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Baby, we got a bubble!?

TORONTO, June 5, 2012 -- Greater Toronto REALTORS® reported 10,850 transactions through the TorontoMLS System in May 2012 – an 11 per cent increase over the 9,766 sales in May 2011. Sales growth was strongest in the ‘905’ regions surrounding the City of Toronto.

“Sales growth in the ‘905’ area code was stronger than growth in the City of Toronto across all major home types. While lower average prices are certainly one factor that has contributed to this trend, recent polling also suggests that the City of Toronto’s land transfer tax has also prompted many households to look outside of the City for their ownership housing needs,†said Toronto Real Estate Board (TREB) President Richard Silver.

New listings were up substantially on a year-over-year basis in May – rising by more than 20 per cent to 19,177. The average price for May 2012 sales was $516,787, representing an annual increase of 6.5 per cent compared to $485,362 in May 2011. Price growth continued to be driven by the low-rise market segment.

“Strong competition between buyers seeking to purchase low-rise home types drove strong price growth in May. However, if new listings continue to grow at the pace they did in May for the remainder of 2012, the annual rate of price growth should begin to moderate on a sustained basis,†said Jason Mercer, TREB’s Senior Manager of Market Analysis.

http://www.torontorealestateboard.c...ket_updates/news2012/nr_market_watch_0512.htm
 
AKS said:
This isn't the article marsh is referring to. But it's about high end luxury condo which interest has a stake in.
Click to expand...

cdr is correct as are you. I thought Marsh was referring to another article.

I am aware of the "difficulties being experienced on high end.

Trump incidentally is 60% and not 40% sold of the condo units but they are left with a difficult price range ($2.7 to 6.3 million) which there is a very limited market. I won't even begin to comment on the hotel units which I believe will be the hardest hit "luxury component".

I believe while we may be hurt initially at SL (I am not planning on selling) I think once the initial speculators are out (which I think will be highest in the 800 sq.ft. condos due to price point) where there may be some "bargains" and even some of the 1 bedroom/den and smaller 2 bedroom units, I think we will recover quicker just due to simple math.... $1.1 million for say 1100 sq.ft. is a lot more managable than $1.5 million for 1500 sq.ft. Similarly $900K for just under 900 sq.ft. is not far off the prices for mid-upper range condos and I think provided the condo fees are not much different than these projects we will draw buyers.

4S is still the cream....but it wa $300-400 more/sq.ft. and I think they too may have difficulty maintaining the differential though the smaller units (again due to price point) will be desirable.

My personal belief is that in luxury it is the $2+million where some real bargains will be had. The problem will be that even if bought at a bargain, the condo fees and taxes make the running costs prohibitive to a lot of people, even if they can afford to buy it....they can't afford to run it.

Marsh or AKS or anyone else, maybe someone could find the article Marsh was referring to. I am intrigued to hear what the other buildings are that Marsh's post referred to.
 
Hey guys, I read the cover story in TO Life that Marsh is referring too. Since its the July issue you won't find it on their site yet, but they do post them a month or so afterwards. The article is worth reading though, and if you can't wait a other month to read then I suggest reading through it at your local Chapters/Indigo.

While most of the article is common knowledge to most people on UT, there are some other things I did not know. Some highlights:

They discuss the falling balcony glass issue that plagued Tiff, Burano/Murano, 1 Bedford, etc. the problem with the glass is that it cannot be traced to one single manufacturer (some from China, some from US) and it is uncertain if weather is the culprit.

The double edge sword of developers using section 37 to get their way and the city living off the proceeds of property taxes. Councillor Carrol likens the relationship with the city amd developers to a P3 type deal

Shoddy construction materials and trades who are pressured to move quickly is discussed. No surprise here, the quality of new builds (sound proofing in particular) sucks for the most part.

They discuss how even those who live in a building that has some sort of deficiency don't want to speak up because a) don't want to get cease and desist letter from developer b) if you speak up you are letting everyone know your building is shit and it will impact resale value

Leaky balcony/window wall arrangement plaguing many buildings (particularly CityPlace).
Apparently, Optima, the building on Navy Warf has a whole host of problems (law suit filed years ago still hasn't gone to court) and quote '...lenders and insurance brokers have already taken notice of Optima's situation, and some have reportedly refused to insure mortgages for that property. As a result, Optima's unit owners could find it difficult to sell to anyone who wants to buy with a downpayment less than 20 per cent'...of course the problem is the type of person that will buy such a unit is a first timer who will need CMHC. The article goes I'm to state that 'Optima is not the only Toronto condo tower on what broker's call the 'black list'' --> was not aware of this at all

Article concludes with a summary of MPP Rosario Marchese's private members bill for better transparency and amendment to Condo Act. I think this is a really good idea and wish more people get behind it.
 
Southcore said:
Hey guys, I read the cover story in TO Life that Marsh is referring too. Since its the July issue you won't find it on their site yet, but they do post them a month or so afterwards. The article is worth reading though, and if you can't wait a other month to read then I suggest reading through it at your local Chapters/Indigo.

While most of the article is common knowledge to most people on UT, there are some other things I did not know. Some highlights:

They discuss the falling balcony glass issue that plagued Tiff, Burano/Murano, 1 Bedford, etc. the problem with the glass is that it cannot be traced to one single manufacturer (some from China, some from US) and it is uncertain if weather is the culprit.

The double edge sword of developers using section 37 to get their way and the city living off the proceeds of property taxes. Councillor Carrol likens the relationship with the city amd developers to a P3 type deal

Shoddy construction materials and trades who are pressured to move quickly is discussed. No surprise here, the quality of new builds (sound proofing in particular) sucks for the most part.

They discuss how even those who live in a building that has some sort of deficiency don't want to speak up because a) don't want to get cease and desist letter from developer b) if you speak up you are letting everyone know your building is shit and it will impact resale value

Leaky balcony/window wall arrangement plaguing many buildings (particularly CityPlace).
Apparently, Optima, the building on Navy Warf has a whole host of problems (law suit filed years ago still hasn't gone to court) and quote '...lenders and insurance brokers have already taken notice of Optima's situation, and some have reportedly refused to insure mortgages for that property. As a result, Optima's unit owners could find it difficult to sell to anyone who wants to buy with a downpayment less than 20 per cent'...of course the problem is the type of person that will buy such a unit is a first timer who will need CMHC. The article goes I'm to state that 'Optima is not the only Toronto condo tower on what broker's call the 'black list'' --> was not aware of this at all

Article concludes with a summary of MPP Rosario Marchese's private members bill for better transparency and amendment to Condo Act. I think this is a really good idea and wish more people get behind it.
Click to expand...

Too much fear mongering.

A recent unit at Optima sold with 3 offers - http://www.theglobeandmail.com/life...ree-offers-for-cityplace-1den/article2369978/
 
radioheadmike said:
Too much fear mongering.

A recent unit at Optima sold with 3 offers - http://www.theglobeandmail.com/life...ree-offers-for-cityplace-1den/article2369978/
Click to expand...

But I do understand the dilemma...owners not wanting to talk about problems for fear of lowering their property values. The general public +/- their realtors being unaware or potentially wilfully blind.

Just because there were 3 offers, perhaps the buyers waved conditions though presumably if there is a lawsuit when the condo documents are requested the buyer would be made aware.
 
We just had our annual meeting at One King and I couldn't be happier with our results. Apparently, our building has been on the "black list" with agents because of our lawsuit with the developer (David Mirvish). We have now settled, but because we have debt on our books for the purchase of our hotel operations from the developer, the lawyers of potential purchasers seem to reject our status certificates. The joke is that we own all aspects of the building, are paying our debt down through profits from operations, paying suite owners a healthy profit every month, and seeing our condo fees drop. The problem is nobody understands our condo corporation. Bottom line is that there are great buying opportunities at One King that won't last forever. Where else can you buy a studio 40 floors up with magnificent views, a historic lobby, connected to the path with a return of $2k per month for less than $250k. I sense there may be a lot of envious Trump investors out there.
 
civdis said:
a return of $2k per month for less than $250k. I sense there may be a lot of envious Trump investors out there.
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Interesting, can you give more information about the condo fees for a unit such as this?

If I put down 20% for $250,000. That's $50,000 down payment. I estimate condo fee is about $500? So, $2000-500 = $1500/month. Minus property tax (~$125 monthly) $1500-125 = $1375. Assuming a monthly mortgage payment of $1,200 and half of that is eaten up by interest ($600) $1375-600 = $775/month, that is $775*12 = $9300 return/year. Finally, $9300/ $50,000 = 18.6% return per year

I'm not sure if my math/thought process is right though. But sure it looks like a good investment.
 
dlam said:
Interesting, can you give more information about the condo fees for a unit such as this?

If I put down 20% for $250,000. That's $50,000 down payment. I estimate condo fee is about $500? So, $2000-500 = $1500/month. Minus property tax (~$125 monthly) $1500-125 = $1375. Assuming a monthly mortgage payment of $1,200 and half of that is eaten up by interest ($600) $1375-600 = $775/month, that is $775*12 = $9300 return/year. Finally, $9300/ $50,000 = 18.6% return per year

I'm not sure if my math/thought process is right though. But sure it looks like a good investment.
Click to expand...

Civdis will hopefully help out here but my guess is that you have allowed property tax based on residential whereas if the unit is in the hotel unit pool, the tax will be based on non residential rates. Probably $375/month is a better estimate. As well, you are assuming 100% occupancy which they are not achieving though I believe from a previous post they are running higher than the average of 68% of hotels in TO.

Let's assume they are 75% rented... your $24000 is now $18000. Assuming $420/month as I believe these are 400 sq.ft. units and the fees are around a $1/month in that building or slightly more....That is $4800. Now take your $1200/month mortgage or $14,400 and suddenly the math does not quite work out as well. (Essentially no or slight negative cash flow)

If the $2000 is the rent that is being achieved as a monthly rental, then this would make more sense but I would still bet that there will be at least 1 or 2 months/year where you are not rented and that will lower your return significantly.
 
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