How is the Real Estate Market?

This is one question that we as REALTORS® get asked the most. Although just like the question, the answer has different implications for different people. My advice to both the person asking the question and the person answering the question is to try and understand the answer in relevance your personal situation and goals. Are you selling, buying or just planning on leasing? The answer has to be specific to your particular objective.

Toronto has gradually slipped into a land supply issue. It is not as abundant as it used to be, especially after the inception of Green Belt. As such, the logical solution is to increase density. This is being achieved by reducing the dwelling sizes and expanding vertically. With the development charges at an all the time high and expensive initiatives to build green, builders are pushing the pricing envelope.

Last year, we saw projects like Fly Condos in downtown Toronto being sold at approximately $500 per sq.ft. Although a different type of a project www.thebishacondos.com is hovering around $700 per sq.ft. price point. Then there are projects comparable to Bisha hotel and condominiums going at close to $1,200 per sq.ft. But take heart, there are still amazing values (www.2brcondo.com) out there at $500 per sq.ft. What does all this tell you? Well, all the factors mentioned above combined with the influx of new migrants settling into GTA, are contributing to higher prices. 44% of the GTA’s new housing market and 78% of high rise condo market is in the City of Toronto.

A quick poll done earlier this month involving a small group of REALTORS®, builders and others associated with the real estate industry had mixed feelings about the market. 45% believed that fear prevails in the market while another 46% were of the opinion that there is optimism. 56% thought that economic conditions, including interest rates and employment, were important when buying and only 16% thought that price was a criterion. The perception is that more than half of the purchasers are investors and even then 67% of the industry experts thought that the price will go up in the next six months. This is comforting for the condo market since 52% felt that condominiums will be highest in demand in the years to come.

As per the statistics published by the Toronto Real Estate Board, we are roughly at the same price point as we were 20 years ago. This has to be viewed in conjunction with the mortgage rates because that is a key component to affordability.

Hovering around 20% two decades ago, mortgage rates today are still at an all time low. To ensure that Canadian real estate market doesn’t go belly up like in the US, most lending institutions are qualifying buyers at fixed rates even if they are getting mortgages at variable rates. That’s approximately a 3% rate buffer in terms of affordability. Furthermore, the new condo real estate deposit structure has been pushed by most developers to 25% down payment, 5% of which is payable at the time of interim occupancy. This is a shift away from 15 + 5% model and quite a departure from 5% down payment sales. The new home market also remains affordable. All this foresight has lead to robust market conditions where prices are gradually trending up and not exploding.

Hence folks, it is a healthy market. So get out there and do what you need to do. Wish you a very happy real estate.

Photos of Marilyn Monroe - Update

Hello Everyone

Why am I writing this blog in a letter format? Because I wish to thank everyone in first person. Thanks to all of you who have been following my blogs and sending me emails regarding them. I received a lot of feedback regarding the photos of Absolute Towers in Mississauga that I had posted. After all, a picture is worth a thousand words. And of course since I my formal education is in Architecture, I enjoy the Absolute Towers and their clever design even more.

So here we go; I was in Mississauga day before yesterday and I took some more pictures. Let's see if you can spot the difference in the amount of construction of the Absolute Towers between now and then. The link to the previous photos is as follows. Enjoy.
http://realestate1on1.blogspot.com/2010/05/photos-of-marilyn-monroe.html

Thank you.
Jagdeep Singh, B.Arch.
Real Estate Broker
647-287-4644

Bank of Canada's Interest Rate Hike

Economists have been predicting with about sixty percent likelihood that September 8th, the Bank of Canada would raise rates again by another quarter point. It turns out, the economists were right. The BoC has announced that the overnight rate will increase by an additional quarter percentage point to 1 percent. The real question now is what this means for the economy as a whole, and the housing market in particular.

With the increase to 1 percent for the overnight rate, the Bank Rate is correspondingly 1.25 percent, and the deposit rate is .75 percent. Financial conditions in Canada have tightened modestly since April, with the changing monetary policy measures, but overall still remains highly simulative from a global perspective. This increase is consistent with the previously stated objective of achieving a 2 percent inflation target by next year. The global economy and Canadian economic indicators are what drove today’s decision to increase the rate. Canada’s economic recovery is expected to be more gradual that the July Monetary Policy Report had suggested, although the dynamics of inflation have remained fairly consistent.

The Bank of Canada’s second quarter projections were slightly more optimistic than how economic activity panned out, however consumption and investment has evolved in line with targeted expectations. Accommodative credit conditions due primarily to sharp declines in global bond yields in recent weeks support the expectation that consumption growth will remain solid and business investment in Canada will rise strongly.

Contemplating Commercial?

Are you thinking of buying commercial real estate? Whether as an end user or for investment, the time couldn't be better. Market is balanced and there are plenty of options available for all levels of investors. For the first time ever, after a long time in the City of Toronto, and perhaps for the last time, a commercial condominium retail mall is available for sale. That's right! You can actually own a piece of a multi-million dollar project and benefit from a professionally run system. It is like investing in stock market but through a professional mutual fund management company.

Welcome to The Landmark! It is the ultimate location for business and investment value. Strategically positioned among the national retailers, it is bound by new residential developments. The site will be well served based on an optimized traffic flow plan. Strolling along the wide corridors of The Landmark, shoppers will be dazzled by the variety of shops and services, truly a shopping paradise for the entire family.

The site boasts of approximately 100 acres of continuous shopping.

Representing the project as the sales partner, I had the opportunity to att end the press conference held today to announce the financing and the general construction company for the project. Time couldn't be more right to buy in commercial. While second quarter 2010 demonstrates to be a much stronger period by total price for all transactions, the average price per square foot in Metro increased from Q2 2009 to Q2 2010.

As the chart indicates, compared to other markets, Toronto is the place to be. So enjoy the update on Landmark, and happy investing to all.

Canada Ranked High in Real Estate

Jones Lang LaSalle’s Global Real Estate Transparency Index quantifies real estate market transparency across 81 markets worldwide. The Transparency Index is updated every two years and has been charting the steady progress in real estate transparency across the globe since 1999. The Index aims to help real estate investors, corporate occupiers and retailers understand important differences when transacting, owning and operating in foreign markets. The Index is also a helpful gauge for governments and industry organisations who are interested in improving transparency in their home markets. Rising levels of transparency are associated with rising levels of foreign direct investment – a powerful incentive for encouraging the free flow of information and the fair and consistent application of local property laws.

Jones Lang LaSalle made a number of refinements to the 2010 Index in response to feedback from clients and the ever-changing demands of cross-border investors, corporate occupiers and retailers. In recognition of the increasing relevance of real estate debt transparency, the company has introduced new elements relating to the availability of information on commercial real estate debt and the role of bank regulators in monitoring and publishing data on real estate debt. New markets have been added from North Africa and the Levant (i.e. Tunisia, Lebanon and Jordan) to reflect the ever-widening real estate universe now being targeted by investors, corporate occupiers and retailers.

Out of all the countries rated, Canada is ranked number 2 on the list. This means that Canada is the second most transparent market. The Asia Pacific region has shown the most broadly-based improvements in transparency over the past two years. It is in India and China where the region’s greatest advances have been recorded, a trend that has now filtered across each of their secondary and tertiary cities. U.K. is a close 3rd while number 6, 8 and 10 are United States, France and Germany respectively. Number 1 spot goes to Australia. India is 41 on the list and Pakistan is 73.

Among the world’s most transparent real estate markets, Canada differentiates itself on having a combination of a sound banking system, well-developed commercial real estate lending standards and stable property markets with relatively low vacancy and rental volatility. Historically, lending in Canada has been dominated by large, domestic financial institutions with conservative underwriting standards. Indeed, cash flows and collateral values of commercial real estate loans are monitored regularly. Unlike many other advanced economies, Canada’s major chartered banks are regulated depository institutions which had strong deposit bases and high capital reserve ratios going into the global recession. The largest investment banking operations in Canada are housed within the major chartered banks, making the banking system inherently less prone to bank runs, since chartered banks have access to cash in the form of deposits. In liquidity constrained environments, access to cash via deposits is crucial to the wealth of banks.

Transparency Index provides valuable insights into the changes in real estate transparency across the globe. On an ongoing basis, this will prove to be a valuable decision making tool for the international investor.

Photos of "Marilyn Monroe"

Absolute Towers near Square One in Mississauga, with a twisting profile that brings to mind a curvaceous Marilyn Monroe, are under construction.

Yansong Ma, founder of MAD Architectural Design Studio in Beijing, drew up the tower that beat out five other designs. It's the first international design competition held in Mississauga. The gentle spiral that sees the oval building twist almost 360 degrees from bottom to top won accolades from architecture critics around Toronto.

Due to overwhelming success of the first building, Fernbrook announced that a second 50 storey that is also now under construction. Unlike the South tower, which gets thinner in the middle as it rises, Absolute North will instead get larger in the middle, which has resulted in some members of the public calling them the "condo couple" with the South Tower being the sexy female and the northern tower being the masculine man.

The towers have also been referred to as Yansong Ma's version of Yin and Yang. The community is being created by Fernbrook Homes in partnership with the Cityzen Development group. Enjoy the recent photos that I took this past long weekend.

The Best Area to Buy In? – A mini blog!

A colleague of mine (a fellow REALTOR) asked me this morning, “Can you please give me some quick tips/advice for a person looking to buy a condo unit / home for investment and rental income perspective, eventually selling after 5years? What’s the best area?” The purchase intends to occupy the unit before the end of the year.

Is the answer to this really as simple as naming an area? I don’t think so. Here is what I wrote back:

Assuming you are asking only from a rental perspective only and not a “flip” scenario and have pre-qualified the purchaser in regards to their overall intent and ability to buy, the questions you need answered are as follows.

1. What sort of return they will be happy with?
2. Will they sell if they are unable to rent or can they hold out?
3. Who is going to manage the rental, i.e. finding a tenant, collecting rent, addressing maintenance issues regarding the property?
4. Has the prospective Buyer/Investor been a landlord before? S/he need to be aware of the new changes under The Residential Tenancies Act, specially be familiar with the Regulations 516/06 & 517/06. Will the buyer (future landlord) be able to this themselves or need professional help every time they rent out the property.
5. Is this person a “local buyer” i.e. how important is proximity of the rental property to them?

Once we have answers to these questions, we can correctly advise them regarding the area. That’s it for me. Do you have any thoughts? If so, please post your comments.