By Jenny Yuen – Toronto Sun

Eileen Camp­bell looks around her lovely 900-sq.-ft. down­town Toronto condo and sighs.

For the past seven years, the chef has made her two-bedroom cor­ner unit at 550 Front St. W. really feel like home by gut­ting the kitchen, installing a quartz counter top and open­ing up the space.

Camp­bell, 65, moved west after liv­ing in a home in the Beach area, lov­ing that she no longer has to main­tain a back­yard or shovel snow off a driveway.

And being a foodie, she’s close to hip restau­rants along the King West strip. She’s also able to enjoy sum­mers out in her ter­race with her lit­tle chi­huahua — that is, when there isn’t a dust storm from nearby con­struc­tion of other con­dos going up along the waterfront.

But retire­ment is near­ing for Camp­bell and she’s made the deci­sion move again — to a house in the Nia­gara Region.

Econ­o­mists fore­cast Toronto’s boom­ing condo mar­ket will expe­ri­ence a cri­sis in a few years with too much sup­ply and sag­ging demand, start­ing in 2013.

Com­ment: Sure, econ­o­mists who do not live here. The Toronto condo mar­ket has sur­vived all pre­dic­tions of its demise, start­ing back in 2003.

So for Camp­bell, this is the ideal time to sell and is list­ing her prop­erty at $449,800.

“In my mind, if there is that much inven­tory for peo­ple to choose from, would they choose (to buy) a brand-new place or a place that’s been here for a while?” she said. “I don’t want to wait to find out. I’d rather get my equity out now and move onto some­thing else.”

Sev­eral of Canada’s biggest banks recently warned about a pos­si­ble cor­rec­tion in the hous­ing mar­ket. Still, prices of homes keep ris­ing, accord­ing to the Toronto Real Estate Board (TREB) with mort­gage rates remain­ing low, hov­er­ing around 3%.

In fact, the Econ­o­mist recently declared Canada as one of nine coun­tries where “home prices are over­val­ued by about 25% or more” and among four coun­tries where prices are in line with those in the United States “at the peak of its bubble.”

Com­ment: And peo­ple who work in the indus­try, peo­ple who actu­ally live in Canada, have trashed that state­ment and shown it to be wrong.

While many fear Toronto’s real estate bub­ble is on the verge of burst­ing, ana­lyst are cau­tion­ing buy­ers and sell­ers to relax.

Com­ment: For the the last time, IT IS NOT A BUBBLE!

“I do not believe that Toronto, as a whole, is in a bub­ble,” explains Don Camp­bell, pres­i­dent of the Real Estate Invest­ment Net­work. “I think it’s more like a bal­loon where the air is going to start leak­ing out.”

Hous­ing will con­tinue to stay strong through­out down­town com­mu­ni­ties and sur­round­ing areas, such as Leslieville and the Junc­tion, where many new­com­ers may choose to buy homes because down­town is too expen­sive, Camp­bell said. Where there is trou­ble is the new condo mar­ket.

“I believe we’re going to feel an over sup­ply in 2013 because we’ve got a record num­ber of con­dos com­ing onto the mar­ket in 2012,” he says. “In addi­tion, there have been a lot of devel­op­ment appli­ca­tions put for­ward to the City of Toronto at the end of Decem­ber. We’re already start­ing to see a slow­down in for­eign money going into the condo market.”

Com­ment: And the EXACT same thing was said last year. Too many new con­dos com­ing onto the mar­ket, 2011 will see the prices drop, demand will soften. Wrong.

When those who bought new con­dos are handed their keys with the inten­tion of imme­di­ately flip­ping the prop­erty, they’ll be oth­ers doing the same.

Com­ment: But that is not what is hap­pen­ing. Peo­ple are buy­ing them to live in, or to rent out. The tra­di­tional rental mar­ket is gone, it has shifted to con­dos now.

“There­fore, you’re going to have an over­sup­ply of the sit­u­a­tion come on,” Camp­bell adds. “That over­sup­ply won’t last for a long time — not like the U.S. — but it’s going to keep a real cap on value.”

Craig Alexan­der, chief econ­o­mist for TD Canada Trust, says many first-time home buy­ers jumped into the real estate mar­ket in 2009 because of record-low mort­gage rates. The mar­ket remained strong in 2010, but it began mod­er­at­ing in 2011.

Com­ment: No it didn’t – 2011 was the 2^nd best year ever, bet­ter than 2009 and 2010.

“I think in the com­ing year we’ll see the hous­ing mar­ket pretty flat,” he predicts.

“I don’t see the like­li­hood of a major cor­rec­tion com­ing this year. I do think there’s over-valuation in the mar­ket, but I don’t see a major hous­ing bub­ble in the GTA. I think when we see inter­est rates rise, we’ll see hous­ing prices decline but it won’t be a dra­matic decline.”

Com­ment: BINGO! Now that is a rea­son­able prediction!

The big risk to the so-called bub­ble occurs when there’s a sharp spike in unem­ploy­ment or as inter­est rates shoot up. Alexan­der fig­ures inter­est rates should increase by a mod­est rate — 1% in 2013 and 1% in 2014.

Com­ment: IF rates rise – and that is a very big IF. The BoC is leav­ing rates alone until next year, we will have to wait and see. But that will only slow things down, not bring it all crash­ing down.

“Toron­to­ni­ans need to be care­ful not to over-extend them­selves because even­tu­ally, inter­est rates will rise,” he said. “I feel like the lit­tle boy that cried wolf because every year I tell peo­ple that rates could rise and then they don’t. But I always have to remind peo­ple that the wolf does show up at the end of the story.”

Richard Sil­ver, the pres­i­dent of the Toronto Real Estate Board (TREB), said the seller’s mar­ket has tran­si­tioned to a bal­anced mar­ket with more list­ings now than a year ago.

Com­ment: And we have seen the same thing year over year. Days on mar­ket keeps get­ting shorter, there are fewer list­ings and prices keep ris­ing. The same will hap­pen in 2012, sorry Richard.

“Any­thing that came on the mar­ket had mul­ti­ple offers and buy­ers had to get a lot more aggres­sive,” he said.

“They had to get their ducks in a row — like their financ­ing and build­ing inspec­tions and had to make deci­sions quickly. Now, buy­ers have more time. They can look around.”

With the new condo sales, it really depends on what is hap­pen­ing in for­eign investors, Sil­ver said.

“A lot of (condo deals) hap­pen off­shore … that’s a really big part of the mar­ket,” he said. “We’re very lucky in Toronto. Right now, there’s a lot of shov­els going in the ground. I look at New York and there’s hardly any­thing being built. Yet, in Toronto, it’s gangbusters.”

TREB had second-best year on record for sales in 2011 with 89,347 — up 4% from the pre­vi­ous year.

Accord­ing to the real estate board, $465,000 is the aver­age price of a single-family home in 2011. So, what does that get you in the GTA? Sur­pris­ingly, not as much as you’d think.

In Toronto, that amount will get you a 800–900-sq.-ft. condo, though it will be ren­o­vated and in move-in condition.

“There was only one house that turned up (on a search) – it was on Duf­ferin, there were no pic­tures, so it would’ve been an absolute fixer-upper for $465,000,” said Kim­ball Sarin, a bro­ker with Bosley Real Estate, who has been in the real estate busi­ness for a decade. “Whereas this price range for con­dos, you could get a decent space in move-in con­di­tions. You can some­times get two bedrooms.”

If you’re look­ing for a house in Toronto, you’ll likely have to scour Leslieville or the Junc­tion area — places that are roughly 20 min­utes out­side the down­town core.

“I find peo­ple who are look­ing for only con­dos don’t even want to dis­cuss mov­ing out­wards, they just want to be down­town,” Sarin said. “They’re mostly younger peo­ple, 20s-30s typ­i­cally, first-time buy­ers. We’re also get­ting a lot of empty-nesters. Peo­ple that are going to be sell­ing a larger house.”

Cather­ine McIsaac, a Sut­ton Group sales rep­re­sen­ta­tive, said parts of the 905 are slowly catch­ing up with the ris­ing prices in Toronto. The only detached prop­erty avail­able in Oakville was a 1,500–2,000-sq.-ft. three-bedroom fam­ily home in the West Oak Trails with an unfin­ished basement.

In Mis­sis­sauga, the Mar­i­lyn Mon­roe build­ing — a unique curvy condo tower at 50 Absolute Ave. near Square One — fits in the $465,000 bud­get. That price fetches a two-bedroom plus den, 997-sq.-ft. unit which costs about $428,400.

With an influx of 100,000 peo­ple to the GTA each year, many renters are mov­ing into con­dos pur­chased by off­shore investors because there aren’t many devel­op­ers build­ing rental prop­er­ties anymore.

“There are sev­eral new condo devel­op­ments in the area,” said Tanya Cre­pulja of Sut­ton Group Realty. “Con­dos accounted for about 1/4 of the sales in the GTA, which shows there’s high demand for this type of product.”

The only afford­able area for sin­gle fam­ily homes was in Durham Region. Royal LeP­age Frank Real Estate sales rep­re­sen­ta­tive Alexis Appleby said you could get a decent home for around $380,000. And the fur­ther you head east towards Oshawa, the cheaper it gets.

York Region, on the other hand, is expe­ri­enc­ing a seri­ous lack of inventory.

In Rich­mond Hill alone, last week there were only 13 free­hold houses avail­able for under $500,000 — rep­re­sent­ing 6.5% of the total num­ber of houses on the mar­ket in that area.

“I think that paints a pic­ture of how almost des­per­ate the inven­tory sit­u­a­tion is,” said Jim Com­mon, sales rep­re­sen­ta­tive for RE/MAX. “The aver­age days on mar­ket at this price point is 15 days. There are 200 homes for sale in Rich­mond Hill — 66 of those are over $1 mil­lion. I think inter­est rates will even­tu­ally increase and that will bust the bubble.”

Com­ment: As I said above – Sell­ers Market.

And prices are expected to keep climb­ing in 2012. Accord­ing to TREB econ­o­mist Jason Mer­cer, he pre­dicts the aver­age price of a home will rise to $480,000 this year.

That makes it tougher for first-time home buy­ers to save and bank away a down pay­ment for a decent home.

Trellawny Gra­ham, a 32-year-old who works in adver­tis­ing, bought a house in Novem­ber. She ended up pur­chas­ing a two-bedroom, 1000-square-feet home in Oshawa because that was the only area she could afford.

“I can get so much more for my money,” she said. “I find places closer to (the city) are just dou­ble or triple the price and not even as nice as mine. It sits on deep plot of land. I was able to get my house for $185,900. It was just scary to think if I’d ever find a house that I can actu­ally afford to buy.”

Com­ment: The prob­lem is, houses in Oshawa have been $185,900 for years now. There is no price growth there and val­ues are very likely to drop with the slight­est whiff of bad news.

Toronto real estate lawyer James Fraser said as wor­ri­some Canada’s hous­ing mar­ket is, it is incom­pa­ra­ble to the U.S. because Cana­dian buy­ers and banks are both prudent.

Com­ment: Exactly.

“Our fore­clo­sure rate has not budged at all dur­ing the reces­sion – it’s less than 1%,” he said. “If someone’s thrown out of a job, then that’s going to be an extremely stress­ful sit­u­a­tion and peo­ple could lose their houses. But I don’t see the same fac­tors that have dev­as­tated the US hous­ing mar­ket — I’m not see­ing peo­ple get into the hous­ing mar­ket when they can’t afford it.”

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Con­tact the Jef­frey Team for more infor­ma­tion – 416−388−1960

Lau­rin & Natalie Jef­frey are Toronto Real­tors with Cen­tury 21 Regal Realty.
They did not write these arti­cles, they just repro­duce them here for peo­ple
who are inter­ested in Toronto real estate. They do not work for any builders.
—————————————————————————————————–

Com­ment: Sure, econ­o­mists who do not live here. The Toronto condo mar­ket has sur­vived all pre­dic­tions of its demise, start­ing back in 2003.

safe as houses realty

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