What The Media Is Saying About Toronto Real Estate In March 2013

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If you’re a regular reader of our blog, you already know urbaneer.com predicted that the market in  2013 would be increasingly wonky. And you have to look no further than the media to see the contrasting reports that demonstrate the extremes by which we realtors operate.

First, when it comes to the broader global market conditions, there’s been some recent press (click HERE for a March 13th Financial Post article) about how, in China, their government has recently implemented purchasing and financing restrictions on investment property. This has been positioned as good for Canada and other foreign countries with stable markets, by suggesting Chinese investors will funnel their capital into international markets. While I suspect the uber-rich (and those with relatives in Canada) will do exactly that, I’m not sure the Chinese market is as stable as one might hope. Did you see the segment on 60 Minutes that revealed entire ‘Ghost Cities’ that remain incomplete or unoccupied? Click HERE for a really shocking video story. If China’s real estate market implodes from its own bubble, could that not trigger Chinese investors to liquidate their Canadian properties in order to access much needed funds?

 

 

On the national front, there were a couple of hair-raising reports this week that put the fear in most all Canadians who read them. Canadian Real Estate Magazine posted an article on Tuesday citing TD Bank’s analysis that the Canadian housing market wasn’t necessarily going to crash, but that it also wasn’t going to increase in value for the next ten years. What I really like about this article is the comments by John Pasalis, broker/owner of Realosophy Realty Inc., who said it’s important that investors be mindful of the relevance of such macroeconomic national reports. “Investors have to remember this is talking about national averages and price changes, it’s not really relevant to the average investor investing in a local market,” John Pasalis says. “Even within a local market, you’ll have different asset classes that will perform differently – what’s happening in the housing market will be different to what’s happening in the condo market. Large scale, ten year predictions like this – it’s something to be aware of, but not something I would be worried about as an investor.” Which should offer some reassurance to those who read the Financial Post article where Moodys has proclaimed the fundamentals of the Canadian housing market are so overvalued that, in order to earn its top rating, real estate prices would have to correct by a substantial 44 percent! This has left everyone wondering what really is in store for Canada in the short and long term.

Locally, there’s no question Toronto is growing. HogTown citizens got very excited when it was revealed Toronto now has a population which exceeds Chicago, ranking it number 4 in North America. Given the number of construction cranes dotting the landscape, this is what one would expect. Keep in mind, any new condominium tower that launched its pre-sale marketing programs 12 to 24 months ago (when the market was scorching hot) is only just now getting its construction crane set up. Which, as summarized in this March 13th Financial Post Article, is why housing starts are up in urban areas across the country. Goody! More Traffic!

 

 

Locally, as the February sales statistics came in, data showed sales were down but prices were marginally up from the year prior in the Toronto market. In their March 5th articles reporting on the Toronto Real Estate Board’s monthly report, both the Toronto Star and The Globe and Mail reiterated how both the freehold and condominium markets were seeing sales numbers drop 15 to 20 percent.

What the articles didn’t mention wasthat the sales of freehold houses are down mostly due to a lack of supply of good properties, whereas condominium sales are down due to fewer purchasers entering the market while more cookie-cutter product comes available. There was an article on March 7th in The Globe and Mail called “What February’s Housing Sales Say About Toronto’s Spring Market” which squarely laid out the dynamics of the central Toronto housing market. Basically, if you’ve got a flashy house in a great neighbourhood, or a stylish condominium in a stable building, you’re a contender to attract a bidding war. However, if you don’t, you may have to be prepared to wait for the right buyer, or reduce your price. You can click HERE to read that well-crafted article quoting my pal Brian Elder.

Yes, much to the frustration of urbaneer.com’s Buyers, the bidding wars are back full tilt with a heightened competitive vehemence. All month our freehold housing Buyers have consistently been competing against 4 to 14 other Buyers in their efforts to secure properties, whereas our condominium Buyers have been able to negotiate their purchases for under list.

To share an example of the drama, there was quite a hullabaloo over a house listed at $419,000 that received 40 offers this week, though most every realtor working in the city knew the property in question was grossly underpriced. Urbaneer.com had to talk a number of our clients out of pursuing this one knowing it was worth at least in the mid-500s and would spike out of their budgets, especially as the property in question needed to be completely gutted and rebuilt.

An article in today’s Globe and Mail really summarizes the downtown market to a tee. There’s frustration on the part of Buyers for freehold houses, and frustration on the part of Sellers of condominiums, as these two markets are oscillating, by and large, in different directions.

As the freehold and condominium markets spin apart, it appears the glue keeping them together are the current mortgage rates. Although it made headlines earlier this month when the Bank Of Montreal cut its mortgage rate to 2.99% for a five year term in order to attract new clients, the truth of the matter is that prudent mortgage borrowers doing their research already know they can secure a rate like this, if not better (as low as 2.79% from a reputable lender) through different lending institutions. Interestingly, urbaneer.com is finding a lot of our clients are considering securing a ten year fixed mortgage on their next purchase as a strategy to weather the inevitable higher interest rates predicated in the next few years. Given one can secure a ten year mortgage rate for a reasonable sum (right now as low as 3.69% from MortgageJake), we see the merit in securing a long term fixed rate if your objective is to stay in the property for the duration of that term.

Did you read our recent Tales From The Real Estate Trenches called ‘House Hunting In Spring’? Click HERE for an amusing if slightly bittersweet commentary on the quest for a home in today’s freehold housing market.

Do you need assistance? At urbaneer.com we’re here to help, all without pressure or hassle.

We simply love what we do.

With a multi-disciplinary education on housing, sound knowledge of the mechanics of real estate and a sharp skill set in negotiations, we welcome sharing our insights with you. With over two decades of real estate sales – that’s through a real estate crash, a recovery and a boom to today’s wonky market dynamics, we can maneuver Toronto’s market realities exactly as they pertain to you. It’s why we’re one Of Bosley’s TOP TEN Realtors!

~ Steven and the urbaneer team

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