[Yossi Kaplan MBA]

270k for 680sqft

Would Waterparkcity be considered an "Investor-ridden" development. I currently live there and am thinking about moving out. Baby on the way! We have an approx. 680sf 1+1, 2nd floor. We were talking to the agents and they are talking about a list price of $270,000? Just wondering if you guys think it will move?

If your unit has water view and parking, and is good condition, good layout, the price is reasonable.


If you're facing north and no parking you'll be on the market for a long time and will "enjoy" many strangers walking into your place for showings.


Basically for 270-280k these days you can get 1+den with parking and decent to great views. when you are selling you need to be competitive with the rest of the market, not just within your building.

Good luck with the baby and congratulations!


yk.

 

[Funkster]

Yossi,

Similar to the previous post, I see that iLoft is offering a new suite release - 560 sq. ft. 1 Bed for $209,900. I'm really interested as it looks like good value and will be ready soon. If you have a few secs, do you have any thoughts on this, as well as other bldgs in the immediate area - California, South Beach, Waterscapes, NXT?

Thanks

 

[Yossi Kaplan MBA]

iLofts

Yossi,

Similar to the previous post, I see that iLoft is offering a new suite release - 560 sq. ft. 1 Bed for $209,900. I'm really interested as it looks like good value and will be ready soon. If you have a few secs, do you have any thoughts on this, as well as other bldgs in the immediate area - California, South Beach, Waterscapes, NXT?

Thanks

sure, 209,900 is not a bad price, yet I've seen similar downtown units for about the same. if you're going to live in the condo, and love the location, go for it, so a bit of comparison shopping and go for the best you can find.

if it's pure investment, my advise would be to stay downtown b/c the demand there is the greatest, hence less risk, better rents, easier to find tenants, easier to sell later, etc.

last, if the building is not under construction, do your due diligence: i'd be very careful to buy something that is not out of the ground right now.

hope that helps.

 

[Funkster]

Thanks so much Yossi, that makes sense. This would be to live in / investment. I like the area because I'm close enough to Downtown, but not right in there. I'm leaning towards Mystic Pointe because it's a fairly popular community when the weather is nice - it's also well out of the ground, as you recommended.

It's so different out there these days, but luckily, I'm a first-time buyer and I almost have the money saved to make the big purchase. Now seems to be a better time than ever to buy. Friends of mine suggested I wait to see if prices fall more, but I see it as if I wait too long, I'll be waiting forever

I appreciate your insight,

F

 

[northstar]

... Friends of mine suggested I wait to see if prices fall more, but I see it as if I wait too long, I'll be waiting forever

Regarding the "waiting for prices to fall" that is so often heard these days... I wanted to mention some things to consider.

If you are buying a place to live in yourself - I'd consider buying now, for the following reasons:

Past experience: In 1999, I bought my first condo.
At the time, condo prices had just surged about 15 or 20%, after having fallen severely throughout the early to mid-1990's.
"Waiting for prices to fall" friends were convinced that condo prices were set to crash again.
However, with mortage and principle, I would end up paying about the same as rent... so I took the plunge.
10 years later, I've been able to move up to a second home, while some of my friends, who were waiting for the 1999 condo crash, are still renting - and are pretty much permanently priced out of the market.
Lesson: Is that one can never time the market, and there will always be naysayers.

Interest Rates: Back in 1999 - interest rates of 6.25% had people, like me, seriously looking into the option to buy vs. rent.
Today's mortgage interest rates are around 4%, which is based on the Bank of Canada rate being close to 0%.
So "if" you re looking to buy - now would be as good a time as any to take advantage of extremely competitive mortgage rates.


If you are looking for an Investment Property, then I would suggest that now is NOT a good time to buy.
Even if interest rates are at historic lows, the Stock Market is at equally historic lows.
One can surmise that the Stock Market has much more upside potential for investors,
without all the hassle of trying to find good tenants.

Just my 2¢

 

[daveto]

Northstar, I think you make some good points but it seems to me that there is a backward looking element to your analysis.

In purchasing a place to live (now, or 10 years ago), one of three things will happen to the value of the property. It will remain constant, increase or decrease. In your case, you bought 8 years after the market peak and the value increased. But if your friends had been correct and the value had dropped, then you would perhaps be offering very different advice.

At present in Toronto I've seen condos listed for $370k, but rentable for $1700 a month (equal or less than the carrying costs excluding principle). In times of great economic uncertainty the wisest course of action is usually to minimize risk. As such I'm concerned that the lure of the historically low 5 year mortgage rate might be endangering many of the inexperienced and underdiversified 1st time buyers who are supporting the present marketplace.

I think it speaks volumes (pun intended) if the market anecdotal evidence is correct and it is indeed these inexperienced under-35 first time buyers who are supporting 2009 ytd sales

 

[northstar]

Northstar, I think you make some good points but it seems to me that there is a backward looking element to your analysis.

In purchasing a place to live (now, or 10 years ago), one of three things will happen to the value of the property. It will remain constant, increase or decrease. In your case, you bought 8 years after the market peak and the value increased. But if your friends had been correct and the value had dropped, then you would perhaps be offering very different advice.

Hi daveto - You make a good point, but I guess I was making a calculated risk.

If you read about my experience in 1999, you will note my mortgage cost was comparable to the rental cost at the time.
True, the value of the condo could have gone down, but that was a risk I was willing to take.
My cost of shelter was approximately the same in a condo or through renting.

Now, over time, the cost of rent would have climbed slightly.
Correspondingly, over time, mortgage costs disappear, once the mortgage is paid off.

There are 2 instances when I think it makes sense to rent - (presuming one's income affords the luxury of having a mortgage).
1. If rental costs are "significantly" cheaper than a comparable mortgage.
2. One is planning to stay at a place for no more than 2 or 3 years (maximum).

I'm out of touch with current downtown rental prices, but I suspect (with 4% mortgages) that some condo's could be purchased for about the same price that it would cost to rent them.

If that is still not the case - then perhaps it's best to continue renting awhile.

 

[daveto]

Northstar, yes agreed, the key consideration is cost of renting vs ownership. I think things are very different now than 10 years ago, and that is part of the problem.

Consider the following 2181 Yonge St Minto condo listed at $355k, or for lease at $1650/month. At a price-to-rent ratio of 215 this is representative of the Toronto condo market.

http://www.mls.ca/PropertyDetails.a...tg=2&of=1&ps=50&o=A&Mode=0&PropertyID=7996135

http://www.mls.ca/PropertyDetails.a...tg=2&of=1&ps=50&o=A&Mode=0&PropertyID=7997724

Monthly to own (excluding principle payback and any CMHC insurance):
$355k x 4% div 12 = $1183.
Condo fees = $322
Property taxes? $2,400 annually = $200/month
Total = approx $1700

vs renting at $1650.

But then add in purchase costs/fees and add in what happens in 5 yrs when faced wiith a higher interest rate( 6%?) , and it is difficult to see how this is a good deal.

Now, if the same property costs 20%+ less? Maybe then it is a more difficult decision, and closer to what you encountered 10 years ago. Interestingly, over the past 15 years inflation adjusted rental costs in Toronto have remained quite stable, even while property values have doubled (net of inflation).

Personally, I'm very eager to buy something. But I can't see how it won't be so much better in a couple of years.

ps. The following link show that Price-to-rent ratios for Canada have increased 60%+ over the past 10 years. I'm terribly intrigued to wonder what the hell happened at the end of the 90's to unleash this upon us. Maybe the repeal of Glass-Stengal? i dunno.
http://www.tradersnarrative.com/global-real-estate-ratios-show-extent-of-bubble-2066.html

 

[kennyx]

Northstar, yes agreed, the key consideration is cost of renting vs ownership. I think things are very different now than 10 years ago, and that is part of the problem.

Consider the following 2181 Yonge St Minto condo listed at $355k, or for lease at $1650/month. At a price-to-rent ratio of 215 this is representative of the Toronto condo market.

http://www.mls.ca/PropertyDetails.a...tg=2&of=1&ps=50&o=A&Mode=0&PropertyID=7996135

http://www.mls.ca/PropertyDetails.a...tg=2&of=1&ps=50&o=A&Mode=0&PropertyID=7997724

Monthly to own (excluding principle payback and any CMHC insurance):
$355k x 4% div 12 = $1183.
Condo fees = $322
Property taxes? $2,400 annually = $200/month
Total = approx $1700

vs renting at $1650.

But then add in purchase costs/fees and add in what happens in 5 yrs when faced wiith a higher interest rate( 6%?) , and it is difficult to see how this is a good deal.

Now, if the same property costs 20%+ less? Maybe then it is a more difficult decision, and closer to what you encountered 10 years ago. Interestingly, over the past 15 years inflation adjusted rental costs in Toronto have remained quite stable, even while property values have doubled (net of inflation).

Personally, I'm very eager to buy something. But I can't see how it won't be so much better in a couple of years.

ps. The following link show that Price-to-rent ratios for Canada have increased 60%+ over the past 10 years. I'm terribly intrigued to wonder what the hell happened at the end of the 90's to unleash this upon us. Maybe the repeal of Glass-Stengal? i dunno.
http://www.tradersnarrative.com/global-real-estate-ratios-show-extent-of-bubble-2066.html

I've seen the debate that compares the monthly costs for owning vs. renting (the $1700 vs $1600 example you have above)...
But shouldnt you also factor in that after the 5 or 10 years (or whatever), you will get $X back when you own the property vs. $0 when renting?

 

[daveto]

I've seen the debate that compares the monthly costs for owning vs. renting (the $1700 vs $1600 example you have above)...
But shouldnt you also factor in that after the 5 or 10 years (or whatever), you will get $X back when you own the property vs. $0 when renting?

Kennyx,

In the above example $X=$0.

Any principle paydown is in excess of the $1700/month. The only way the $X will not equal $0 is if the property price increases/decreases beyond the resale transaction costs.

ie Keep in mind that when you sell a property you face transaction costs equal to 6-8% (agents fees, staging fees, etc)., and that the above $1700/month doesn't reflect any wear & tear maintenance costs on your unit.

 

[JayBee]

So it looks like prices are finally dropping. A lot of the builder sites that weren't discounting anything a month ago are discounting suites by $60K+.

Resale still seems to be high though and I'm assuming most sellers are sitting on their places and renting them out until the market recovers.

 

[kennyx]

Kennyx,

In the above example $X=$0.

Any principle paydown is in excess of the $1700/month. The only way the $X will not equal $0 is if the property price increases/decreases beyond the resale transaction costs.

ie Keep in mind that when you sell a property you face transaction costs equal to 6-8% (agents fees, staging fees, etc)., and that the above $1700/month doesn't reflect any wear & tear maintenance costs on your unit.

Thanks for the response... but Im probably missing something, because I always thought:

n = number of months/periods

Rent Scenario
$1600 * n --> at the end of scenario, you're left with $1600*n in total dollars spent

Buy Scenario
$1700 * n --> at the end of scenario, you're left with $1700*n in total dollars spent plus $X (where X equals the amount you sell the unit for)

Now Im not saying that in the 'Buy' scenario you're in the +ve, but in the rent scenario you're always in the -ve.
And in most cases (because of 'X'), shouldnt Buy > Rent?

or am I totally off base and missing something?

 

[daveto]

Thanks for the response... but Im probably missing something, because I always thought:

n = number of months/periods

Rent Scenario
$1600 * n --> at the end of scenario, you're left with $1600*n in total dollars spent

Buy Scenario
$1700 * n --> at the end of scenario, you're left with $1700*n in total dollars spent plus $X (where X equals the amount you sell the unit for)

Now Im not saying that in the 'Buy' scenario you're in the +ve, but in the rent scenario you're always in the -ve.
And in most cases (because of 'X'), shouldnt Buy > Rent?

or am I totally off base and missing something?

The simple buy scenario I showed above does not include

- 6 to 8% transaction costs (land transfer, agents fees, moving costs, etc)
- a probable substantial increase in the $1700/month buy cost when rates increase
- various unit maintenance costs/wear and tear during ownership

It also doesn't include lost investment income from better paying investments (ie if you choose to rent, and take your buy deposit and put it to work elsewhere)

Having said the above, the key consideration is where are we in the real estate cycle. Are we in an average period (ie price increases of inflation + 2%), a boom market (ie the past 10 years), or a price decrease period.

There are people who bought within 1 year of the last peak in 1990 who only recently saw their property return to their original purchase price.

To be frank, if a buyer doesn't already understand the above considerations then I think they would be well advised to delay any real estate purchase until they develop a much better understanding of the financials of this sort of major purchase.

 

[luxome]

i'm just curious, does anyone think if the resale prices of any of the new condos built will be lower than the pre-construction price?

Historically, has that ever happened? (Resale lower than preconstruction). Since some condos downtown are over $700/sqft, does anyone think they will take a loss in resaling the condo units after the construction is complete??

 

[simuls]

I absolutely think you will see some firesales on properties but this won't happen until 2010/11. Many of Freed's places will drop to the $400-450 range from the $600 range they've been in for the last 2 years - same thing with much of the new Concord, Maple Leaf, etc., they'll all drop and speculators who bought (roughly 40% of each building) will lose money. The price drop in resale (depending on area) is still only in the 5-6% range, while new condo's are maintaining - although the incentive engine is starting to rev up. Expect these incentives to intensify and for resale to drop another 10-30% in price.