest available room
to expand the single family housing stock
is suffi ciently distant, entailing a sufficiently
troublesome commute, to be a very weak
substitute for the core. Development land
beyond the “905†or in its furthest corners
doesn’t effectively compete with or limit
prices in Toronto’s Rosedale or the Annex.
Vancouver’s surrounding mountains and
waterways impose their own limits on single
family house supply. For similar reasons,
the price for a rare single family house
in Manhattan is even more astronomical
relative to average incomes earned in the
city. And let’s not even talk about central
London.

Condo supply, even at the high end and
in good locations, can still be expanded
by densification. Luxury homes in central
locations could be at some risk, as Tal notes,
from the inability of those in middle level
houses to move up. But land scarcity, and
poor transport from distant suburbs, helps
make the insanity of Canada’s house price
climb look just a bit less insane.
 
I'm seeing a strong demand for smaller 2 bedrooms. Very strong demand. 1 bed and 1+1 demand is fading. I think 2 beds are going to go up in value while 1 beds, 1+1's will either stay the same or drop. I feel the buyers who are priced out of the housing market are buying these up. As someone who is actively looking for a 2 bed in the $500ish price range, I'm seeing a lot of activity in that area and I only see it getting stronger as the newer condos tend to be full of 1 beds and 1+1s.

Prices are outrageous in general, but a lot of that is attributed to how Toronto is built. Transit is a joke. Traffic is outrageous. There's a larger segment of people willing to ditch the car and travel as well as the expensive house for the condo life. Even my mother is thinking of stripping down and moving downtown. I know, anecdotal evidence doesn't hold much weight, but i think if the city was built differently, pricing wouldn't be as high. I could be completely off, though.
 
I'm seeing a strong demand for smaller 2 bedrooms. Very strong demand. 1 bed and 1+1 demand is fading. I think 2 beds are going to go up in value while 1 beds, 1+1's will either stay the same or drop. I feel the buyers who are priced out of the housing market are buying these up. As someone who is actively looking for a 2 bed in the $500ish price range, I'm seeing a lot of activity in that area and I only see it getting stronger as the newer condos tend to be full of 1 beds and 1+1s.




Prices are outrageous in general, but a lot of that is attributed to how Toronto is built. Transit is a joke. Traffic is outrageous. There's a larger segment of people willing to ditch the car and travel as well as the expensive house for the condo life. Even my mother is thinking of stripping down and moving downtown. I know, anecdotal evidence doesn't hold much weight, but i think if the city was built differently, pricing wouldn't be as high. I could be completely off, though.

I believe that what is happening is that many people who want to live downtown are taking 2 bedrooms and room mates since $1500 for a 1 bedroom vs. $2200 for a 2 bedroom means living expenses are $1100/person vs. $1500/person.
I suspect that the high end will have problems since the mid range is not going up as much and people will not be able to take the step up. I also now feel that reasonably "whatever that is" SFH's in the core will likely hold their value even if interest rates go up. Finally, condos will become the defacto housing for the city as it is in most more major cities.
 
I'm curious what would make you change you mind. Is it just the mortgage? I mean that's an excellent reason not to buy, but I was just wondering.

Not just the mortgage. We just like having the freedom now to move practically whenever and wherever we please. If a job changes location, or if we find another neighbourhood or building we really like, we can easily pull up stakes. I am also not confident in the housing quality and don't feel like I am getting my money's worth. I am in the market for a home, not a thrown-together microbox built only as an investment commodity.

There's a larger segment of people willing to ditch the car and travel as well as the expensive house for the condo life. Even my mother is thinking of stripping down and moving downtown. I know, anecdotal evidence doesn't hold much weight, but i think if the city was built differently, pricing wouldn't be as high. I could be completely off, though.

...condos will become the defacto housing for the city as it is in most more major cities.

I can't put my finger on when it happened, but for my wife and I, the decision to go urban just seemed to float down out of the clouds. We were throbbing and engorged for a suburban home 15 years ago, with nary a thought given to living right in the city. But a few years ago we started finding ourselves craving a more urban experience. Seems many other suburbanites are feeling this "pull", too. Maybe it is instinctual, given our increasing disconnect from each other due to technology, the loss of rural jobs and manufacturing towns, and a general shift in how people live their lives.

I agree that condos make more and more sense, and are becoming increasingly attractive. Even to couples like us in our early-mid 40s, who have already lived the suburban "dream" (lol) and spent enough time standing in line at Home Depot on a Saturday.
 
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Not just the mortgage. We just like having the freedom now to move practically whenever and wherever we please. If a job changes location, or if we find another neighbourhood or building we really like, we can easily pull up stakes. I am also not confident in the housing quality and don't feel like I am getting my money's worth. I am in the market for a home, not a thrown-together microbox built only as an investment commodity.





I can't put my finger on when it happened, but for my wife and I, the decision to go urban just seemed to float down out of the clouds. We were throbbing and engorged for a suburban home 15 years ago, with nary a thought given to living right in the city. But a few years ago we started finding ourselves craving a more urban experience. Seems many other suburbanites are feeling this "pull", too. Maybe it is instinctual, given our increasing disconnect from each other due to technology, the loss of rural jobs and manufacturing towns, and a general shift in how people live their lives.

I agree that condos make more and more sense, and are becoming increasingly attractive. Even to couples like us in our early-mid 40s, who have already lived the suburban "dream" (lol) and spent enough time standing in line at Home Depot on a Saturday.

I think it's probably a bit of everything. I just don't know how sustainable these condos are, though. A lot of the condos during this boom have been built for investors and the young, single crowd. They are disposable. You move in for a few years then move on to something better. But what about the people who want to live there long term? They're not built for that. Minimal storage, poor functionality (ie: linear kitchens, sliding doors to bedrooms, tiny rooms, etc). The glass boxes are not really energy efficient, either. I can only imagine how they will age. I'd like to see more of a shift to building condos that are more sustainable and marketed not only to investors, but to end users. I walk into a sales center and the sales person immediately talks to me about how easily I can rent out the unit.

I think the real value is in the older buildings and the ones that were built with the end user in mind. Then spend the money and renovate it yourself. My mother's friend who's in her early 60s craved that downtown life. She moved from the burbs to a condo on lakeshore. She ended up moving back to the burbs, bought an older building and renovated her unit. Looks beautiful.

What is worrisome is it's an investor driven market...what happens when the investors move on? I don't see any families or people above the age of 35 rushing to buy units in a poorly built glass box.
 
I can't put my finger on when it happened, but for my wife and I, the decision to go urban just seemed to float down out of the clouds. We were throbbing and engorged for a suburban home 15 years ago, with nary a thought given to living right in the city. But a few years ago we started finding ourselves craving a more urban experience. Seems many other suburbanites are feeling this "pull", too. Maybe it is instinctual, given our increasing disconnect from each other due to technology, the loss of rural jobs and manufacturing towns, and a general shift in how people live their lives.

I agree that condos make more and more sense, and are becoming increasingly attractive. Even to couples like us in our early-mid 40s, who have already lived the suburban "dream" (lol) and spent enough time standing in line at Home Depot on a Saturday.
But in the GTA, it's not an either/or scenario. Never has been.

Nearby, somebody just moved into a two-storey home recently. A small one, but one that is in good condition. All brick. Problem with the house is that it was 70s decor with wallpaper nobody liked, and an oil furnace. The new owner is ripping down the wallpaper and repainting and getting a gas furnace etc. So, tens of thousands of dollars of reno costs, but not hundreds of thousands. The house sale price was $600000 for I believe about a 1400ish square foot house, plus basement on top of that, plus a single car garage, with extra driveway parking and a decent-sized yard on a corner lot. These are middle-aged people from Asia, who lived in a condo or apartment all of their lives in busy cities. In Toronto, they worked downtown and lived downtown too, in a condo.

The house is 12 km from the downtown core. Driving to the downtown core is through city streets, not highway, and is less than 30 minutes to the core, unless you go during highest peak times or when there is road construction or an accident.

No, $600000 or $700000 isn't chump change, but it's not as if all of Toronto means $1 million plus for a detached home either. And if you go for a townhouse, it's even cheaper.
 
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I just don't know how sustainable these condos are, though. A lot of the condos during this boom have been built for investors and the young, single crowd. They are disposable. You move in for a few years then move on to something better. But what about the people who want to live there long term? They're not built for that.

Exactly. There is a building in the Avondale pocket (just south of Yonge/Sheppard) that currently has 29 units for sale (100 Harrison Garden Blvd). I would also imagine the rental to ownership ratio is quite high, but have no numbers to verify that. I would never consider purchasing in a building with such a high turnaround or a high proportion of renters (even though I am one). 80:20 in favour of owners seems to be a good indicator of a stable, liveable building.

I think the real value is in the older buildings and the ones that were built with the end user in mind.

What is worrisome is it's an investor driven market...what happens when the investors move on?

For folks like us, who do want a condo but are turned off by the quality of product, the older units are the only ones we will even look at. But the maintenance fees on those units tend to skew upwards of $800, which is another detriment as the utility metering is not individualized (we as two people do not use as much water or hydro as a family of 4-6), cable TV is often included (we do not want it), and there are other amenities often included that we don't want or need.

It would be great to find an an older unit of, say approx 1200-1400 sq ft, with a cost of $450-500K, monthly fees of $450-550, and which is already renovated/updated, and is in our desired location. Haven't seen anything close to that yet :)

When the investors move on, it will be difficult for many who bought in at low money down with visions of immediate riches.

But in the GTA, it's not an either/or scenario. Never has been.

Driving to the downtown core is through city streets, not highway, and is less than 30 minutes to the core, unless you go during highest peak times or when there is road construction or an accident.

Key word is "driving". We are trying to get away from the car. In fact, it sits in the underground 6 out of 7 days, only coming out on the weekend if we decide to head out of town. The goal is to eventually use only transit and/or car share services. Unfortunately, we bought it shortly before moving from Halifax (Toronto was not on the radar yet), so it is still too new to to be worth selling.

For us, living on the subway line with walkable services and amenities is pretty much essential.
 
For folks like us, who do want a condo but are turned off by the quality of product, the older units are the only ones we will even look at. But the maintenance fees on those units tend to skew upwards of $800, which is another detriment as the utility metering is not individualized (we as two people do not use as much water or hydro as a family of 4-6), cable TV is often included (we do not want it), and there are other amenities often included that we don't want or need.

It would be great to find an an older unit of, say approx 1200-1400 sq ft, with a cost of $450-500K, monthly fees of $450-550, and which is already renovated/updated, and is in our desired location. Haven't seen anything close to that yet :)

It would be great but ...

You are hoping for maintenance fees, based on your desired square footage, of $0.40/sf, give or take, which is significantly lower than what I believe to be the city average of approximately $0.60/sf (again, give or take) for older buildings. Don't forget, it's not just age of a building that's a factor but also square footage of the unit, plus the number of units to share the costs of repairs. So I don't see your hopes as being realistic.

We have three bedrooms, all with double and/or walk-in closets, two baths, eat-in kitchen, laundry closet, linen closet. coat closet, walk-in utility closet plus basement storage locker. Lots of storage, lots of space. They don't build them like this anymore, and certainly not in a location with a walk score of 90 and a transit score near 100. We do not hear our neighbours, unless they are renovating.

Our maintenance fees are $0.65/sf which includes a whole bunch of amenities -- an indoor pool and sauna, well-equipped gym, party room, parking, visitor parking, digital cable plus two boxes, 24/7 security plus hydro (for heat as well.)

We are not metered and it would make absolutely no sense to meter as we pay bulk rates as opposed to ordinary household rates, plus we mitigate all the other BS costs hydro tacks on to household bills. We have looked at this many times and the conclusion is always the same. So what we're aiming for is moving to LED as fast as we can in common areas, educating residents and, as the older folks move out, the newer ones come in with better appliances and more savvy about energy-saving. It also helps that we have an extremely low renter-to-owner ratio which means people are more conscientious of costs.

Yes, we are undergoing a period of many major repairs, as any homeowner comes to expect after a certain number of years. There is no free ride, even in condos. Our rates will increase slightly and we are planning a very modest special assessment.

But this is the reality of owning a house as well. You can't say, oh well, the foundation is leaking (for example) but I will put it off until I can afford it. You deal with it before the walls collapse.
 
We sold our honking great house and moved to a largish condo a few years back. So far, it's been great. Lock up and leave, no worries about the grass growing, etc. Our car also sits parked most of the time because we walk, bike or take TTC -- we did have two cars and sold one. We still keep one because we often travel so it's worth having at this point.

What I do find, though, is that a lot of people like us like the lifestyle but have a hard time adjusting to the community living/rules that go along with condos. What do you mean, I can't just change the lock on my door? What do you mean, I can't put decorative flower urns in the hallways? I never use the gym, why should I pay for it? And so on and so on.

It's not for everyone, that's for sure, but it works for us.
 
What I do find, though, is that a lot of people like us like the lifestyle but have a hard time adjusting to the community living/rules that go along with condos. What do you mean, I can't just change the lock on my door? What do you mean, I can't put decorative flower urns in the hallways? I never use the gym, why should I pay for it? And so on and so on.

It's not for everyone, that's for sure, but it works for us.

^^LOL^^

What do you mean I can't install a new floor on a weekend? That's when my handy student son is available.

Why is the pool so warm? Why is it so cold?

How come the super can't come to fix my blocked toilet?
 
Why doesn't the condo corp pay for the shower door I broke? Why can't I park my second car in visitor parking?

I'm in Florida from November til April. I can't move my car because of that repair in the parking garage.

Why can't I stash all my old filing cabinets, baby furniture and winter tires in my parking spot?

Why can't you replace the boiler on a day when I am out of town and don't need hot water?

I was out when that thunderstorm hit and water came in through my open window. My laminate floor bubbled up (or something) and I expect the corporation to compensate me.
 
It would be great but ...

You are hoping for maintenance fees, based on your desired square footage, of $0.40/sf, give or take, which is significantly lower than what I believe to be the city average of approximately $0.60/sf (again, give or take) for older buildings. Don't forget, it's not just age of a building that's a factor but also square footage of the unit, plus the number of units to share the costs of repairs. So I don't see your hopes as being realistic.

We have three bedrooms, all with double and/or walk-in closets, two baths, eat-in kitchen, laundry closet, linen closet. coat closet, walk-in utility closet plus basement storage locker. Lots of storage, lots of space. They don't build them like this anymore, and certainly not in a location with a walk score of 90 and a transit score near 100. We do not hear our neighbours, unless they are renovating.

Our maintenance fees are $0.65/sf which includes a whole bunch of amenities -- an indoor pool and sauna, well-equipped gym, party room, parking, visitor parking, digital cable plus two boxes, 24/7 security plus hydro (for heat as well.)

We are not metered and it would make absolutely no sense to meter as we pay bulk rates as opposed to ordinary household rates, plus we mitigate all the other BS costs hydro tacks on to household bills. We have looked at this many times and the conclusion is always the same. So what we're aiming for is moving to LED as fast as we can in common areas, educating residents and, as the older folks move out, the newer ones come in with better appliances and more savvy about energy-saving. It also helps that we have an extremely low renter-to-owner ratio which means people are more conscientious of costs.

Yes, we are undergoing a period of many major repairs, as any homeowner comes to expect after a certain number of years. There is no free ride, even in condos. Our rates will increase slightly and we are planning a very modest special assessment.

But this is the reality of owning a house as well. You can't say, oh well, the foundation is leaking (for example) but I will put it off until I can afford it. You deal with it before the walls collapse.

Very informative and useful post, even if it crushed my hopes...lol. Thanks!
 

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