[interested]

^^^
ISYM

I believe the 50% figure was not meant to be an actual decline but simply a point by Ka1 that he was in a position to ride out the
decline even if it was of that magnitude.

I am having a bit of difficulty following your post and if I am misreading it, please accept my apology. It appears the paragraph referring to Pink Lucy's experience would be to support the argument that people are/will continue to move into the City. I am not sure if you meant to say "Of my typical Toronto clients the few who look to move out of TO for affordability no longer consider this a worthwhile option." Assuming you did, then it suggests that you accept the hypothesis that communte times and costs mean that people will no longer move to the burbs. Did you perhaps mean move out of York Region to Toronto no longer consider this an option.

I ask this as the rest of your points in the following paragraphs appear to represent reasons for the end of the TO market.

I note C1 seems to be suffering a severe drought in sales. This is the most interesting to a lot of us because this is the main area that most on this forum seem to be talking about. That said, I am fascinated because in the building that I have the condo in for rental there were 5 up for sale in the past month and they all are gone.

As relates to YR; I notice anecdotally that there are 5 houses for sale around me whereas previously there had been maybe 1 every 6 months or 2 tops. 2 have sold but the other 3 have been up now at least 1 month and 2 for many months. People have been pushing the price envelope and buyers at least here in Oakville are not biting. That said, the market from $500-$800K is very hot according to realtors I have spoken to. The problem is beyond that and very marked at the $1.5 to 2 Mill and up where things are absolutely languishing.

I agree 100% with you that if more listings are coming on and more terminated/expired listings are increasing in numbers, this is a forward predictor. It does confuse me a bit though because on the guava site the suggestion for the GTA as a whole is that there is 2.4 months of inventory....a low figure historically: sales are low historically but so is inventory which may explain the slow sales; days on market is 32 which is low....I appreciate this figure is "massaged" as what does not show up is properties removed and relisted and showing as much less time on the market but I would have to believe this type of error has been present before this year; and median price/average price for this particular month is relatively high compared to other years though it remains to be seen if we will have the usual spring price increases as the market may or may not heat up.

Finally your last comment underlined: "when in a sellers market sellers don’t list it is because they don’t intend nor need to" I am not sure what you mean. Are you suggesting that the Realtors/Sellers are being less than forthright about the real reason for not listing... that they can't sell as they can't get the price they want? And therefore buyers who buy "arriving late" means they are overpaying if they buy now?

I can tell you that we really should distinguish end users from investors. I can't speak for all investors but as I have posted before and as Pink Lucy and Ka1 eluded to, we don't worry much about the actual value of our home as we live in it and there are intangibles at work here that mean we do not look at our investment as pure investment. I suspect we all are somewhat more objective about investment property.


Finally, to cdr's and Redfirms comment about Ka1. I just assumed and I am sure Ka1 as a "beancounter" has figured out to transfer the equity from RoCP to Aura if he moves into it as a principal residence. It is clear despite his attempts to stimulate discussion that he is savvy and fully understands what he should do if he moves to Aura. I believe his 50% comment refers to the fact that as relates to his home to live, the paper value is actually quite irrelevant (other than for the financing of it) since he would have no intention of selling whether up 20% or down 50%. Clearly for the "rental property" and for the long term future, it will be a relevant issue.

 

[KA1]

if AURA is to be your principal residence, would it not be more financially savy to refinance RoCP to the hilt to pay off as much AURA so that you don't have a mortgage, since PR mortgage interest payments are not tax deductible ?

you'll crystallize a tax free capital gain and have a higher cost base for the 'rental' condo.

Cdr this is a thread on '.. Bubble..' and I don't want to turn into a lecture on tax planning.

Having said that, I would reiterate that I am, by profession, a 'Bean Counter' and I have spent, and still do, a good part of life in income tax area.

With all due respect, for you to make suggestions that you have made, to use an English expression, is like teaching bible to Pope.

There are lots of variations to consider in making a decision -- taxes are one of them. If one lets income tax become the main consideration in making a decision, then, it is akin to letting the tail ( and here I mean a dog's tail) wag the dog. That's not the way I work.

If your thoughts are guided by your accountant, and here I am assuming that you do have an accountant, then, perhaps, it is time for you to consider changing your accountant. No insult intended here -- neither to you nor to your accountant. Just a statement.

Please also see my reply to Redfirm's post.

Now going back to the thread. As far as I am concerned, contrary to what Interested, Redfirm and others have been shouting, there has been no bubble in Toronto R/E, there isn't any and there will be none either.

I now await the onslaught of the negative comments from anybody and everybody.

Praise the Lord!

 

[macookie]

Anyways, my next set of questions/comments would be along the lines of cdr's comments above ... or is it that you don't care about tax advantages the same way you don't care about 50% adjustment south?

As a former income tax auditor, I'd suggest obtaining some advice prior to restructuring your mortgage to obtain interest expense, because if you mortgage the rental property and then just pop that amount on your principle residence... the interest expense on the rental becomes void, because it's not being used for income producing purposes. And change of use rules apply once you move out of your principle place of resident, and into your new abode... so your old property automatically gets a adjusted cost base. Just saying.

I'm not really going to put a percentage on the fall... I just assume the fair market value of a condo downtown should for a one bedroom be around $200-250K and a two bedroom $300-350K... or around $400psf at today's income levels... with prices drifting upwards... the bigger the percentage is going to be to get it back to those values... the slide might be more or it might be less... but that's were I think fair market value is at. Because those are the values in which I can reasonably afford to purchase... on my $100K salary... and I'm 33... and a one-bedroom condo at $225K... I'd have about a 50% down-payment... that's where I feel comfortable at... moving out of renting into my own condo... but, if prices don't come down... single people, or couples, making approximately the same income are going to continue to rent because it makes sense. $100K... is about $65K after tax... and I spend $35K... I'm sure my other peers aren't as fiscally responsible given the stats we see in the Globe and Mail about Canadians and debt. So yeah... I might be bias, because I know where I want the price to be... but if it doesn't happen... fine... but people in the same situation as me are stretched... and affordability is the key to all of this. I'm okay if the economy tanks... I'm fine because my professional bodies keeps the mantra... We see more than numbers.

(I'm assuming that 2.5 x income + 20% down payment and the other metric I'm assuming is correct is 15 x yearly rent... which gets you to what would be approx. fair market value.)

 

[KA1]

Hibernation, eh? No, I'm working ...
Anyways, my next set of questions/comments would be along the lines of cdr's comments above ... or is it that you don't care about tax advantages the same way you don't care about 50% adjustment south?
Finally, I understand that you're still working... but you are retired from your gov't job, right? Point being that normally retired people are not as risk inclined as younger people with longer horizon....
Talk to you in 10 days ... little trip coming ... mix of business and pleasure ...

Redfirm,

In your previous posts, you have indicated that you are, like me, a Bean Counter and heavily in tax area. I am not that heavily in the tax area. You have staff working for you and I have only my shadow working for me.

I am very much dismayed, and to certain extent, shocked, that you, with your backrground, are thinking along the lines of Cdr 108. If you were to translate your thinking to an advise for your clients, then, I would like to say "God Bless your clients". No insult intended here. Just a prayer from the bottom of my heart.

May the Lord grant you some extra wisdom.

Peace!

 

[CN Tower]

I'm not really going to put a percentage on the fall... I just assume the fair market value of a condo downtown should for a one bedroom be around $200-250K and a two bedroom $300-350K... or around $400psf at today's income levels... with prices drifting upwards... the bigger the percentage is going to be to get it back to those values... the slide might be more or it might be less... but that's were I think fair market value is at. Because those are the values in which I can reasonably afford to purchase... on my $100K salary... and I'm 33...

Mac, your comments are stupendously ridiculous! Do you honestly believe the market should adjust to your personal financial circumstances in order to be considered fair? That is the definition of egocentricity and the antithesis of an economics 101. By your logic I should advance the notion that real estate prices in Toronto should be higher because I can afford to pay more for real estate than current prices.

I might be bias, because I know where I want the price to be...

Might be? Mac, my friend, it's time for a little ego check. If you want to make money take yourself out of the equation and see things how they are not how you want them to be. I'm trying hard to not form a judgement against you based on your revelation that you were an income tax auditor but man, with your 'tude, you are certainly living up to the stereotype!

Good luck in any case. I hope you are able to achieve the goals you seek. You and all here

 

[interested]

^^^
Macookie;
Though I appreciate you may have a bias as to where you think the market should be(many of us on this forum have a number we think is reasonable which varies person to person), the reality is the market is far larger than you ,Ka1, CNTower or me, or for that matter this whole forum. However, when a lot of like minded people decide something, it does tend to influence the market. Eventually prices may adjust to your $400/sq.ft. figure but I rather doubt it in the core. Building today costs probably around $350-400/sq.ft. for condos(mid range) in the downtown. If it touches that range again, I would be a buyer as builders will stop building and in 5 years prices will be up. By the same token, applying the logic in reverse, now would not be the time to buy in my view.

I agree with you about the $400/sq.ft. figure but for different reasons. The last "investment real estate" I bought was for $410/sq.ft.including parking and locker. I could satisfy myself with the rate of return. I might accept up to $450/sq.ft. and I have difficulty at $500/sq.ft. figure and certainly do not understand $600/sq.ft. and up for investment residential condo real estate investing. That said, I was willing to spend considerably more than that for a personal use condo... a non logical non investment decision but made with my eyes wide open. This was a decision I felt as an approaching Senior I could afford to have the luxury to do. But that said, I appreciate that this represents a small portion of the market and would literally be like the tail wagging the dog if the market as a whole applied this logic (to quote from Ka1).

 

[interested]

As a former income tax auditor, I'd suggest obtaining some advice prior to restructuring your mortgage to obtain interest expense, because if you mortgage the rental property and then just pop that amount on your principle residence... the interest expense on the rental becomes void, because it's not being used for income producing purposes. And change of use rules apply once you move out of your principle place of resident, and into your new abode... so your old property automatically gets a adjusted cost base. Just saying.

I am sure that the "accountant in both of you" know how to properly structure this without breaking the law. There are ways, I am sure....but I am not an accountant.

 

[ILuvTO]

Mac, your comments are stupendously ridiculous! Do you honestly believe the market should adjust to your personal financial circumstances in order to be considered fair? That is the definition of egocentricity and the antithesis of an economics 101. By your logic I should advance the notion that real estate prices in Toronto should be higher because I can afford to pay more for real estate than current prices.



Might be? Mac, my friend, it's time for a little ego check. If you want to make money take yourself out of the equation and see things how they are not how you want them to be. I'm trying hard to not form a judgement against you based on your revelation that you were an income tax auditor but man, with your 'tude, you are certainly living up to the stereotype!

Good luck in any case. I hope you are able to achieve the goals you seek. You and all here

Not to speak for Mac, but if you take his post and change it up so that he uses figures for average household income instead of his own personal income, then it would do a better job of supporting his argument that houses are overvalued if we were to use the classic price to income measurement as our guide.

 

[drewp]

As a former income tax auditor, I'd suggest obtaining some advice prior to restructuring your mortgage to obtain interest expense, because if you mortgage the rental property and then just pop that amount on your principle residence... the interest expense on the rental becomes void, because it's not being used for income producing purposes. And change of use rules apply once you move out of your principle place of resident, and into your new abode... so your old property automatically gets a adjusted cost base. Just saying.

I'm not really going to put a percentage on the fall... I just assume the fair market value of a condo downtown should for a one bedroom be around $200-250K and a two bedroom $300-350K... or around $400psf at today's income levels... with prices drifting upwards... the bigger the percentage is going to be to get it back to those values... the slide might be more or it might be less... but that's were I think fair market value is at. Because those are the values in which I can reasonably afford to purchase... on my $100K salary... and I'm 33... and a one-bedroom condo at $225K... I'd have about a 50% down-payment... that's where I feel comfortable at... moving out of renting into my own condo... but, if prices don't come down... single people, or couples, making approximately the same income are going to continue to rent because it makes sense. $100K... is about $65K after tax... and I spend $35K... I'm sure my other peers aren't as fiscally responsible given the stats we see in the Globe and Mail about Canadians and debt. So yeah... I might be bias, because I know where I want the price to be... but if it doesn't happen... fine... but people in the same situation as me are stretched... and affordability is the key to all of this. I'm okay if the economy tanks... I'm fine because my professional bodies keeps the mantra... We see more than numbers.

(I'm assuming that 2.5 x income + 20% down payment and the other metric I'm assuming is correct is 15 x yearly rent... which gets you to what would be approx. fair market value.)

Been busy, but wanted to add that there are plenty of Condos in the downtown core going for 400-500 per square foot range. Maybe if you didn't spend so much time reading articles you would know that plenty do exist. Sometimes I wonder where your comments come from. People who wait for the market to crash never win!

 

[macookie]

Not to speak for Mac, but if you take his post and change it up so that he uses figures for average household income instead of his own personal income, then it would do a better job of supporting his argument that houses are overvalued if we were to use the classic price to income measurement as our guide.

The last time I checked average household income in Toronto was close to $100K... but I could be wrong given that so many people under report income... http://www.trra.ca/en/reports/TorontoGenDemo.asp

 

[drewp]

I would be more interested to see what C1's income is.

 

[ISYM]

Interested, I apologize if my post was not clear. Yes to: supporting PinkLucy’s experience and to: commute and costs deterring a move to the burbs. No to your interpretation about YR’s residents moving to TO. This is the trend I am witnessing whether it is to be near their kids who’ve fled YR for core life; retiring and opting for the city or returning to the city after initially getting their foot into homeownership by purchasing in YR. The latter might appear strange but it’s as a result of the young post-grad first timers who could not afford TO 20-23 years or so ago. Some YRers are even opting to leave the GTA alltogether. In other words I’m starting to see a reversal of what started to happen from the late ‘80s and I’m not surprised really given the extent by which sprawl grew such that 20 Years ago one could fly up or down the 404 from the 401 to Davis Drive during rush hour. 10 years ago that changed to between Major Mac & Davis and now it is a virtual parking lot all the way.


Regarding C1 I provide the below to address both its performance and the terminated, expired and suspended listings (TSE) as a predictor and leave it to you and the other readers to form independent opinions as to what they may be saying while bearing in mind that it takes more than just the first two months of the year to make a precise determination of same. The non-reporting of TSE isn’t an error, it is just not a factor the majority of Realtors think to consider and therefore do not require TREB to report.

@ Feb 28 2011 sales of all types totalled 607.
At the end of Feb there were 875 active listings.
TSE numbered 492.

To date 2012 sales of all types total 487 down by 120 units (will narrow by month end) or 19.76% less than 2011.
With 902 current active listings. Up by 27 units or 3%
TSE number 543. Up by 51 units 10.36%.

Allow me to give my perspective on Guava’s aggregate reporting or even those from CREA, TREB, Individual brokerages or any other member of the industry by posing these rhetorical questions:
When was the last time you saw a headline from within the industry that stated? “Worst month ever!” or? “Worst year ever!” or? “Sold for 15% under asking!” or? “Sold for 115% of asking because it was underpriced by 18%.” Yet individual Realtors (the good ones anyway) when dealing with a purchase or sale for their clients ingnore these aggregates and drill down to the micro level. As a whole the industry’s associations and boards are always going to present the aggregate results in the best possible light. This is true for every type of organization from business all the way up to the federal government. With dozens of VOWS which argue for more information coming online even they will be careful to protect a half full image.

TREB publishes a very in-depth report every month, more so since last year. I encourage anyone with a deep interest in the market to read every single page not just the first and demand of the REALTORS with whom they deal the minutest amount of information.

I agree wholeheartedly with you about KA1, you and PinkLucy and your intent to hold for long-term. Such thinking is supported in my statement about why sellers in a sellers' market don’t list.

 

[macookie]

Notable sales on 24-Feb-2011...
22 Cuthbert Cres, sold for $1,050K, $75K over asking, 7 days on the market
519 Hillsdale Ave E., sold for $1,201K, $161K over asking, 2 days on the market
393 Berkeley St, sold for $1,200K, $75K under asking, 46 days on the market
17 Moir Ave (semi), sold for $462K, $67K over asking, 2 days on the market
175 Glebemount, nice handyman's special 'as is' glem sold for $382K, $57 over asking, 7 days on the market
278 Springdale Blvd, sold for $472K, $23K over asking, 10 days on the market
217 Carmichael Ave, sold for $925K, $46K over asking, 7 days on the market
69 Fairlawn Ave, sold for $1,180, $201K over asking, 4 days on the market
224 Coldstream Ave, sold for $2,395K, 11 days on the market.

Yes, drewp... these people aren't waiting for the market to crash... and they are all going to be forever winners.

 

[drewp]

The Toronto Condo market is actually quite healthy right now. Where we are seeing product on the market for a while are newly registered Condos. A lot of investors always overshoot the value. I had a client that wanted to list his property in Uptown for over $600000. The unit is 715 square foot with no parking and no locker. He paid under $400000 for the unit. He said someone told him that properties are listed between 800-850 a square foot. That is where the problem occurs, is that certain investors believe what a Condo should fetch them, when in reality the market dictates the price. Realistically the building is selling around 775-800 a square foot. Still very healthy. Look at what happened at TIFF. Investors were being told that the building can command 800 a square foot, but realistically on average we are seeing 700-750 a square foot, but more likely 700-725 sqft.

Daily listings in C1 are around 50-60, and half of those are rentals which isn't that much. I know I say this a lot, but re-sale just makes much more sense right now. I think in the next couple of years what might happen is some projects might be put on hold. I think asking 800 a square foot is a bit insane right now. A project in the downtown core should be around 600-650 sqft to make sense to an investor right now. Certain prime areas can command more.

I think that since interest rates will remain low until 2013 the market will be quite healthy. When unemployment rates decrease maybe the interest rates will increase, this in result could lead to a softening of the market. Not as substantial as some would say. After 2013 I would address the market then. Real estate is local and cyclical, and yes looking at the past and predicting peoples behaviour is what economists are paid to do. We must all agree the bubble talk has been talked about to death for several years. Eventually someone will be right.

The city and the demographics have changed. More women are working, not having children, and couples now have dual incomes. Gay men buy a lot of Condos. This is a demographic that isn't discussed often. Lifestyle has become more important to people. Many people are moving to the downtown core for convenience, amenities and leisurely lifestyle.

I think we see some sort of effect on the Toronto Condo market in the next 3-5 years. I think when investors see that they are not getting as much as they hoped, we might start to see a slow down or a price correction on pre-con.

If you base your future real estate decision on the market crashing you will always get it wrong. Buying and flipping has become less attractive, and I warn people to be careful on purchasing assignments because investors think they deserve a certain amount.

I wish I knew, but I bet a lot of Investors who bought assignments at TIFF are really kicking themselves right now.

 

[interested]

^^^
Drewp: I have a question about this statement: "A project in the downtown core should be around 600-650 sqft to make sense to an investor right now." I am sure you have seen a number of people show the math on rents and that the return at $600-$650/sq.ft. is around the zero mark, possibly slightly positive or slightly negative but essentially no rate of return. How do you feel it makes sense unless you are assuming price escalation which would not seem to be the case given the rest of your post.

I personally feel that the proper thing to buy today if I were in the market would be either a resale or an assignment. I would think that assignments I would be looking for would be at a discount to what the builder is presently asking or lower than similar new Precon's in other comparable buildings. For e.g. if new is $800/sq.ft., the contract was 2 or 3 years old and bought at say $600/sq.ft., that the assignment would be at say $700/sq.ft. In other words, I would expect to pay more than the original price but less than the present ask by builder for the similar unit. Having never bought an assignment, I can only imagine how this plays out. I would think it depends on whether there are a lot of assignments and whether the original purchaser is motivated to unload the property. Perhaps you could shed some light on assignments if you have experience without revealing sensitive information for the benefit of those of us not privy to such data. For e.g. assignments in a given building, what the original price might have been, and what the builder is asking for a comparable unit now and what an assignment actually went for.