Toronto Loft Conversions

Toronto Loft Conversions

I know classic brick and beam lofts! From warehouses to factories to churches, Laurin will help you find your perfect new loft.

Modern Toronto Lofts

Modern Toronto Lofts

Not just converted lofts, I can help you find the latest cool and modern space. There are tons of new urban spaces across the city.

Unique Toronto Homes

Unique Toronto Homes

More than just lofts, I can also help you find that perfect house. From the latest architectural marvel to a piece of our Victorian past, the best and most creative spaces abound.

Condos in Toronto

Condos in Toronto

I started off selling mainly condos, helping first time buyers get a foothold in the Toronto real estate market. Now working with investors and helping empty nesters find that perfect luxury suite.

Toronto Real Estate

Toronto Real Estate

For all of your Toronto real estate needs, contact Laurin. I am dedicated to helping you find that perfect and unique new home to call your own.


Tag Archives: new launches

Has Toronto’s condo roller coaster peaked?

Greg Quinn – Bloomberg News

Toronto’s sizzling condo market has peaked, and developers are just waiting to see where the roller coaster goes next, says a housing research firm.

“We have hit the peak in the new condo market, we are on the down side of the roller coaster,” Ben Myers, executive vice president of Urbanation Inc., said in a phone interview. “We will really have to see how the developers react to a little bit of the slowing in the market, if they hold off on new launches.”

Comment: Well yes, 25-30,000 new condos every year was certainly not sustainable. But it does not mean we are dropping to zero now. Passing the peak does not mean a plummet to the basement.

Canada’s biggest city is being transformed by a wave of new condos as low interest rates and a stable economy draw investors and individual buyers to downtown projects. Finance Minister Flaherty tightened mortgage lending rules in June and criticized “continuous building, without restriction” of condos while the central bank says record consumer debt and the chance of a sudden housing correction are major risks to the economy.

On Tuesday data showed that the value of building permits fell less than expected as a gain in housing offset a steep decline in non-residential construction plans.

Permits dropped 2.5% in June, compared with a 3.6% fall expected by analysts, seasonally adjusted data by Statistics Canada showed on Tuesday.

Comment: Yet again analysts were wrong.

Housing permits rose for the second straight month after four consecutive declines, advancing 4.2% following a revised 9.6% jump in May.

Permits for single-family units and for multiple-family units both rose in value by 4.2%. The central province of Ontario led the gains in both categories.

Comment: So wait, permits are up and values are up in Ontario, but people are saying we are on the way down? Wuh?

Non-residential permits fell 12.3% following a 3.6% increase in May, mainly because of weaker construction plans for government buildings in the Western province of British Columbia and for medical facilities in Alberta.

Although Canadian home prices hit a third straight record high in June, extending a steady climb that had triggered fears of a property bubble, a slowdown in the pace of price increases suggested the red-hot housing market is cooling.

Comment: National prices have been increasing at 3-5% annually – when inflation is 2-3%. How is that anything close to a bubble? High prices do not a bubble make. Extremely rapid rises (such as the 127% increase in 15 months in 1989-1990) are the true mark of a bubble.

Record Projects

New downtown projects in Toronto include Cinema Tower by Daniels Corp. and Pemberton Group’s U Condominiums. There are a record 196 condo projects with 52,695 units under construction in Toronto, according to Urbanation, allowing investors who dominate the market for new units to become “a little pickier on the projects they are holding out for” Myers said.

Comment: I am so confused. I have heard numbers from 143 to 196 as to how many condos are being built. Is it GTA or just 416? Active construction or just active projects for sale and being built?

Howard Youhanan of Condoman Realty Inc., said some investors “will never see a return” because “the builders overpriced the units in the first place.”

Comment: Amen to that. That is the biggest problem. Not the nebulous threat of a correction that is unlikely to happen, but paying too much to the builder at the beginning.

Condo sales dropped 10% in July from a year earlier to 1,753 units and the average price fell 1% to $328,216, the city’s real estate board said Aug. 3. Prices have fallen 11% since February, according to Bloomberg calculations using Toronto Real Estate Board figures, and were little changed in July from a year earlier, ending annual price gains that peaked at 22% in October.

Comment: But that is cherry-picking numbers. Prices tend to rise in the beginning of the year and then fall. Year-over-year is the only way to know for sure. And August 2011 had condos averaging $355,513 mid-month, and at the middle of August this year we are at $341,270 – a decline of 4%. So yes, there is a drop from last year, but it is less than the sensational 11% being thrown about.

Housing research company Urbanation also reported Aug. 2 that new condo sales plunged 50% in the second quarter to 4,769, from a record high a year earlier while there were a record 18,123 unsold new units.

Comment: What about available units? If there were 50% less units for sale, then it makes sense. But if the inventory remained the same and volume dropped, that says something. But this cannot be evaluated without context.

The increase in unsold condos has been moderated by a decline in the stockpile of low-rise units, suggesting there isn’t a problem with oversupply according to George Carras, president of RealNet Canada Inc., a real estate data seller. He said the 25,930 unsold homes in the first half of the year are close to the average since 2000, according to his company’s figures.

Mortgage Restrictions

Mortgage restrictions and provincial rules limiting Toronto land use may drive up prices by limiting the supply of new condos, he said. About half of condo projects that have pre-sold 70% of the units haven’t begun construction, he said.

“The tightening of credit is causing a restraint around the ability of traditionally-sold projects to move into construction,” Carras said. “Tightening of credit could have the exact opposite outcomes to what they might be expecting.”

Comment: Yes… if supply slows and demand remains constant (though more likely increasing) then upward pressure on prices is the result. Less condos will make them more expensive – witness single family homes.

The tougher lending rules are the latest in a series of measures that have raised monthly payments for a typical first- time homebuyer by 25%, said Derek Holt, Scotiabank’s vice-president of economics in Toronto.

“The regulatory part of the picture will be an additional downside for housing markets to deal with for a long time yet,” Holt said. “This is the market going through a correction that I think is needed to hopefully avoid what would have been an even worse outcome.”

Household Debt

The tighter mortgage rules came after Bank of Canada Governor Mark Carney said that record household debts posed the biggest domestic risk to the financial system. The ratio of household debt to disposable income reached about 154% in the first quarter, higher than the U.S. figure of 141%.

Comment: What does it matter how we compare to the US? They were preyed upon by evil bankers, plus their economy is generally worse than ours. I do not like our debt ratio being that high, trust me, but comparing it to the US is useless.

Carney has kept his key lending rate at 1% since September 2010, the longest pause since the 1950s, and in July cut his economic growth forecast citing global weakness and the weakest export recovery since World War II. The central bank’s July 18 forecast also said that housing investment will make no contribution to economic growth in 2013 or 2014 after signs of “overbuilding”

“You don’t even need a collapse scenario in housing markets to keep the Bank of Canada on hold for some time yet,” said Holt, who last week pushed back his forecast for a rate increase until 2014 due to weak economic growth including housing demand.

Comment: Same as what I said last week, don’t expect to see a rate hike until late 2013 or likely 2014.

Industry Sentiment

The Real Property Association of Canada said Aug. 2 that an index of industry sentiment fell to the lowest level in three years in the third quarter because of concern about a slowing economy. The measure, compiled by FPL Advisory Group fell to 58 from 63 in the second quarter, with readings greater than 50 still suggesting “positive trends.” The industry group says its members own more than $180 billion in real estate assets.

Comment: How many of them are in Toronto and how many of that group dropped their rating?

Toronto isn’t in the middle of a condominium bubble because record construction of new units is being matched by the demands of the city’s growth, Royal Bank of Canada economist Robert Hogue wrote in a report last month. He said that condo prices may fall by as much as 7% on a quarterly basis from their peak because of tighter regulations, increased supply of new units and decrease affordability. Flaherty in June lowered the longest mortgage amortization to 25 years from 30 years and capped debt payments at 39% of income.

Comment: But this drop is against years of gains, to be honest. And small drops are not such a bad thing. Unless you are selling… but those buying to flip do everyone a disservice. Mind you, fewer new projects and we are going to see prices creep back up as supply shrinks.

Standard & Poor’s cut its outlook to negative from stable on seven Canadian banks July 27, including Toronto-based Royal Bank of Canada and Toronto-Dominion Bank, citing a prolonged increase in housing prices and consumer indebtedness.

Comment: Everyone forgets that our mortgage default rate is only 0.4%. So while banks have tons of mortgages out, the default rate is beyond low. And we have CMHC to back them up. How that can be negative, I do not know.

‘Policy Initiatives’

S&P, which said it might lower the ratings on Royal Bank of Canada and Toronto-Dominion one level, said it “will continue to consider the impact of recent government and regulatory policy initiatives to curtail potential systemic risk arising from the housing sector as well as assess Canada’s relative performance vis-à-vis its global peers.” Royal Bank of Canada and Toronto-Dominion are rated AA- by S&P, the fourth-highest level.

Flaherty’s tightening may help the market because it “codified what an affordable situation was,” said Jason Mercer, senior manager of market analysis for the Toronto Real Estate Board. Toronto homes in general still are well below the payment limits, suggesting there is more scope for price and sales gains, he said.

The average five-year mortgage rate was 5.24% last week, down from a peak of 7.54% in December 2007 and close to the lowest since the 1950s.

Comment: Posted bank rates, which we all know are bunk. People are actually getting 2.94% on their 5-year mortgages.

New Units

There are still signs that buyers and sellers are keen for new units. The Ontario Place provincial park should be sold to housing that may include condos, according to a report written for the government by former Progressive Conservative leader John Tory, while Daniel Valencia Mizrachi says he has five clients who want to rent a condo and he can’t submit their offers fast enough to secure them a place to live.

Comment: Do not even get me started on the rental market. I had a client put his (admittedly awesome) loft up for rent. He posted it on Kijiji on Saturday and by Sunday had 30 phone calls and 70 emails – he did one viewing and 45 people showed up. Asking $1,700 he got $1,825 for it – and turned down $2,000. So yeah, demand for condos downtown is still pretty high.

“All the rental condos are rented in a few days, and normally above the asking prices. Now they are asking for one bedroom plus den– $1,900, which doesn’t make sense, and people are ready to pay that,” he said. “The market will be safe for another two or three years, no problem.”

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.