Tag Archives: changing hands
Housing-price increases mean future challenges for both owners and renters
Terrence Belford – Globe and Mail
Sales of both low- and high-rise newly built homes cooled significantly in April from the near-frenzied pace of the previous month. Why that happened, and whether the pace will pick up again as summer progresses remain matters of speculation.
The only thing that appears certain is that affordability is going to present major challenges for most residents of the Greater Toronto Area. That includes home owners and renters alike.
RealNet Canada reports new high-rise condo sales stood at 1,484 suites in April, off 40% from March numbers. Low-rise new home sales were 1.712 units, off 13% from March.
At the same time, the average new high-rise condo price jumped $5,033 in April from the month before to sit at $425,120. Low-rise new homes meanwhile dipped an average of $1,113 to $489,282.
Resale home sales continued to be brisk during the first two weeks of May. With 4,887 homes changing hands in that period, sales were up 7% from last year. The average selling price was $448,641, up 12% from early May last year.
What caused the big dip in sales of new homes?
George Carras, president of RealNet, suggests sales may be just taking a breather after six bullish months. He also says buyers may be adopting a wait-and-see attitude at this point.
“There is still a good number of new projects coming online in the next couple of months and people may just be waiting to have a look at them before making a buy decision,” he says. “About 40% of April sales were from newly launched projects.
“What is happening is that people flock to new launches for the first 10 days or so and then interest drops markedly.”
But underpinning demand is the crucial matter of affordability. Especially hard-hit are first-time buyers. People selling an existing home they have owned for maybe five years probably have enough cash from that sale to make a down payment greater than 20% of the purchase price.
That means they do not need a CMHC-insured mortgage and are not subject to the rules set in place by the federal government on April 19. They can take advantage of continuing low variable-rate mortgages or negotiate significant discounts on fixed-term mortgages.
Those with less than 20% down, however, must prove they can make payments at whatever the five-year fixed-term interest rate is at the moment.
The Royal Bank of Canada addressed the affordability issue in late May with a cross-country survey. Robert Hogue, senior economist said: “We expect affordability to deteriorate through 2010 and 2011, but this should be limited as more balanced supply-and-demand conditions will take much of the steam out of the housing market.”
Doesn’t sound too bad, right? Now take a look at RBC’s numbers. The bank says anyone owning a detached bungalow in the Toronto area can expect to see 49.1% of their pre-tax income go towards home-ownership costs such as mortgage payments, property taxes and utilities.
The report continues: “With escalating prices, affordability measures are now above the long-term average. This suggests that additional increases in housing costs may price more and more buyers out of the market.”
So, if you cannot buy, you just rent, right? Renters, however, will probably have some very unpleasant surprises in store over the next few years. The Toronto Real Estate Board says that at the end of April, the average rent for a one-bedroom apartment was $1,463 a month, up 2% from April, 2009, and the average rent for a two-bedroom apartment was a hefty $1,909 a month, up 5% from last year.
Since the mid-1980s, condos have supplied almost 98% of the GTA’s stock of new rental units. Investors buy them, then try to rent them for enough money to cover mortgage and monthly maintenance costs.
For the first quarter of this year, those investors have accounted for up to half of all new condo sales in prime locations – in the heart of downtown, along subway lines or in any other area where there is high demand for rental accommodation. In two or three years time, those suites will be built and at the move-in stage.
The prices investors are paying now for suites are significantly higher than those of two and three years ago, which means they will have to charge significantly higher rents.
It is not inconceivable that a one-bedroom-and-den downtown apartment may command $2,000 a month in five years time and a two-bedroom north of $3,000. Nor is it inconceivable to expect total housing expenses to eat up well over 60% of your monthly take-home pay if you want to live in a great central location in the GTA within that five-year time frame.
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Tom Lebour – Toronto Real Estate Board President
April represented the second consecutive month in which transactions in the Greater Toronto Area exceeded the 10,000 mark, with 10,898 homes changing hands.
This figure exceeds the 8,107 sales in April 2009, a month that heralded the beginning of our market’s recovery. Most significantly, it surpassed April 2008′s 8,762 transactions and even the 9,452 sales that took place in April 2007, which was followed by the only other two consecutive months that exceeded 10,000 sales.
Breaking down last month’s numbers, there were 4,310 sales in the 416 area and 6,588 transactions in the 905 region.
The 3,349 condominium purchases that took place comprised nearly 31% of all sales last month. By contrast, at this time a year ago, condominium apartments comprised 28% of the month’s transactions. This indicates a growing preference among Torontonians for the condominium lifestyle.
With respect to prices, the results are also very positive. Currently, the average price of a home in the GTA is $437,600, which represents an almost 12% increase over the April, 2009 average price of $385,641. Price increases in both regions were nearly equal last month. In the 416 area, the average price of $479,340 rose nearly 14% from $421,470 a year ago. In the 905 tegion, the average price of $410,293 increased more than 13% from last April’s $362,009 average.
Homes stayed on the market for an average of 21 days, compared to an average of 37 days last April, and there are now 22,951 homes available for sale throughout the GTA, in contrast to 23,515 a year ago. In the coming months though, it’s expected that homeowners will be motivated by recent activity, which should result in more listings and thus, a more balanced market.
While sales have undoubtedly been robust throughout the past 12 months, the market is functioning as expected. This spring’s homebuyers are hoping to achieve purchases before July 1st due to the impending harmonized sales tax and an anticipated increase in interest rates.
While homebuyers in the second half of this year will incur additional expenses due to these two factors, Greater Toronto realtors are constantly advocating to ease costs associated with homeownership. For example, we are currently seeking a commitment from Toronto’s mayoral candidates to repeal the Toronto Land Transfer tax, an action that will save homebuyers thousands of dollars.
Regardless of the many variables that can affect a transaction though, you can increase your chances of a favourable outcome by seeking the guidance of a realtor. They can advise you on market conditions in your specific area and offer insight into recent sales in the neighbourhood so that you can make informed decisions when planning your next move.
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Is the luxury homes market in the GTA coming back? There are many who say it never really went away.
Granted, projects offering suites at the lower range of the luxury scale – perhaps those priced at $850 to $950 a square foot – went through some doldrums. But according to companies such as RealNet Canada, which tracks the condo market, luxury condos above $1,000 a foot always sell at a relatively steady pace despite economic ups and downs.
“If you compare lower-end luxury sales with more modestly priced suites they both follow almost parallel courses,” says RealNet president George Carras. “When the condo market is down overall, so are those suites below about $950 a square foot.
“But for the super-luxury class, the people who have the money to afford them make their buying decision in good times and bad. It all depends on when they want to make a move.”
If, however, the state of your finances leaves you well below that super-rich class, there is indeed good news.
All forms of luxury homes in the GTA have come back with a rush. The Toronto area has probably never seen such a range of choice. Need a townhouse? Try the Townhomes of Lytton Park on Avenue Road south of Lawrence or Ancroft Place in South Rosedale just over the Sherbourne Street bridge.
How about a boutique mid-rise, which combines Yorkville’s rich history with a clean contemporary look? Zinc Developments Group has Hazelton 36. It incorporates the façade of the old St. Basil’s School into a sleek new terraced design.
For those who long for a life that almost makes you believe you are next to a highland salmon stream but still close enough to walk to the splendid boutiques, specialty stores and cafés of Bloor West Village, there is Riverhouse at The Old Mill.
How about a penthouse high above King Street West’s celebrated theatre and entertainment district? The new tower at 8 Mercer Street can make that dream come true, with its three levels of large two-plus-den and three-bedroom penthouses.
But city life is not everyone’s cup of tea. There are those whose idea of ultimate luxury is a large home on a 100-foot lot within a chip shot of a world-class golf course. They might find that dream home at the Glenbourne Custom Estate Collection right across from the Angus Glen course in Markham.
“It is really quite exciting,” says Barry Lyon of Barry Lyon Consulting. “Less than a decade ago, if you wanted a luxury condo, you went to one of the projects in Yorkville. Now there are choices all across the GTA…”
“Builders have recognized that people want choice; they want luxury homes that allow them to stay in neighbourhoods they love or to move to neighbourhoods that offer them what they consider the perfect lifestyle for their stage of life.”
That lifestyle might include a throwback to Manhattan in the 1920s through the 1950s when anyone who was anyone lived in a suite atop a five-star hotel. Central Toronto now boasts at least half a dozen of those.
It might still include a suite larger than most suburban homes, with a terrace almost large enough for a tennis court in the heart of Bloor Street’s glittering shopping district. Yes, we have those. In fact we even have a range of choices.
The theatre district, the financial core, the entertainment district, Lytton Park, Lawrence Park even the fringes of Forest Hill and Rosedale offer superb luxury suites and homes.
So, what is driving this spring and summer’s market? How have we managed to go from doldrums to boom times in a matter of months?
Experts such as Mr. Lyon and Jimmy Malloy of Chestnut Park Real Estate, recognized as one of the city’s top agents, say four factors are at play.
The first is the demands of simple demographics. Both point out that men and women on the leading edge of the Baby Boom have had to put on hold, for nearly two years, plans to downsize their existing domestic arrangements and launch themselves into a more carefree pre-retirement and retirement lifestyle.
“The kids are gone; the house is too big for them alone and they want to start a new life in the home of their dreams and in an area they love,” says Mr. Lyon. “But the recession has kept those plans at bay for the past 18 months to two years.”
The second factor is the resurgence of the resale market. The Toronto Real Estate Board says the first quarter of this year was the best on record, with 22,418 homes changing hands. New listings were up 42% from the same period last year and average home prices climbed every month.
“What this meant was that people saw they could once again easily sell existing homes – and get top dollar for them,” says Mr. Malloy. The ability to sell an existing home is absolutely crucial if you are planning to spend upwards of $1-million on a new luxury condo, he adds.
The third factor at play is the upswing in financial markets.
Men and women who saw recession-driven, steep declines in the value of their savings were in no mood to contemplate spending on anything except the basics, says Mr. Lyon.
“But now we have the markets rebounding … Canada weathered the recession better than any other industrial nation and we again have confidence in the future,” he says.
Not just confidence in Canada but in the future of the GTA as well. All predictions suggest the area will continue to grow through immigration by 100,000 new people a year. All of them will be looking for a place to live.
Which brings us to the fourth factor – and that is something peculiar to the luxury market. As Mr. Lyon and Mr. Molloy explain it, luxury condo buyers are picky and prudent. They prefer to buy when they can finally see what they are getting.
That means the brisk traffic at luxury project presentation centres starts when the building begins to rise from the ground.
“Simply put, they want to see what they are getting for their money,” says Mr. Lyon.
That is why penthouse suites are the last to be released for sale even in moderately priced projects, adds Mr. Malloy.
“Luxury buyers also want to take their time before making a decision,” he adds. “It is not at all uncommon for them to come back and back again with their interior designer in tow, going over every small detail of their suite.”
That said, there may be a fifth factor influencing the luxury market: The ever-expanding range of choice.
“Great cities need diversity,” says Ken Zuckerman of the Zinc Developments Group. His company is creating Hazelton 36, that Yorkville boutique condo that incorporates the 1920s vintage St. Basil’s School. “Not everyone wants to live in the same area or the same kind of building.”
When you get diversity of choice, people who might not otherwise consider moving to a condo see alternatives that perfectly suit their taste and need, he explains.
David Silverberg, director of sales and marketing for Nexxt Development Corp. offers a hearty amen to that thought. Nexxt, in partnership with the Mizrahi Group, is building the freehold Townhomes of Lytton Park at Lytton Boulevard and Avenue Road.
“One of the things that is so exciting about this project is that we are bringing back to Toronto a much-loved form of luxury housing that simply has not been available largely because of land costs and the demand for higher densities,” he says.
“Not everyone wants to live in a condo and not everyone wants to live downtown. When we acquired this site we though it would be perfect for bringing back townhomes – freehold townhomes. If you want a healthy vibrant luxury market and a healthy vibrant city then choice is the key.”
Plans for future launches indicate the GTA has no worries there. Developers large and small have signalled their intention to bring new projects to market this summer. Minto Group, for example, will relaunch the St. Thomas tower at St. Thomas and Charles streets.
Canlight Hall Realty has purchased the 21 townhouses that make up Ancroft Place in South Rosedale and plans to update them and sell them as condos starting around June.
For those longing to remain in their much-loved Lawrence Park neighbourhood near Bayview Avenue south of Eglinton, The Tridel Group has launched Blythwood at Huntington, an elegant, brick-and-stone eight-storey mid-rise overlooking the Sherwood Park Ravine. While two-bedroom suites will start in the mid-$500,000s, larger homes on upper floors, including the penthouses, will have prices well above the million-dollar mark.
“It very much looks like this summer will mark a new and exciting stage in the GTA’s housing market,” says Mr. Malloy. “The range of options in luxury homes is going to be truly impressive.”
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