[KA1]

Condo prices -- both resale and new -- in downtown Toronto have increased sharply in the past 20 odd months and they are still going up and up. Units in new buildings coming in the market are being snapped up fast -- around 80/85% units being sold in 1 day. There are regular postings in various threads about sales at ever increasing sq. ft. prices. That's despite the fact that the economy, officially, is still in recession, unemployment is high and Bank of Canada Governor and others are warning of impending crisis when -- and not if -- mortgage interest rates go up.

I live in RoCP1 in a 830 sq.ft. unit. Last known sale of my size unit in March 2008 was at $ 350,000.00. In July 2009 a unit was sold for $ 460,000 --price increase of 31% in 16 months. I am sure price has gone up even higher since then.That's crazy.

I am wondering as to which demographic individuals are buying condos at ever increasing prices and how they are going to afford mortage payments. Would the market crash when interest rates start going up?

On the other hand, if the prices start going up when economy picks up, then downtown Toronto could become, like Manhattan, a play ground for soon to be millionaires like us -- that is you and me, my friends. If downtown becomes devoid of young ones -- who motto is to drink Canada dry --, then what will happen to businesses in the entertainment district?

Desperately looking for some enlightenment.

 

[dpylyp]

I am also seeking enlightenment

Are the prices going to continue going up? I believe so;
we are a destination for immigration and we are a destination for investment.
We are destination for education with our universities in Toronto. YofT, Ryerson, Humber, and many others.

Between October 08 and March 09 the market tettered on Dare I say collapse. Everyone held their collective breath while Media screamed about the greater depression. What was the result? The market rebounded in droves.

I think that was our market adjustment. we pondered, hesitated and then decidedly moved forward. Our collective conscious decided that 300K for a place to live financed at 2.5% (or less) was market. Small detached houses are constantly trading in the soft 500K

The banking system is sound [compared with US]
Interest rates are expected to climb but increased rates slow the economy.

Harmonized sales tax is expected to slow the home purchase market. Price increase [from the tax] will be felt on fuel, insurance, maintenance fees, and many things we have never seen taxed before.

Is the price per square foot a barometer? Depends what amenities are included. You cannot make blanket $ x per square foot assumption.

DT at $ 600 per square foot vs Humber Bay Shore at $ 400 psf with a rec center and access to the water, parks and Mark Goodman Trail. A building where you have your own roof terrace could top $750 and you are near Bloor west Village.

DO you want to remodel a century property? Enjoy the thermal efficiencies of a modern property? Invest in a LOFT condo conversion? [No builders Tarrion warranties]

Depends on YOU. Some want the business connection, marketing, restaurant, elbow rubbing networking of DT. Others want the rollerblades and bicycle path.

Life is always about the choices you made or will make. I just enjoy sharing people dreams and adventures!

 

[kettal]

nice advertisement...

 

[lead82]

My main question is how do people afford buying at these prices? The average income is only 50k, and most young people dont put more than 20 down, if that.

 

[Therion]

Most people afford it by going with the variable rate, and paying little interest. Obviously this puts them at risk over the next few years as rates will start rising, possibly fairly fast. This will not happen until the U.S. starts to raise as well.
Also, the term "house poor" is now popular. In our father's times, a family's housing budget was minuscule compared to what it is today, which is why mom could stay at home with the kids. Today, some people spend well over half of their after-tax income on their housing needs, and we're not talking about the urban poor here.

 

[lead82]

I would have to agree with that. So people are cutting back on other non-discretionary spending like not going on many vacations or buying much other stuff. Everything is invested in their home.

Still, even with the low interest rates, borrowing upwards of 300K for someone making below $60K seems as too much debt (5 times gross income, or 7 times net income). This only covers the mortgage, condos also include maintenance fees and property taxes, and many now have heating and hydro costs.

I guess we'll see in 5 years where price will go, but my guess is that they will plateau at some point or even go down slightly until incomes are able to catch up.

 

[confusion]

Last known sale of my size unit in March 2008 was at $ 350,000.00. In July 2009 a unit was sold for $ 460,000 --price increase of 31% in 16 months. I am sure price has gone up even higher since then.That's crazy.

If you think your increase has been crazy, I bought on Bay north of you for 180K back in 2005 for a place 700sqf. Hitting the 5 year mark now it has pretty much doubled in price. It blows me away to think that this could go higher since it just kept going up during the recession. Crazy is right!

Anyway, I want to reiterate on point, never spend money you don't have. Until you actually sell, pretend that net gain is money you don't have.

 

[urbandreamer]

If I'd just doubled my money on a condo, I'd sell. 2010==Toronto pops.

 

[X2 Buyer]

My main question is how do people afford buying at these prices? The average income is only 50k, and most young people dont put more than 20 down, if that.

I knew at least two families from my friends' pool who have almost paid off their mortgages and both of the families the ages of the couples are under 45 and I am talking about over half million dollar's homes. So Canadians' are good at savings I guess. Oh btw, both of the wives and husbands are working 9-5 so both have incomes.

 

[cdr108]

I knew at least two families from my friends' pool who have almost paid off their mortgages and both of the families the ages of the couples are under 45 and I am talking about over half million dollar's homes. So Canadians' are good at savings I guess. Oh btw, both of the wives and husbands are working 9-5 so both have incomes.

that sounds really good but we need more perspective to give an accurate view.

when did they purchase their first property and what size of mortgage did they have?

half million dollar homes mean nothing now ... and if they bought 7 years ago, that would have been valued at $250,000, etc.

if they had a combined income of $100,000 in the above example 7 years ago, then they bought substantially less than typical 3.5-4.0 x ratio.

 

[X2 Buyer]

that sounds really good but we need more perspective to give an accurate view.

when did they purchase their first property and what size of mortgage did they have?

half million dollar homes mean nothing now ... and if they bought 7 years ago, that would have been valued at $250,000, etc.

if they had a combined income of $100,000 in the above example 7 years ago, then they bought substantially less than typical 3.5-4.0 x ratio.

Very true analysis - this only provides one demographic group of the people who purchased homes. The question was why people can afford the housing so it answers partially I assume. The young people who just finished off university several years ago I know some of them buying condos around $300K range - both have incomes for the couple lower side of the median incomes.

 

[KA1]

Ka1

Very true analysis - this only provides one demographic group of the people who purchased homes. The question was why people can afford the housing so it answers partially I assume. The young people who just finished off university several years ago I know some of them buying condos around $300K range - both have incomes for the couple lower side of the median incomes.

I would like to see the discussions concentrated on the broader picture rather than on individual cases.

It is my opinion that younger generation -- either single or a couple -- is taking high financial risks by buying condos at ever increasing prices. To a single individual the thinking seems to be that buy at today's high prices because tomorrow prices will be even higher and even more unaffordable. And, so far, they seem to be right. For a couple, the thinking seems to be that with two salaries we can afford to buy a condo now , instead of paying the rent to someone else, pay the mortgage. Down the road, mortgage will be a lower amount and resale price of a condo will have gone higher. One day, take the equity out and buy a townhouse a little farther away -- unless, of course, a couple is willing to raise a family in a 1+1 condo.

With any one single or a combination of events, for example an increase in mortgage interest rates or loss of a job, the situation could turn into a downward spiral for quite a few individuals-- unaffordable mortgage, trying to sell a condo in a buyer's market, and perhaps, ending with a mortgage higher than the current market value of the condo. Not possible? Think again.This has happened in the past in Calgary and in Vancouver more than once.

Unless someone is willing to put up a hefty down payment or can look to parental support just in case, give up this attitude of 'Now or Never'. It is getting risker day by day to purchase a condo in downtown. I am old enough to have seen more than one 'Happy' family get financially in a bind and split due to the resulting stress. Personally, it is not good for me if the prices of condos remain steady or even go down. However, I rather see the flowers blooming in a garden rather than hear sad stories.

I have been wrong before. And I could be wrong this time also.

 

[Granny]

Where is downtown pricing going in the future?
This is the same question that has always being asked, twenty years ago, six months ago, today, and a year from now. A tough question that has always had a simple answer.

It's a actually a two part question.

A. Where will pricing be a year from now?
Who knows. Who cares. If you are a young individual buying a 'home', perhaps consider the fact that odds are you will live much longer than a year.
Advise: Buy what you can afford and buy quality over bargain even if it means buying something smaller than you wished for. Hang on to the place and get on with living your life.
B.Where will pricng be 10 years from now?
Do you really need an answer for this one? It's possible that even your wildest fantasy might be a modest guess.
Advise: Buy what you can afford and buy quality over bargain even if it means buying something smaller than wished for. Hang on to the place and get on with living your life.

There is one fellow in the above posts that always has always kept me chuckling.
When prices were going at about 350./ft, a few years back he was predicting pricing would drop to 200/ per sq. ft. No matter what is happenig in downtown Toronto, If prices are climbing then they will drop soon, and badly. If prices have pulled back as they did last winter, than there is going to be a much more severe drop about to happen. He never seems to tire when it comes to beating that drum. Why does he do it? Who really cares. Perhaps he believes there is always a potential first time buyer who will consider what he has to say. We all know someone like that individual, and they always have plenty of hard 'facts' and 'statistics' to back up their claims.

Buy what you can afford and buy quality over bargain even if it means buying something smaller than wished for. Hang on to the place and get on with living your life.
..and no, I'm not real estate person LOL. I'm just someone who has been around a little longer than most around here.

 

[aguduser]

Where is downtown pricing going in the future?
This is the same question that has always being asked, twenty years ago, six months ago, today, and a year from now. A tough question that has always had a simple answer.

It's a actually a two part question.

A. Where will pricing be a year from now?
Who knows. Who cares. If you are a young individual buying a 'home', perhaps consider the fact that odds are you will live much longer than a year.
Advise: Buy what you can afford and buy quality over bargain even if it means buying something smaller than you wished for. Hang on to the place and get on with living your life.
B.Where will pricng be 10 years from now?
Do you really need an answer for this one? It's possible that even your wildest fantasy might be a modest guess.
Advise: Buy what you can afford and buy quality over bargain even if it means buying something smaller than wished for. Hang on to the place and get on with living your life.

There is one fellow in the above posts that always has always kept me chuckling.
When prices were going at about 350./ft, a few years back he was predicting pricing would drop to 200/ per sq. ft. No matter what is happenig in downtown Toronto, If prices are climbing then they will drop soon, and badly. If prices have pulled back as they did last winter, than there is going to be a much more severe drop about to happen. He never seems to tire when it comes to beating that drum. Why does he do it? Who really cares. Perhaps he believes there is always a potential first time buyer who will consider what he has to say. We all know someone like that individual, and they always have plenty of hard 'facts' and 'statistics' to back up their claims.

Buy what you can afford and buy quality over bargain even if it means buying something smaller than wished for. Hang on to the place and get on with living your life.
..and no, I'm not real estate person LOL. I'm just someone who has been around a little longer than most around here.

Hello Granny,

1. It is a wise advice that you gave! It made me think about the song Que sera sera: "Whatever will be, will be. The future is not ours to see..." Really, people can give all kinds of prediction for the future, and if you keep listening to them, you would be confused more! So if you need a place to live, look for something good that you can afford, and then go on with your life. Once you've done it, don't look back, don't look around, don't try to take a peek at the future.

What will be, will be...

(When I started to read your post, I was thinking "this sounds wise! This person must have been around longer, and seen more..." and you've confirmed my thoughts at the end of your post.)

2. However, your advice is more for people who are looking to buy a place to live, than for investors. And it is investors who are trying to predict the future the most. I'm waiting to get into my first condo next summer (which I bought a few months ago - for quality and affordability), but I'm also a beginner investor. I wonder what advice you can give to investors...

Thanks,

 

[Ania]

Good point Granny!
But we need the doom and gloom view too, that way people can consider both sides.