Monthly Archives: November 2014

Home bidding war

Bidding Strategies for the Potential Homebuyer

Homebuying, whether you want it to be or not, is a competition between you and complete strangers, all vying for the grand prize of a new home at the best possible price. In the spirit of competition, many are willing to do whatever it takes to metaphorically “win the race” by cutting corners in order to be the first to place an offer. According to Ricky Chadha of The Globe and Mail, this mentality has led to a growing concern among first time homebuyers about whether to add a contingency on an offer requiring a home inspection. If a home stands out from the pack during your search, it will more than likely generate a lot of interest from other buyers, some of which may be persuaded to skip the inspection for the sake of being first to the table with a serious offer.

The market for homes for sale in Toronto is hot, despite rising prices and dropping sales, and multiple offers on any listing is not uncommon, which only increases the level of competition. Sellers with multiple potential buyers will often look to offers with the minimum of conditions, and unfortunately, the home inspection clause is often one of the first to go. So when is it safe to drop a home inspection from the purchase of a new home? According to Chadha, your offer strategy should depend almost entirely in the amount of interest and offers the particular home generates. In other words, you should not treat each home exactly the same way, and gauge each situation independently.

The scenario can be broken down dualistically, with options split into one of two Home bidding warcategories: whether no other offers exist, or whether many multiple offers exist. If you find yourself in the rare situation where no other offer exists for the home in question, then add in the home inspection clause. It’s wonderful to be in this position, because a seller is likely not going to reject your offer on this condition alone, simply because no other competing offers exist. If you do get any resistance from the seller, you can offer to tighten up the timeline for the home inspection as a negotiation chip (perhaps two business days instead of the standard five), but ultimately, the buyer holds a lot of power in this scenario.

Strategic offers when multiple offers exist can be a bit more risky, but sometimes it is necessary to take risks in order to get the home of your dreams. You still have the option of requesting a home inspection, whether it be after the offer is made or pre-offer, but you run into the possibility of having the seller reject your offer outright, or have a competing homebuyer make their offer look more attractive by not including a home inspection clause. If the seller seems hesitant to allow you to perform a home inspection (at your expense), or has provided you with a home inspection report that he/she had financed, a red flag should pop up in your mind. This could be a sign that a seller is trying to hide something particularly damaging about the home.

Toronto Condo Boom

Toronto’s Condo Boom, and Municipal “Intensification” Policies

The condominium boom in Toronto is no secret. In fact, the exponential increase of condo construction projects in the GTA has been on the radar of local and national market analysts for quite some time, but only now is it receiving global attention. And there’s good reason for it. According to RealNet’s GTA new-home market results for June, marking the halfway point for 2013, there was a record 251 new condo projects being built across the city, totalling 64,670 units. Roughly twice the number of construction projects underway in New York City, a city with twice the population, putting Toronto 10th on the global list of high-rise cities, according to Simon Kent of The Toronto Sun.

Several reasons are cited by various sources to account for this boom. There is general consensus, however, that the proliferation of condominium units in the city was a deliberate effort, spurred on by the municipal and provincial governments to “intensify” both high-rise and low-rise development throughout the GTA. These “intensification policies” enacted back in 2006, some believe, were diabolically introduced by the government to take advantage of existing land-transfer tax laws, which were (and still are) a huge cash cow for the city. Others point to more historical, and less conspiratorial factors to attribute for the condo boom, such as the fact that the province of Ontario designated much of the undeveloped land northeast of Toronto as a “greenbelt,” forcing many developers to purchase former industrial land in the city’s downtown core.

Some see this condo construction boom as a threat to the overall housing market, while others see it as a huge success, the result of sound intensification policies in action. And there are arguments on both sides of the coin. The Bank of Canada has publicly warned that the Toronto housing market in general is both “overpriced” and “overbuilt,” prompting them to predict that the growing inventory of unsold condos in Toronto could eventually create “the risk of an abrupt correction in prices and residential construction activity.” When you break it down to its core, the fundamental concern plaguing most market analysts is whether there is enough demand to balance out the proliferation of available units, all while median condo prices continue to soar, with estimates of up to a 25% increase in price since 2009.

The fact of the matter is, as George Carras of the Toronto Star argues in an article released in June of this year, the issue of demand for the units being built is moot, because a bulk of the units under construction have already been pre-sold. Property management firms implement extensive pre-sales programs in order to ensure that such projects are financially feasible to undertake in the first place, normally requiring a unit acquisition rate of over 80% in order to proceed with construction (with roughly a 20% down payment required for each unit). Ian Austen of The New York Times, reinforces this claim, arguing that Canadian banks keep a tight leash on condo developers, requiring them to sell 70 to 80% of units in any project in advance before construction money is lent. Urbanation, a firm that specializes in tracking the Toronto condo industry for developers and lenders, estimates that 89% of the units now being built in Toronto are already sold.

According to Susan Pigg of the Toronto Star, any discernable decline in condo sales because of high prices and overstocked inventory is likely to level out, or even improve, as a result of city-wide population growth and improved employment opportunities that will likely increase the demand for condos, as stated in a report released by the Conference Board of Canada back in August of this year. “As condo starts near past averages and inventories edge closer to demand, we are seeing the condo market stabilize both in terms of the price of existing units and the volume of new construction,” said Robin Wiebe, senior economist at the Centre for Municipal Studies at The Conference Board of Canada, in a statement.

Calgary Mansion

Canada’s Most Expensive Homes and Condos

According to figures provided by the Canada Real Estate Board, home prices across the country rose 7% in October of this year versus a year ago. Corresponding MLS data for the month indicate that the average price of a home was $419,699, up from $391,931 compared to this time last year. However, this national increase in homes prices is a bit deceiving, considering the increase can be attributed to price jumps in Canada’s largest real estate markets: Toronto, Vancouver and Calgary. Toronto and Calgary each saw price increases just over 9%, while Vancouver saw a 6% increase in the past year.

Some analysts, like economist David Madani of Capital Economics (read his analysis on the Global News website), argue that such a dramatic price increase in these three markets could cause a housing crash, as prices eclipse the average annual incomes needed to support a mortgage to purchase these homes. Madani is quick to admit that in the Toronto and Vancouver markets, low interest rates on mortgages, coupled with “robust demand,” is continuing to fuel home sales in those two cities.

Increases in the price of luxury homes, affordable only to the country’s wealthiest segment of the population, is also likely contributing to the average home price increase seen nationwide. Some of the most expensive mansions and condos in Canada are being sold at obscene prices, causing the overall average price to be skewed because of the existence of these outliers.

The award for Most Expensive Home in Canada actually belongs to Calgary, according to a recent article by The Huffington Post. It is not surprising that the top three most expensive homes would come from each of the Big Three cities. The 242-acre property located in the Rocky Mountain foothills on the outskirts of Calgary (shown above), contains two houses, a covered bridge and a vintage gas station, and will run you just shy of $38 Million. Coming in at number two is a 2-acre plot on Toronto’s Bridle Path, which contains a 10 bedroom, 15 bathroom mansion that is valued at just under $29 Million. And to round out the top three is a 1.2-acre plot overlooking the British Columbia coastline, an area known as Point Grey. The house that currently sits on the property is considered by many realtors to be in horrible, shabby condition, but the land it sits on is apparently worth just under $26 Million.

Trump Tower TorontoIt’s important to note that the Huffington Post list did not account for condos for sale in Canada, with a few notable units being sold for extravagant prices. The asking price for one Trump Toronto’s most expensive penthouse suites costs an estimated $33 Million, with Tony Wong of The Toronto Star, calling it “the most expensive concrete box in Canada.” The three floor unit sits on the 58th floor, has three storeys and a panoramic view of the city, a total of 11,755 square feet of space. The unit is still currently under construction, making the possibility of a price increase all the more likely.

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Stunning Custom Masterpiece, A Must See!! This Gorgeous Home Features Top Of The Line Upgrades:10 ft Coffered Ceilings, Custom Trim Work, Moldings, Wine Room, Hardwood Floors, 8 Foot Fireplace, Glass Walls, Spa Like Bathrooms, And An Unbelievable Designer Kitchen With Rainfall Granite Island. Professionally Landscaped, Salt Water Pool, Outdoor Kitchen, Waterfalls, Lighting & So Much More! 200k Spent, Over 4500sq ft. Luxury Space!  

Video Tour

32 The Meadows Avenue, Markham | Jason Lau & Moe Nikaien Real Estate Team | 416.277.6776 | 416.833.2540 from Jason Lau on Vimeo.

Presented by Jason Lau and Moe Nikaien Real Estate – 416-277-6776 | jason@jlau.ca

Just Listed – $979,000 – 32 The Meadows Ave, Markham

Stunning Custom Masterpiece, A Must See!! This Gorgeous Home Features Top Of The Line Upgrades:10 ft Coffered Ceilings, Custom Trim Work, Moldings, Wine Room, Hardwood Floors, 8 Foot Fireplace, Glass Walls, Spa Like Bathrooms, And An Unbelievable Designer Kitchen With Rainfall Granite Island. Professionally Landscaped, Salt Water Pool, Outdoor Kitchen, Waterfalls, Lighting & So Much More! 200k Spent, Over 4500sq ft. Luxury Space!  

Video Tour

32 The Meadows Avenue, Markham | Jason Lau & Moe Nikaien Real Estate Team | 416.277.6776 | 416.833.2540 from Jason Lau on Vimeo.

Presented by Jason Lau and Moe Nikaien Real Estate – 416-277-6776 | jason@jlau.ca