cdr108
Senior Member
not sure if you were alluding that BJL has the downpayments or not, but AFAIK all deposits are kept in trust with the lawyers so he can't access the downpayments for cashflow to pay for progress of projects.
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not sure if you were alluding that BJL has the downpayments or not, but AFAIK all deposits are kept in trust with the lawyers so he can't access the downpayments for cashflow to pay for progress of projects.
cdr108
Senior Member
well the above noted 373 SQ FT 1 bedroom floorplan is NOT in London UK NOR Manhattan NYC.
it's in Ottawa and according to another poster, the location is poor.
rbt said:
Ryan_T
Senior Member
While this is probably true, I think Toronto is a bit too young to be commanding that sort of price. Just because it's being done elsewhere, doesn't mean it applies to Toronto. And you also have to compare income levels.
interested
Senior Member
cdr, I admit I don't know how it exactly works but once BJL or any developer has enough sales, the bank forwards the money for construction. It may do so in tranches...for e.g. give enough to build the garage at say 60% sales and say that it will give the rest when 70% is achieved. I believe the banks just wish to know there are purchasers on the hook and that they are not financing more than probably 100% if 70% or 80% of the project is sold. In other words, the bank would be the first mortgagor and would get another developer to finish the project. They would have say $70 million loan on total sales of $100 million but with sales of 70% or $70 million guaranteed by purchasers. The 20-25% down payments would guard the bank against a significant downturn. If the $100 mill project say declines 30%...they have guaranteed sales assuming the purchasers close for the 70 million and the bank would still not lose money and would see the last 30% sold at a 30% discount but still leaving another 21 Million profit if my math makes any sense.
interested
Senior Member
Also, if you have been to London...it is crowded...there are no or very few surface parking lots around...far more people in a much more crowded environment. There is simply no where to build there (or very few spots) and they come with hefty price tags I am sure.
James
Senior Member
Here's an interesting article in the Globe & Mail today, with most of the info coming from Shaun Hildebrand, a senior market analyst for the Greater Toronto Area at CMHC. Since we've discussed the notion of foreign investors time and time again, it's interesting to note that they're estimating about 4% of condo buyers don't have Canadian citizenship. He also feels pretty confident that we won't see a similar bubble as we did in 1990. Lastly, whether it's relevant or not, he compares the cost in Toronto to those in other cities.
http://www.theglobeandmail.com/repo...seen-stabilizing-in-2013-cmhc/article5271277/
Toronto condo market seen stabilizing in 2013: CMHC
Toronto’s slowing condo market will stabilize next year, but the risk that prices will fall is greater in the longer term, Canada Mortgage and Housing Corporation says.
Shaun Hildebrand, a senior market analyst for the Greater Toronto Area at CMHC, is scheduled to present his latest thoughts on the market at a conference Wednesday morning.
The large quantity of cranes dotting the city’s skyline are part of the reason why many observers have suggested that Toronto’s condo market could be in a bubble, one that could precede a significant drop in prices.
But Mr. Hildebrand said he’s far less worried than many. “I’m not overly concerned, although there are risks,” he said in an interview. Among those are the rising proportion of condos that are owned by investors, and the large increase in new condominiums that will be completed in the years ahead.
One risk that Mr. Hildebrand doesn’t subscribe to is the much-discussed notion that foreign investors are propping up the market.
“I don’t see that there will be any sort of mass exodus of foreign money,” he said. While there are no statistics on the proportion of new condos that are being bought by foreigners, Mr. Hildebrand said that surveys by the Municipal Property Assessment Corporation suggest that about four per cent of the condos in Toronto are owned by people who don’t have Canadian citizenship.
Mr. Hildebrand also takes comfort from some lessons he’s learned by studying the condo bubble that occurred in the late 1980s.
“Even though today we see that the number of units under construction is about twice as high as it was back then, the share of units that are unsold is relatively low,” he said. “When a project comes to completion today it’s 95 per cent presold. In the late 1980s bubble it was at best 60 per cent sold.”
Buyers also generally put down larger deposits today, making it harder to walk away.
“Condo prices from 1985 to 1989 rose by 170 per cent, so there was a lot of speculative activity going on then,” he said. “And then you were entering into a very significant recession that hit the labour market in the early ‘90s, and interest rates went into the double digits. But despite that perfect storm we only saw prices decline by about 25 per cent over the course of the next seven years, a relatively small amount in relation to the run up, so that tells us that prices are pretty sticky on the way down.”
In addition, Mr. Hildebrand said that a lot of investors who bought condos in the late ‘80s held onto them when the market got tough.
Another statistic that gives him comfort: he says that in the past decade condo prices have risen by about 55 per cent, while the price of all other homes have risen by about 75 per cent.
Moreover, he compared Toronto prices to those in other cities around the world, and found that prices for prime condo space in areas like London and Paris are twice as high as they are for prime space in Toronto, and in New York and Tokyo they’re about 30 per cent higher than here.
“So even though we’re seeing all of this supply, all of this building taking place, it’s not necessarily a prescription that prices have to decline,” he said. “In the short term we’re quite confident that prices will hold up. They may decline slightly over the next six to nine months, but in an environment where interest rates remain low and the economy’s holding stable, any sort of reductions in price are just going to help to improve affordability and set the stage for a better level of sales towards the end of 2013.”
While he doesn’t see sales rebounding to the levels they were at prior to the moves Ottawa made in July to tighten up the mortgage market, he does expect them to be “a little higher” than they are now.
“The longer term comes with some greater risks,” he said. “There’s almost 50,000 units under construction right now, an increasing share of investors are believed to own these units, so it’s going to be key to understand what they choose to do with their units when they come to completion. Right now a lot of them are holding on. But will they continue to do that in the future? And the bigger question is what demand is going to look like. It’s obviously more difficult to anticipate the economic environment a few years out than it is say over the next year or so. So that’s where the risks lie, I would say 2014, 2015.”
~~~
http://www.theglobeandmail.com/repo...seen-stabilizing-in-2013-cmhc/article5271277/
Toronto condo market seen stabilizing in 2013: CMHC
Toronto’s slowing condo market will stabilize next year, but the risk that prices will fall is greater in the longer term, Canada Mortgage and Housing Corporation says.
Shaun Hildebrand, a senior market analyst for the Greater Toronto Area at CMHC, is scheduled to present his latest thoughts on the market at a conference Wednesday morning.
The large quantity of cranes dotting the city’s skyline are part of the reason why many observers have suggested that Toronto’s condo market could be in a bubble, one that could precede a significant drop in prices.
But Mr. Hildebrand said he’s far less worried than many. “I’m not overly concerned, although there are risks,” he said in an interview. Among those are the rising proportion of condos that are owned by investors, and the large increase in new condominiums that will be completed in the years ahead.
One risk that Mr. Hildebrand doesn’t subscribe to is the much-discussed notion that foreign investors are propping up the market.
“I don’t see that there will be any sort of mass exodus of foreign money,” he said. While there are no statistics on the proportion of new condos that are being bought by foreigners, Mr. Hildebrand said that surveys by the Municipal Property Assessment Corporation suggest that about four per cent of the condos in Toronto are owned by people who don’t have Canadian citizenship.
Mr. Hildebrand also takes comfort from some lessons he’s learned by studying the condo bubble that occurred in the late 1980s.
“Even though today we see that the number of units under construction is about twice as high as it was back then, the share of units that are unsold is relatively low,” he said. “When a project comes to completion today it’s 95 per cent presold. In the late 1980s bubble it was at best 60 per cent sold.”
Buyers also generally put down larger deposits today, making it harder to walk away.
“Condo prices from 1985 to 1989 rose by 170 per cent, so there was a lot of speculative activity going on then,” he said. “And then you were entering into a very significant recession that hit the labour market in the early ‘90s, and interest rates went into the double digits. But despite that perfect storm we only saw prices decline by about 25 per cent over the course of the next seven years, a relatively small amount in relation to the run up, so that tells us that prices are pretty sticky on the way down.”
In addition, Mr. Hildebrand said that a lot of investors who bought condos in the late ‘80s held onto them when the market got tough.
Another statistic that gives him comfort: he says that in the past decade condo prices have risen by about 55 per cent, while the price of all other homes have risen by about 75 per cent.
Moreover, he compared Toronto prices to those in other cities around the world, and found that prices for prime condo space in areas like London and Paris are twice as high as they are for prime space in Toronto, and in New York and Tokyo they’re about 30 per cent higher than here.
“So even though we’re seeing all of this supply, all of this building taking place, it’s not necessarily a prescription that prices have to decline,” he said. “In the short term we’re quite confident that prices will hold up. They may decline slightly over the next six to nine months, but in an environment where interest rates remain low and the economy’s holding stable, any sort of reductions in price are just going to help to improve affordability and set the stage for a better level of sales towards the end of 2013.”
While he doesn’t see sales rebounding to the levels they were at prior to the moves Ottawa made in July to tighten up the mortgage market, he does expect them to be “a little higher” than they are now.
“The longer term comes with some greater risks,” he said. “There’s almost 50,000 units under construction right now, an increasing share of investors are believed to own these units, so it’s going to be key to understand what they choose to do with their units when they come to completion. Right now a lot of them are holding on. But will they continue to do that in the future? And the bigger question is what demand is going to look like. It’s obviously more difficult to anticipate the economic environment a few years out than it is say over the next year or so. So that’s where the risks lie, I would say 2014, 2015.”
~~~
interested
Senior Member
interested
Senior Member
From the Star:
http://www.thestar.com/business/art...s-concerned-over-lack-of-investor-information
Condo watchers concerned over lack of investor information
Published on Wednesday November 14, 2012
Share on twitter Share on facebook
Image
By Susan Pigg Business Reporter
Developers are only adding to fears about the state of Toronto’s softening condo market, and begging for more government intervention, by refusing to disclose how many investors are “assigning” units before taking possession, housing watchers say.
Market research firm Urbanation had to abandon a survey this week aimed at getting a better handle on that assignment market after some 120 developers refused to answer questions. Assignments are units bought in the preconstruction phase by investors who intend to flip them to new buyers at a significant markup before having to come up with final closing costs, including land transfer taxes.
Some developers said they didn’t have the information. Others said they had no intention of supplying it, said executive vice president Ben Myers, who sent out the first emails to developers last August.
But Jim Ritchie, vice president of Canada’s largest condo development firm, Tridel, said his company didn’t respond simply because the question wasn’t relevant. “They (assignments) represent a very, very small component of our business. We just don’t see them very much,” said Ritchie.
Policy makers, among them the Canada Mortgage and Housing Corp., have been trying to get a better handle on the extent to which investors now dominate the Toronto market and what risks, if any, they may pose to its future health. Understanding the growing assignment market is considered key to that.
“Obviously, this all adds to fear about what’s happening in the market,” says Myers. “There can be consequences in the end to not having enough information out there — like the government starting to make decisions that may affect developers detrimentally.”
CMHC has been stepping up its research into the condo market, especially in the last few months as the market has started to soften.
It now estimates that just 3.7 per cent of GTA condos are owned by foreign investors, a CMHC housing outlook conference was told Wednesday.
But, when combined with domestic buyers, investors now own about 22 per cent of all condos offered up for rent across the GTA, and closer to 30 per cent in the downtown core, says CMHC.
Both those numbers are both considered low by condo experts, who estimate, depending on the building, investor ownership is now actually closer to 60 to 95 per cent.
What remains most concerning are the big unknowns in the industry: Who exactly are those investors, how long do they intend to hang on to their units as the market softens and how many more recent buyers are just average folks in over their heads with units that now average $600 to $700 per square foot.
“There’s nobody who really knows,” says long-time development consultant Barry Lyon. “And there are questions we all have to ask: Why aren’t developers being more open, why aren’t lenders demanding more knowledge of purchaser characteristics?
“I think everyone has been enjoying the ride and we may see more scrutiny now.”
This reminds me of the old law adage: "Never ask a question you don't know the answer to".
My suspicion is the developers know the data likely will hurt them, especially if it comes out that the percentage of foreign investors and other speculators locally are high. Also, I don't think if I was a developer I would want it known that say 20% or more of units are being assigned and that the earlier players are buying with the intent to flip and that prices will be pushed up by the time John Q Public buys in.
http://www.thestar.com/business/art...s-concerned-over-lack-of-investor-information
Condo watchers concerned over lack of investor information
Published on Wednesday November 14, 2012
Share on twitter Share on facebook
Image
By Susan Pigg Business Reporter
Developers are only adding to fears about the state of Toronto’s softening condo market, and begging for more government intervention, by refusing to disclose how many investors are “assigning” units before taking possession, housing watchers say.
Market research firm Urbanation had to abandon a survey this week aimed at getting a better handle on that assignment market after some 120 developers refused to answer questions. Assignments are units bought in the preconstruction phase by investors who intend to flip them to new buyers at a significant markup before having to come up with final closing costs, including land transfer taxes.
Some developers said they didn’t have the information. Others said they had no intention of supplying it, said executive vice president Ben Myers, who sent out the first emails to developers last August.
But Jim Ritchie, vice president of Canada’s largest condo development firm, Tridel, said his company didn’t respond simply because the question wasn’t relevant. “They (assignments) represent a very, very small component of our business. We just don’t see them very much,” said Ritchie.
Policy makers, among them the Canada Mortgage and Housing Corp., have been trying to get a better handle on the extent to which investors now dominate the Toronto market and what risks, if any, they may pose to its future health. Understanding the growing assignment market is considered key to that.
“Obviously, this all adds to fear about what’s happening in the market,” says Myers. “There can be consequences in the end to not having enough information out there — like the government starting to make decisions that may affect developers detrimentally.”
CMHC has been stepping up its research into the condo market, especially in the last few months as the market has started to soften.
It now estimates that just 3.7 per cent of GTA condos are owned by foreign investors, a CMHC housing outlook conference was told Wednesday.
But, when combined with domestic buyers, investors now own about 22 per cent of all condos offered up for rent across the GTA, and closer to 30 per cent in the downtown core, says CMHC.
Both those numbers are both considered low by condo experts, who estimate, depending on the building, investor ownership is now actually closer to 60 to 95 per cent.
What remains most concerning are the big unknowns in the industry: Who exactly are those investors, how long do they intend to hang on to their units as the market softens and how many more recent buyers are just average folks in over their heads with units that now average $600 to $700 per square foot.
“There’s nobody who really knows,” says long-time development consultant Barry Lyon. “And there are questions we all have to ask: Why aren’t developers being more open, why aren’t lenders demanding more knowledge of purchaser characteristics?
“I think everyone has been enjoying the ride and we may see more scrutiny now.”
This reminds me of the old law adage: "Never ask a question you don't know the answer to".
My suspicion is the developers know the data likely will hurt them, especially if it comes out that the percentage of foreign investors and other speculators locally are high. Also, I don't think if I was a developer I would want it known that say 20% or more of units are being assigned and that the earlier players are buying with the intent to flip and that prices will be pushed up by the time John Q Public buys in.
cdr108
Senior Member
that answer is complete BS as any one assigning a P&S Agreement needs the consent of the developer and gets processed through their lawyer too !
metroTO
Active Member
No developer would want to reveal that 60-95% of their units were sold to investors.
These mega high rise condos on Yonge St., in the Entertainment District and along the Gardiner are essentially glorified rental buildings.
These mega high rise condos on Yonge St., in the Entertainment District and along the Gardiner are essentially glorified rental buildings.
cdr108
Senior Member
funny that CMHC says only 30% of units in dt core are investor owned.
i found this article in recent condo life by BJL that says 50%. gotta love the way he can always spin a negative to a positive ... lol
he's also previously written against assignments; however, he seems to market to the specuvestor.
http://www.condolifemag.com/Articles/Default.aspx?ArticleID=1916&Action=Article&SiteID=7
What is going on?
Brad Lamb
Thursday, November 01, 2012
Single family home sales in Central Toronto represent a finite supply with an increasing demand. This is due to the age and style of those neighbourhoods. We haven’t built any significant single family home stock south of Finch Avenue for 40 years. The sale of these kinds of properties remains very brisk. It is unlikely that this will change any time soon as there will be more buyers for houses than sellers. The built-condominium market can expand, and has. Even with tens of thousands of units completed over the last 10 years, the reselling of built condos remains very strong with only a slight decline in volume having been recorded the last three months. Overall, the sales volume for 2012 condo resales has been down, but less than 10 per cent. This will make 2012 one of the strongest years ever for Toronto condominium resales. It is unlikely that prices of built inventory will decline, but they may drift slightly downwards over the short term.
New development sales are a different issue. Generally since 2000, affordability has been irrelevant since 70 per cent of the product in the GTA has been bought by investors (prior to construction). Generally speaking, a developer needs 70 per cent of a project to be sold to build it. 70 per cent of this 70 per cent is bought by investors, or 50 per cent of the overall project. The other half is sold to end-users. The majority of end-user sales occur at completion. The investor’s motivation to buy is not directly connected to affordability issues, rather investment objectives. These objectives vary from investor to investor. Many investors are just looking to hedge money or beat inflation. Some look to earn a real return on rent. Some investors are looking for a long-term appreciation, and some just speculate. Investors recently have been spooked by various issues. The Middle East is always a problem for investment stability, Canadian government officials and the media have done their best to terrify investors. The European debt issues have also convinced investors to fence sit. We have also had a great run in rising values. All of this, and more, has reached an apex which has created a serious slowdown in new development sales. Q3 will be bad, probably less than 2000 units will be sold in the GTA.
Investors are the key to our new development industry. It is their buying power that gets a developer their pre-sales. Without them, it does not exist. They will likely be back in the next few months as they will have little options elsewhere. What represents a good safe place to put investment funds? For all the reasons I have continually talked about, Toronto is one of the best places to buy real estate. Rich, wealthy, vibrant cities are not affordable anywhere in the world. I agree that Toronto is no longer an “affordable city. ”It doesn’t matter. As Toronto prices appreciate in the future and lock out many more buyers, they will have to accept renting homes from the investors that have bought new condos. There is nothing wrong or curious about that. Home ownership in Canada has been relatively easy versus almost any other country in the world and it will only get harder for first time buyers to get in. Currently there are 450 condos for rent (on MLS) south of the 401. There should be over 2000 for a balanced market. This lack of supply is driving rents through the roof. Condo rents have risen 10-15 per cent in the last 9 months. This will continue, and of course, help to re-ignite investors sales.
We will see a short term slow down in new condo sales, perhaps as long as 2 years. Do not expect the cost of building houses to go down, rather it will only go up. Real demand for housing will stay strong as the population continues to grow. Investors and homeowners, listen up: the best time to buy property is when sentiment has turned. Take advantage today of the developer’s current state of weakness. It won’t last very long.
interested
Senior Member
This can be viewed as very self serving. " I am a developer, I have weakness now...buy my product....which in turns gets me out of my project to do another in the future". On the other hand, there is some rationale to this article. However, granted in 2008 with the financial crisis in fact costs went down not up. Trades suddenly lost their bargaining power. Materials were less in demand and prices fell. In fact, I am aware of at least one project that went to bidding in 2010-2011 at prices cheaper than had been budgeted for because of the slowdown from 2008-mid-end 2009 and there were cheaper material and labour costs. So yes, it may be only a blip and prices will continue to rise but it is not a foregone conclusion.
Regarding the 50% or 30% number....since no one keeps actual statistics....no one actually knows or is giving us the raw data to decide what is correct.
cdr...I think perhaps the numbers are referring to different things. 50% in BJL article I believe is new construction in downtown Toronto whereas 30% is perhaps "all condos" in downtown Toronto. For e.g. I rent out a condo that is about 25 years old and I believe that would be included in the 30% figure but not the 50% one if I read the nuance correctly in the 2 articles.
cdr108
Senior Member
interested, you may be correct; however, since Urbanation was dealing with developers and pre-construction; and many of us have noted the higher pre-con price vs resale products, IMO, it is the pre-con product/industry that will bring havoc.
macookie
Active Member
When immigrants stop coming, and/or more specifically what happens when "skilled immigrants" stay home?... and knowing that governments are slow to create policies... what will happen to RE prices?...
http://business.financialpost.com/2...-must-respond-to-need-for-skilled-immigrants/
http://business.financialpost.com/2...-must-respond-to-need-for-skilled-immigrants/