An interesting article from Saturday's National Post on one man's story in real estate investment/home ownership in Toronto over the past 30 years.
William Hanley, National Post · Mar. 26, 2011 | Last Updated: Mar. 24, 2011 6:01 PM ET
You can buy a 900-square-foot, two- bedroom apartment behind the State Department store in Ulan Bator for US$103,700. I know this because I was sent an e-mail touting this deal and others in the Mongolian capital just this week.
The vendor is casting a somewhat wide sales net in trying to sell this property. I can’t imagine someone in Kitchener, Ont., getting excited about a two-bedroom real estate opportunity in Ulan Bator. But, then, I’m not in the market these days.
That said, property and its value still has a place in my scheme of things, even if it is as a virtual real estate tourist after an adult lifetime of actually buying and selling houses and condos with mixed financial results. And with spring comes a renewed interest in property as the market traditionally heats up in Canada and elsewhere. Here in Waikiki, I have had any number of conversations recently about real estate prices here and back on the mainland.
My own long history of “investing” in houses was brought back to me recently when a friend very kindly sent me a link from a Canadian newspaper outlining the price and details of a house sale in Toronto. The house, at 87 Langley Avenue in Riverdale, happened to be my home from 1980 to 1985. And the friend was actually yanking my chain, giving me an ironic dig about my own questionable real estate decisions.
The house, a handsome detached Victorian, sold in just six days for $917,000, well over the asking price of $849,000. Previously, it had sold for $697,500 in 2006, $655,000 in 2004 and $390,000 in 2000.
To put this in further perspective, we sold 87 Langley in 1985 for $169,900 when we moved to England. We loved the house but didn’t wish to be long-distance landlords. Meantime, the house did have an obstinate damp problem with a skylight.
Besides, we thought we had been handsomely repaid for our “investment” in 1980. We had bought for $114,000. So, we had made a return of almost 10% per annum over that five years. And the proceeds were all in cash in our hand, there being no mortgage on the property.
We moved to London satisfied that we had made the right decision, having magically levered an original “investment” of $2,500 down on a small house in 1968 to $155,000 in the bank in 1985, astutely buying and selling along the way.
Of course, “astutely” is as “astutely” does. Within a year of selling 87 Langley, the buyer sold for almost twice that $169,900 in the great 1980s bubble. Another dear Toronto friend phoned us in London with the news, the merry schadenfreude evident in his voice even at such long distance. The Hanleys, long winners in real estate, had come a cropper.
I allowed as how my time machine was not working, so we couldn’t go back and undo the deal. Besides, we had made out well by the standards of a year earlier. Yet I did quietly rue the decision for a while.
Looking back at that time and looking at 87 Langley’s recent sale, I see the lessons I have learned and others might have learned in the great sweep of the Toronto and Canadian housing markets.
First, a house is a home, not strictly an investment. True, over that long sweep, the price of a house will likely appreciate, perhaps to the tune of inflation, plus the growth in the economy and a little extra thrown in. But the three main points house buyers must consider is whether they like the feel of the home, whether they like the neighbourhood and whether they can afford the mortgage payment even if rates rise considerably. The investment aspect is not incidental, but not paramount.
Our old house at 87 Langley might not be a perfect proxy for the Toronto or Canadian house market. Nevertheless, the rise in price in the past decade to $917,000 from $390,000 in 2000 is perhaps instructive.
A compound annual gain of about 12% is impressive and underscores the fact that Toronto was underpriced versus similar world cities. Now, though, it just may be well-priced compared with, say, Melbourne, Australia, and perhaps overpriced versus some U.S. markets.
Not that it makes a lot of difference to us. We have our modest condo in a great area of Toronto not far from 87 Langley and our real estate-buying days were over when we moved there from our house in 2001.
It did occur to us that the condo is worth less than half 87 Langley at current values. So be it. We’re not interested in actively building more assets, just enjoying the ones we have.
The condo will see me out, my leaving of it feet first at some very distant date, I hope.
And yet, after all our adventures in real estate for all those years, I still have a semi-detached interest in property. Even a $103,000 apartment behind the State Department Store in Ulan Bator can get my interest