[simuls]

Two more banks predicting a correction, albeit a minor one at 5-10% on average. "On average" being the key phrase here for me. Condos 20%, homes 10% in the core. Less outside the core of Toronto.http://www.yourhome.ca/homes/real%20estate/article/814065--canadian-home-prices-expected-to-drop-two-reports-say

 

[KA1]

Two more banks predicting a correction, albeit a minor one at 5-10% on average. "On average" being the key phrase here for me. Condos 20%, homes 10% in the core. Less outside the core of Toronto.http://www.yourhome.ca/homes/real%20estate/article/814065--canadian-home-prices-expected-to-drop-two-reports-say

To start with, 5-10% average decrease is spread over 1-2 years and not immediately. Then, you have to look at various segments. Earlier, I had pasted a link to The Globe and Mail news items about sales efforts of Ritz-Carlton suites in Abu Dhabi. Just today, Remax condos has published a report The market in the 300,000 -400,000 range, that was the hottest sewgment, has cooled. Most of the condos in this price range have been 1+den and appealed to young buyers. Market segment in $ 500,000 and above range is strongest. This is the area where 'yuppies' and individuals who now own 1+den are moving into. You can read remax report at www.remaxcondosplus.com'

 

[interested]

To start with, 5-10% average decrease is spread over 1-2 years and not immediately. Then, you have to look at various segments. Earlier, I had pasted a link to The Globe and Mail news items about sales efforts of Ritz-Carlton suites in Abu Dhabi. Just today, Remax condos has published a report The market in the 300,000 -400,000 range, that was the hottest sewgment, has cooled. Most of the condos in this price range have been 1+den and appealed to young buyers. Market segment in $ 500,000 and above range is strongest. This is the area where 'yuppies' and individuals who now own 1+den are moving into. You can read remax report at www.remaxcondos.plus.com'

The key point of this report is the increase in inventory. It doubled. Time on the market went from 20 days to 60 days in 4 months. Now we have the HST, world unease, stock market descending, and currency losing ground. This in no way adds to confidence. I believe alot of people will hold off on making further moves. As well, if the new first time buyer is not there to buy the first property, he doesn't allow the 2nd time buyer to move up and the 2nd one in tern means the 3rd time buyer can't move up.

I still feel we likely will have some correction, not a crash, and frankly, this would not be unhealthy as long as it is controlled.

The previous post about interest rates staying low longer is likely correct. However, this is not a good sign. It is simply a sign that things in the world are not good and common sense dictates that prices should not continually rise in a bad economic environment.

 

[onfence]

Given the present sentiment, how likely would builders be willing to reduce prices on existing stock? It doesn't seem like they are willing to budge at the moment, presumably because it would not be too good of a PR to buyers that already bought and now suddenly the prices have gone down.

 

[urbandreamer]

^It happened in early 2009, and it will happen again. Actually, it's already happening. Look at Monarch's latest Scarborough condo, EQ something or other, starting from $139,000. Or Can Alfa's Liberty Village Central, starting from $150k. I expect average starting price will be from the $150-$160k range instead of the current $200k+ range.

 

[interested]

^It happened in early 2009, and it will happen again. Actually, it's already happening. Look at Monarch's latest Scarborough condo, EQ something or other, starting from $139,000. Or Can Alfa's Liberty Village Central, starting from $150k. I expect average starting price will be from the $150-$160k range instead of the current $200k+ range.

Most of the time the pricee drops have been 1 off units, loss leaders, or shrunken suites. (say 350 sq. ft instead of the 450 sq. ft origianlly offered or otherwise strip down the unit of its built ins. Cheaper finishings inside and therefore lower the price.
Builders will go to incentives, upgrades (since this costs the builder much less and gives the appearance of offering more to the end buyer making him think he is really getting something when in fact $20K usually is worth $10K at most).

I believe in alot of cases, the agreement with lenders will dictate how low they could lower their prices.

 

[KA1]

Normally, builders do not reduce the price of existing stock directly. They offer free upgrades up to a certain amount and/or low rate mortgage for a number of years.

 

[onfence]

I believe in alot of cases, the agreement with lenders will dictate how low they could lower their prices.

You mean the builder's lender, I assume?

Normally, builders do not reduce the price of existing stock directly. They offer free upgrades up to a certain amount and/or low rate mortgage for a number of years.

So you all have not seen builders actually reducing prices from their orginally-listed ones?

 

[KA1]

Not to the public, unless there are a few unsold units in a development and the builder wishes to move on. A few years ago, in a slow market, Monarch had advertised reduced prices to real estate agents only. A few lucky individuals, who knew these agents, got the unit at a reduced price while general public paid the full price for the similar unit.

 

[interested]

You mean the builder's lender, I assume?

Yes, I meant the builder's lender.



So you all have not seen builders actually reducing prices from their orginally-listed ones?

I have seen and builders do actually reduce prices. You can appreciate they are very retiscent to do this however. It is a last resort. As I said, they can sell you upgrades, agree to pay condo fees (remember the builder often owns or has shares in a management company so he just loses the 15% he would have made on managing or cost him 85% vs. 100% of a price discount. Upgrades are often marked up 100-200% so this cost the builder 33 to 50%.

As well, those who bought at the higher prices become quite upset and often demand (though not usually successful) that the builder lower the price on their units as well or at least give them something, and the builder ends up with a bad reputation.

However, if there is a serious drop in property value (20% say), then you will see builders lower prices, especially if they are closing out the property like Ka said. Again, since condos don't get built unless there is at least 70% sales now prehand, the builder is close to break even when he breaks ground and most sell continuously. also most developers have deep pockets and they will rally to keep prices up as it serves none of them to lower prices is they can get away with it.

 

[onfence]

So do you foresee any probable price reductions in this present mkt from builders for the rest of the 2010 year?

 

[interested]

So do you foresee any probable price reductions in this present mkt from builders for the rest of the 2010 year?

Perhaps on some projects that are near completion. I would not expect it on anything that is 2 years away or that has recently broken ground.
I think you will see possibly some reductions but my guess is it will be in the order of 3-5% max at best for the rest of 2010 and likely less (except for closeouts of residual suites where the builder wants out of the last few units). I think you are looking at 2011 at least before you see any real price adjustments if they occur.

You might ask Urbandreamer to clarify exactly what he has noticed happening in an area/project you are interested in. He seems more in tune with what is happening though he definately believes a much larger price adjustment is coming than I anticipate. However, I personally would be in no hurry to buy now(unless absolutely needed to live) as I think the downside risk far outweighs the upside potential for likely the next few years (3-4 years at least).

Hope this helps. Of course, none of us has a crystal ball so these are just guesses by all concerned.

 

[interested]

So do you foresee any probable price reductions in this present mkt from builders for the rest of the 2010 year?

Forgot to mention, you might find some assignments where people's situations have changed or people are scared anticpating price drops who will let go of some projects at 2007 or thereabout prices to just get out of them. That may well happen by the fall of this year.

 

[EXgeMMy]

with the world markets where they are at, I don't think Carney will be raising interest rates. Of course that will only encourage Canadians to take on more debt.

 

[onfence]

I appreciate all your input.