Monthly Archives: March 2015

Renting Condo in Toronto

Toronto’s “Rental Renaissance”

The over-development of condominiums in Toronto, it is argued, is causing a shift in the landscape for renters. Condos are becoming a more and more popular option for those looking rent a home in Toronto’s downtown core.

The numbers surely do demonstrate that a demand exists. The condo apartment vacancy rate, according to the Canadian Mortgage and Housing Corporation in Toronto dropped to 1.3% in Q4 2014, compared with 1.7% in 2013. Fewer condos were left vacated on the market, despite continuing rent hikes. The average condo apartment one-bedroom rent in Q4 2014 was $1,609, up from $1,498 in the fourth quarter of 2010. So just how many condos in Toronto and across the country are being rented out? A 2011 Statistics Canada report suggests that approximately 25% of the country’s condo units are leased out. One estimate, which seems a bit exaggerated, comes from Urbanation, suggests that condos account for a whopping 99% of new rental supply in the GTA

Kingsclub Liberty VillageTwo arguments can be made for the account for the growing popularity of condominiums as an affordable rental option for individuals and families. One argument suggests that the construction of condos has come at the expense of traditional rental apartments, which are being torn down to make way for these new modern accommodations. The second argument has to do with the profitability of rental units. Denise Balkissoon of The Globe and Mail, investors are increasingly becoming the new landlords, as they embrace the “slow but steady profit of property management over the riskier highs and lows of retail sales.” Balkissoon coined the term “rental renaissance,” arguing that the new trend is Toronto is the conversion of planned condo properties have converted into rentals, citing examples in Liberty Village and on Sherbourne Street.

Those of you reading this that are on the fence about whether renting a condo is a good idea, should be forewarned. According to provincial legislation, buildings in Ontario that were built, or came onto the rental market, after Nov. 1, 1991, are not subject to rent control. Which means, after your first year lease is up, you may see your rent skyrocket.

If this fact hasn’t swayed you in any way, Melissa Dunne of MetroNews has a few tips for you that may help you in your search. First, it is probably in your best interest to hire a real estate agent, because, as some agents will tell you, most google searches and listings websites will display 85% or less of the actual MLS listings that are available. Whether or not this statement can be substantiated with hard statistical proof is yet to be seen. Second, it is important to keep in mind that rental costs will fluctuate wildly depending on where you are located in the city. Third, it is important to be smart about the timing of a purchase, as well as to be aware of new constructions and market conditions, in order to take advantage of, and exploit, the laws of supply and demand. If you are aware of new condo developments being built that will add to the number of unsold units to the market considerably, price drops may in tow.

Toronto

The Cause of the Growing Price Gap Between Toronto Homes and Condos

A number of documents and reports related to the real estate market in Toronto and in other major metropolises across Canada, has raised the attention of many market analysts. The first of many highly publicized revelations was discussed in a previous article, related to the average resale price of a detached home in Toronto reaching the $1 million mark (figures gathered and published by the Toronto Real Estate Board). Now, the focus appears to have shifted to another metrics, that being, the gap between the average sale price of a condominium, versus that of a single-family home.

Spoiler alert, the gap is widening.

Tamsin McMahon of The Globe and Mail tracks the discrepancy in prices between detached homes in condos from the end of 2014 in Canada’s major housing markets: Toronto, Calgary, Vancouver and Montreal.

In December, 2014, the average price gap between a condo and a single-family house in the resale market for all four cities hit $320,000, according to Brookfield RPS. The discrepancy is starkest in Vancouver, where the average resale house price has shot up 120% since 2005 to $1.1 million, while condo prices have risen by 50%. The difference in price between low- and high-rise homes stood at a record high of $251,337 in 2014, said a strategic review of the Greater Toronto Area’s (GTA) new home market, according to a review conducted by RealNet Canada and the Building Industry and Land Development Association (BILD). For the purposes of low-rise homes include townhouses and detached properties, while high-rises include lofts and condominiums. The sale of low-rise home sales increased by 46% from 2013 to 17,745 units, with high-rises increasing by 40% to 21,991 homes sold in total.

The average price of a low-rise home in Toronto reached $705,813 in 2014, up 8% from the year before, while the average price of a high-rise unit rose just 4% to $454,476. The gap between condos and houses grew 16% in December compared to a year earlier, hitting a record of more than $251,000. (Low-rise homes consist of houses, including detached and semi-detached houses, townhomes and link homes, while high-rises encompass all condos and lofts.)

Tamsin calls the cause of the gap “predictable,” citing a severe decline in the supply of new listings for urban houses for several years (backed by Shaun Hildebrand). This has been driven partly by a lack of newly built homes in urban centres and also by the fact that existing homeowners have been hesitant to sell in case there’s nothing to buy. Couple this with an unprecedented number of new condo developments, in a politically mandated push to increase population density in major downtown cores across the country.

McMahon adds:

“The growing price divide comes as developers have been under pressure to shrink the size of new condo units to keep costs down, while an insatiable appetite for houses, coupled with a shortage of supply, has driven up the cost of low-rise development.”

Toronto Homes Hit $1 Million, and a Housing Gap Emerges

Home prices in the GTA hit a major milestone last week that every economist and real estate analyst buzzing, and it’s all stemming from monthly figures recently released by the Toronto Real Estate Board.

The report, revealed that the GTA saw home sales increase by 11% from the same time a year ago, what Jason Mercer, an economist for TREB, called a sign of “the robust demand for ownership housing in the GTA.” But the figure that caught everyone’s attention is the average selling price of a detached home in the City of Toronto, which had eclipsed the $1 million mark, reaching an average of $1,040,018, up 8.9% from the same month a year earlier. The prices for all types of homes, including condos and semi-detached homes, were up 7.8% in February, bringing the average overall sales price for a home in Toronto to $596,193. The sale of detached homes went up as well, up 16.9% in Toronto and 13.9% across the GTA.

Paul Etherington, president of the Toronto Real Estate Board, said in a press release:

“Even with the record low temperatures last month, we still saw an increase in the number of people purchasing homes in the GTA. This speaks to the importance households place on home ownership and the fact that buyers continue to view ownership housing as a quality long-term investment in which they can live.”

As Susan Pigg of The Toronto Star reminds us, the average sale price for a detached in Toronto briefly touched on $1 million last April, but had dropped near the end of the month to $965,670, and stayed around there for the past 10 months.

The TREB report revealed something else of interest. The average price of a condo in the 416 region, surprisingly, went down 0.9% year-over-year to $369,655 in February, despite the fact that condo sales went up 12.4% from a year earlier. Daniel Tencer of The Huffington Post refers to this differential as Toronto’s new housing gap: Toronto’s condo prices continue to drop while single-family home prices escalate. Tencer makes a compelling and logical argument to account for this gap. He notes that, even though demand for condos appears to be rising, supply continues to increase at a far more accelerate pace, with the number of unsold condos in Toronto hitting a 21-year record high in January, with an additional 10,368 new condos hitting the market that month. But the market for single-family homes is entirely different story, with a complete lack of new developments near commuter routes. Developers instead have been opting to build more concentrated housing complexes to maximize on the available space.

Michael Babd of The Globe and Mail refers to this shortage as a “relative scarcity” of detached homes, a term he borrows from senior economist Robert Kavcic of BMO Nesbitt Burns. According to Kavcic, detached homes only accounted for a third of new constructions completed in Toronto in 2014. According to Kavcic:

“While the share of detached completions has begun to edge up, it hasn’t matched the increase in demand, and development restrictions will only compound the scarcity as growth in this population group accelerates further through the end of the decade.”

Toronto Real Estate Market Update – Detaches in Toronto Reach Over $1,000,000

The February 2015 Real Estate Market has proved to be all about the increases, especially where it matters!  With a total of 6,338 homes reported sold in the Greater Toronto Area, our year-over-year comparison in sales substantially grew by 11.3%.

“Even with the record low temperatures last month, we still saw an increase in the number of people purchasing homes in the GTA. This speaks to the importance households place on home ownership and the fact that buyers continue to view home ownership as a quality long-term investment in which they can live,” said Paul Etherington, Toronto Real Estate Board President.

INFOGRAPHIC.Feb2015

Detach homes in the 416 finally broke the $1,000,000 mark – with the average price at $1,040,018 in Feb 2015.  Semi-detached homes also saw an increase of 4.9% from February 2014, with the average price at $702,035.  Unfortunately Townhomes saw a dip of 7% and Condos saw a slight decrease in average pricing to $369,655 for the beginning of 2015.

The 905 however is only going up!  With the average Detach homes reaching $694,285 and Semi’s increasing 11.6% to $474,292.  The Townhouse and Condo Market in the 905 is also seeing green as the average selling price for a townhome rose to $433,127 and the average condo selling price up 10.9% – $322,055.

“The strong year-over-year price growth we experienced in February points to the robust demand for ownership housing in the GTA, coupled with a constrained supply of homes for sale in some market segments, especially where low-rise home types like singles, semis and townhouses are concerned,” said Jason Mercer, TREB’s Director of Market Analysis.

Just Listed – $684,900 – 231 Hiawatha Rd, Toronto (Triplex)

Excellent Investment Opportunity With 3 Self-Contained Apartments In Family Friendly Neighborhood. Solid Brick Home With High Basement Ceilings And Above Grade Windows. Three Separate Entrances And Walkout To Yard To 3 Parking Spots And A Garage! Great For Investor Or Renovators. Close To Schools, Shopping, Ttc And Local Gym. Short Walk To Danforth And Gerrard.

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Hudson's Bay Company

Hudson’s Bay Company Makes A Big Real Estate Play

How, and more importantly why, is Canada’s oldest department store chain, Hudson’s Bay Company, becoming one of the more influential and successful real estate investment firms in the world? To answer this question, it’s best to go back to 2008, when HBC was bought out by a Greenwich, Conn.-based real estate mogul named Richard Baker, who would appoint himself the company’s governor and executive chairman. Richard Baker is by no means a household name, but in the business world, Baker has positioned himself as a formidable force in the real estate industry.

According to Hollie Shaw of The Financial Post, Baker’s initial strategy to save the almost bankrupt retailer was to make a series of sales to eliminate the unattractive properties from the company’s portfolio, freeing up funds that were reinvested in more valuable holdings, like the $2.9B purchase of Saks Fifth Avenue in 2013. Baker also had a major role to play in the now defunked expansion of the major U.S. retailer Target into Canada, selling Zellers’ leases to Target for $1.8 billion back in 2011.

RioCanJust this past week, the retailer announced that it was forming a joint venture with two behemoths in the real estate industry – Toronto-based RioCan Real Estate Investment Trust and Indianapolis-based Simon Property Group Inc. – to create new companies valued at over $4.2B. HBC, under this new deal, is slated to contribute the lion’s share of properties, valued at $3.8B, while its partners will contribute cash and property worth a total of $670 million. HBC stands to net $1.1B after expenses as a result of the deal, which would ideally be used towards reducing their debt. The deal gives HBC a combined real estate portfolio valued at $9.2B, a fact that has already caused Hudson’s Bay’s stock on the TSX to rise about 20% or $4.38, to $26.57 per share.

An interesting point is raised by Shaw, who discusses the reasoning behind HBC.s decision to establish a joint venture, as opposed to “spinning off” the company’s real estate holdings into its own Real Estate Investment Trust (REIT). In Shaw’s opinion, the establishment of a joint venture will allow HBC to diversify credit and enable the ventures to potentially acquire more real estate holdings before taking them public. John Andrew, a real estate professor at Queen’s University told Marina Strauss of The Globe and Mail, argues that “there is tremendous value in that real estate that is often not being unlocked in any other way,” citing retailers like Loblaw Cos. Ltd. and Canadian Tire Corp. Ltd. as examples, each of which have both gained from having spun out REITs in the past decade.

According to Mr. Baker himself, partnering with real estate leaders allows HBC to position itself for growth and diversification into non-HBC properties. And also allows the company the freedom to create an REIT in the future, and that a possible IPO might also be in the works for the newly formed companies that are borne out this arrangement. As a whole, the deal Hudson’s Bay in a better position to make acquisitions of with both retailers and non-retailers who possess attractive real estate holdings.