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Toronto Condo Market: Is it Crashing??

Discussion in 'TRIBE Main Forum' started by pig-pen, Aug 16, 2010.

  1. pig-pen

    pig-pen TRIBE Member

    Toronto condo market hits ‘down’ button

    From Monday's Globe and Mail
    Published on Sunday, Aug. 15, 2010 7:50PM EDT
    Last updated on Monday, Aug. 16, 2010 9:31AM EDT

    The developer thought it was a brilliant idea: Build a penthouse on top of an existing condo building in a chic Toronto neighbourhood to take advantage of the city’s insatiable lust for expensive real estate.

    For $1.8-million, the new owner could walk into a brand new, 1,800-square-foot condo designed to her specifications. That was the idea, anyway. But the listing in prime Rosedale hit the market in February, just as sales were beginning to slow for real estate of all kinds, and no one was interested in the unit its agent has dubbed “Project Perch.”

    The property is still for sale, but it no longer comes with an actual condo. Before a single brick was in place, the developer gave up and decided to try a different approach. For $599,000, a prospective buyer now gets blueprints, a stack of planning approvals and a list of local builders who can finish the project on the cheap.

    “My gut instinct tells me the condo market is skewered right now,” said Paul Johnston of Right At Home Realty Brokerage, the listing agent on the project. “It’s been a hell of a year. At the beginning, we finally had buyers after a year of banging our heads on the wall looking for them. But I think this year’s deals have already been done.”

    Following a spring marked by record sales and prices, growing evidence suggests that the air is finally beginning to go out of Toronto’s remarkably resilient condo market. The debate in real estate circles is now this: is it a temporary lull or the harbinger of a more serious decline?

    The outlook for one the key economic generators in Canada’s largest city – a business that produces large numbers of construction and service jobs – hangs on that question. Toronto is North America’s new condo capital: Last year, developers completed about 16,000 units, twice as many as in New York and three times as many as Vancouver. As such, it’s closely watched as a barometer for the sector.

    In July, the picture turned negative. The Toronto Real Estate Board said last week the number of sales in the city fell 25 per cent compared with June. While prices have yet to waver, anecdotal evidence of a slowdown is rife. Bay Street office workers point out that many of the newly opened condo towers in the downtown core appear to be devoid of all signs of human life.

    Meanwhile, the supply of condos is surging. In the second quarter, buyers had a record 10,997 units to choose from. Another 34,089 units are under construction. Eighty-eight per cent of those units have already been sold, but another 5,000 units are expected to begin construction in the next three months.

    An estimated 40 per cent of Toronto condos are owned by investors – many of them from overseas – who often buy multiple units and rent them out. That’s in contrast to the rest of the residential property market, which is dominated by people who live in what they own.

    If the market were to weaken, and those investors disappeared, new projects would find it much harder to meet their sales and financing goals. Canadian banks typically require that a developer presell at least 70 per cent of the units in each building before the bank hands over any money.

    In a worst case, investors might choose to cut their losses and rush to sell their condos rather than stick around and hope for a gradual recovery.

    But not everyone is convinced that a downturn would spark a stampede to the exits.

    “You hear about how so much of the market is made up of investors, and to me that’s not a scary thing,” said George Carras, president of RealNet Canada Inc., a tracker of real estate data. “These people aren’t investing to lose money; they are patient and plan to stick around.”

    Condo prices have performed far better than equities in recent years, according to an index compiled by Mr. Carras’s company. And he believes the market’s fundamentals remain strong. Toronto needs about 40,000 housing units a year to keep up with immigration, he said. Restrictive building policies have made it difficult to build new communities of single-family homes within the city, forcing developers to build up instead of out.

    But while demand might be there, it’s unclear when the market will bump against the limits of what people can afford. Prices have run up dramatically over the past few years. In 2003, new condos in Toronto sold at $294 per square foot on average. Last quarter, it was $565, or 92-per-cent higher. As unemployment remains high and consumer debt sits at the highest level on record, worries grow that the market is no longer tilted toward the smart investor.

    “Condo owners shouldn’t assume they’ll always be able to sell their units at a profit,” said Kurt Rosentreter, a senior financial adviser at Manulife Securities Inc., who has been warning his clients off the asset class for the past year despite surging prices. “You see the big price gains, but you have to wonder about a breaking point – and that would be dangerous for everyone.”

    So far, prices are holding firm: In the second quarter, the average selling price in Toronto gained 1 per cent to $331,000. And despite slowing sales, developers are asking more for less. The average asking price for the 23 projects launched in the last three months was $565 a square foot, a 12-per-cent increase from the same time last year.

    “The big concern is we’re continuing to push pricing in the new sale market, and as you look at the rents the investors are able to charge, they certainly aren’t moving higher at the same rate,” said Ben Myers, executive vice-president of tracking firm Urbanation. “You have to wonder what happens next.

    Toronto condo market hits ‘down’ button - The Globe and Mail
  2. alexd

    alexd Administrator Staff Member

    20,000 new condos are under construction right now. paid for mostly by first time buyers & speculators. when they hit the market the crash will be in full effect. I bet when they are done they will be worth less than what the buyers paid for them.
  3. Rage

    Rage TRIBE Member

    I hope your right because I'm looking to buy a condo in the next 1-2 years and right now, $400k for a 600qr ft one bedroom anywhere in the city just doesn't cut it.
  4. AgentSanchez

    AgentSanchez TRIBE Promoter

    'Crash' is probably a bit strong... I think that prices have been overinflated by people who are investing/speculating in real estate, and I think that there will have be some kind of a correction/downturn over the next year or two. People buying in the market over the last 3-5 years have had, what seems to me, a false sense of entitlement with respect to current and future housing prices - everyone just acted as if the market had to keep heading in the same direction. Given the insanity of the real estate market over the last few years, this assumption was problematic, as I expect everyone will get present to over the next 12 months.
  5. Hi i'm God

    Hi i'm God TRIBE Member

    Yeah I just don't understand Condos.

    I mean sure I get the city life and all that but an 800sq for 300k is just plain stupid.
  6. AgentSanchez

    AgentSanchez TRIBE Promoter

    You can get a nice 2 br 2 bath @ 1000 sq ft for that price as long as you stay away from new constructions. To me, this is indicative of the fact that the market for new condos has been in a bubble.
  7. rawd

    rawd TRIBE Member

    and you can't yell at people to stay off your lawn. No fun
  8. pig-pen

    pig-pen TRIBE Member

    But are we talking a 10% correction? or 30%? I'm guessing more in the 30% range, but no one seems to agree on the scale of the downswing. The real estate industry is of course trying to spin it positively. Bottom line is some people are screwed.
  9. mute79

    mute79 TRIBE Member

    what's their idea of a crash?? to me a crash is loss of more than 25%..

    i agree that a correction is coming, but def. not a crash like in the late 80s
  10. glych t.anomaly

    glych t.anomaly TRIBE Member

    we have a 1700sqft condo @ Yonge and Sheppard that we bought for 308k about 7 - 8 years ago.

    probably the only condo i would live in, at least it felt like a large bungalow that was 8 stories up.

    prices for condos right now, especially downtown are retarded for the amount of footage.

  11. Rage

    Rage TRIBE Member

    Really? Well, I have time and guess I need to look a bit harder...just might be living in the clouds thinking I can find something like that, in the city, close to a subway line, for less than 400k...starting to think hard about one of those new town homes being built in the "new" Regent Park area...my buddy just bought one of those new homes, right beside the on-ramp for the DVP North bound (Dunadas & Broadview)and he paid 220k for a 1 bed-room +den, 900 sq ft.
  12. glych t.anomaly

    glych t.anomaly TRIBE Member

    friend of mine moved in their like 3 months ago. hes a stones throw from the DVP north on ramp.

    its nice, but they are not Huge on the inside by any means. still has underground parking, and you are close as fuck to everything in the downtown.

    awesome view as there is nothing between them when facing west, so he can see the downtown skyline. depending on the unit they can be cheap, but some are more expensive, and for the price of one of those, you can get ACTUAL HOUSES !

    detached, or at the very least a Semi.

  13. octo

    octo TRIBE Member

    I kept my eye on the market for 2 years. I almost bought a place in the new buildings going up in the Junction. But I decided to go a little further west and got a huge place for less money. which leaves me headroom as interest rates go up and plenty of funds for partying.

    1 bedroom over 800 square feet, full size laundry room, HUGE balcony (i had 20 people on my balcony one night and it was only 2/3 full. parking spot with tons of visitor parking. $201K. And that's cause i over paid a bit cause i got in a bit of bidding war and did not want to lose out on that particular unit.

    10 Min bus ride to Runnymede subway station.

    i would like cool people to move in to the complex

    looks like prices went up a bit in the past 2 months. my place was listed at $190k.

    here's a 1 bedroom for $205
    REALTOR.ca - Property Details W1919107

    here's a 3 bedroom for $240
    REALTOR.ca - Property Details W1910147
  14. Mephisto

    Mephisto TRIBE Member

    600sqft goes for $305-330k in my bldg (yonge/shep)
  15. djfear

    djfear TRIBE Member

    Maintenance Fees
    : $736.61 Monthly for the 3 bedroom. 0_o
  16. glych t.anomaly

    glych t.anomaly TRIBE Member

    egad !

    ours is on Kenneth Ave like 6 min walk form the subway, the Master Bedroom is over 300sqft, with a walk in closet, and its own massive bathroom.

    the Solarium is like 17ft long and 9ft wide, facing west, the Living room is the same size as the Master bedroom without the walk in closet, so its like 360 sqft or something, and then the Kitchen, and second bedroom are both fair sizes along with the laundry room/storage room, and the front antechamber is huge, and a second bathroom in the nice long hallway.

    so glad im not buying a condo, my wife and are are looking at houses in the east end, slighty past where we live now, and the avg price of homes we want is 330k for a fully detached home, or semi detached, with a yard, and finished basement, generally rentable with seperate entrance, and 2 bdrm, with a bathroom or two, nice living room , kitchen etc.

    i just cant see going back into a condo, when i can have a house.


    Property Taxes & Monthly Maintenance Fees for ours is around 945$/mnth. * shakes head *
    Last edited: Aug 16, 2010
  17. Deus

    Deus TRIBE Member

    The crash is referring to the volume of sales. Sales (not price) are down by over 40% in Vancouver and Calgary, and over all in Canada down by 30%.
  18. Beings

    Beings TRIBE Member

    That's 56c/Sq.Ft. Eeek. I hope condo management throws in daily hand jobs at that cost.

    edit: n/m you said includes property taxes....
  19. glych t.anomaly

    glych t.anomaly TRIBE Member

    yeah even with the property taxes its still fucking HIGH, the place has Squash Courts, indoor pool & Hottub, Gym, sauna etc, and they keep the place pretty freaking immaculate, i think they just did like a 50k reno to the front foyer, but still, almost a grand a month in taxes and condo fees !

    and its completely paid for ! and it still costs you that much.


  20. Jeffsus

    Jeffsus TRIBE Member

    Remember what happened in Japan vis a vis real estate?

    Replace population inversion with abundant space, and you get Toronto.

    A piece of air is equally worthwhile (blows breath between fingers, insert jingling motion)

    Anyway, I hope no one that I know gets fucked.

  21. lucky1

    lucky1 TRIBE Member

    hats pretty far out, plus its an older building versus new construction, and the runnymede bus ends at 12:30am. I grew up around threre. It's also pretty close to some rough areas (Jane/wolner). I thought it was a Senior's building?
    Last edited: Aug 16, 2010
  22. Snuffy

    Snuffy TRIBE Member

    I remember a family dinner conversation that my parents had when I was a kid. A couple they knew had paid an obscene amount of money for a house - $135,000!!!

    That was nearly twice the price they paid for our home, $74,000.

    Real Estate nowadays is completely and utterly nuts.
  23. graham

    graham Well-Known TRIBEr

    There is a whole lotta stupid going on in here
  24. graham

    graham Well-Known TRIBEr

    We have a fresh boatload of Tamils looking to rent 500 sq.ft apartments downtown. Crash? I think not.
  25. acheron

    acheron TRIBE Member

    thanks for bringing the smart

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