Top broker gives us the word on the street

Zoe Ackah – Epoch Times

R. Scott Davie has been working in real estate for over 25 years, and specializes in pre-construction sales of low and high-rise homes. He is vice president at Milborne Real Estate, one of Toronto’s largest real estate marketing companies, which traditionally sells between 12% to 15% of all new condos in the GTA.

Seasoned veteran Davie is tired of what he feels is unwarranted doom and gloom propagated by media and the banking industry. He feels the market is slow because buyers are waiting for a bubble that doesn’t exist.

Comment: I agree, I am SO tired of all of the unwarranted negative talk. While I do agree that buyers are waiting for a non-existent bubble thanks to the media, the market is certainly not slow.

“When the media and the banking industry are continually spreading bad news, not based on fact, that hurts consumer confidence,” Davie says. “But people still need to move due to life changes like a new job or family formation.”

Comment: Amen brother!

“When you hurt consumer confidence for a year or two, you create pent-up demand.”

Comment: That and demand outstrips supply year after year after year…

Davie is not the only person suggesting people who need to move have been holding off. Jason Mercer, TREB’s senior manager, market analysis, suggested possible pent-up demand on the RealNet Q3 conference call. (Glad I tuned in for that one!)

Comment: Can you imagine how crazy Toronto real estate would be if all of those buyers got off the fence and got active?

“There’s a limited inventory for my clients to choose from right now,” explained Davie. “It’s hard to get a property so people get frustrated and hold off.”

Comment: And the ranks of those holding off only ever increases. As does the pool of buyers active at any particular time. Both of those groups of buyers increase while inventory and supply tend to remain flat or decrease. This is the main driver of Toronto real estate.

Many who are priced out of low-rise may need time to adjust their expectations and find an acceptable condo unit.

The October CMHC report also showed that, though condo sales were down overall, they were up by 31% in some areas of the 905. Clearly viewing the GTA as a number of unique submarkets can provide needed perspective on any numbers that get batted around.

Comment: Actually, condo sales were up 20.4% in the 416 and 35.6% in the 905 in October. And then up again 12.7% and 14.2%, respectively, in November. So no, condo sales are no longer down. Mainly because new projects have slowed, fewer new projects mean fewer new condos mean fewer new condo sales. Thus, the demand was pushed over to the resale market. And, as noted above, some people may have finally come to the realization that they cannot afford a house and have bought condos. Heck, even some who waited for a condo crash that never came finally decided to cut their losses and buy before prices rise even more.

“Whether we’re in the 1980s, 1990s, or 2000s, it always boils down to this—what are the real things driving the market?” asks Davie.

He feels the key driving factors are low-interest rates and immigration, both fuelling a need for housing developers can’t keep up with.

Comment: Developers and resale sellers. Not enough listings on either side to satisfy demand. Demand for housing pushes the sales, low interest rates are behind the rising prices.

“Despite all the cranes you see, we’re not keeping up with demand.” He suggests we look to rental vacancy rate, which has hovered around one percent for years (April 2013 – CMHC 1.7%).

Comment: With 15,000-odd condos being completed every year and 30-50,000 new households being created in the GTA, there is certainly not the supply coming from the new side. Sure, 80-90,000 properties change hands in the GTA every year, but most of them are people buying AND selling, so there is no new inventory created. Even if 30% of the resale market went to new buyers every year, that would still only barely supply the demand. This is what drives the sale end of the market and is certainly behind the low vacancy rate, as well as the 25% rise in condo rentals through MLS last quarter, with rents rising 2-4% as well. Rent or buy, everyone needs somewhere to live!

“If we’re building condos and they are all rented, this shows us we will see the market continue to absorb [new condos].”

Comment: Considering that 90% of condos are sold by the time a building is completed and 98.3% of available rentals are taken, I would say there is still VERY strong demand for condos in Toronto.

If others cities can’t, Toronto still can, says Davie. “Toronto is performing very strongly despite what you hear.” Even if 2013 continues along its current flat trajectory, Davie predicts the GTA will still be the top North American new home market for volume of sales.

Comment: I agree, reality is not what you read or hear. How the media can continue to promulgate stories that are simply out of touch with what is happening on the ground is beyond me.

What next?

“The last time we saw the situation we have right now, with negative stories in the media, was during the recession [of 2009]. There was very little inventory and no one was buying or selling. It was very hard to find a property,” Davies says.

Comment: What? The media has been negative for 5 straight years now. I challenge you to find a positive story. Trust me, I read them ALL and I see 90% that are not only negative, but essentially untrue.

“Once the media started reporting that the economy was improving—suddenly we had this big buying spree! We sold 28,000 new homes and condos in one year.”

Comment: Not sure it was the media. I think once people realized that the media was wrong and that the world was not ending, they just went back to the business of buying houses.

“When people realize the sky’s not falling, we’re going to have another record year.”

When will that be? Davie predicts anytime from six months to a year and a half from now.

Comment: Maybe. The media continues their hue and cry of death and destruction. Obviously people don’t listen, as we have had record numbers month after month after month.

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Contact Laurin Jeffrey for more information – 416-388-1960

Laurin Jeffrey is a Toronto Realtor with Century 21 Regal Realty. He did not
write these articles, he just reproduces them here for people who are
interested in Toronto real estate. He does not work for any builders.
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