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March, April and May are the housing market’s biggest months, and real estate watchers are busy prognosticating whether Toronto’s sluggish-of-late market will see a rebound this spring. One of the more in-depth accounts, courtesy of the Globe and Mail, hones in on how first-time buyers are faring. Below, five key facts about this segment of the market—including what might convince them to take the plunge.
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Sean and James McQuillan left Ireland for Toronto in 2010
In the mid-1990s, companies such as Microsoft, Intel and Apple, attracted by Ireland’s well-educated workforce, tax incentives, minimal regulations and low wages, opened offices in Dublin with a speed that surprised even the gravest doubter. By the time the Celtic Tiger, as the exploding Irish economy was dubbed, had fully deployed its claws, the unemployment rate had dropped to just under five per cent, one of the lowest in the developed world. Ireland’s GDP grew to one of the highest in Europe, exports doubled in just five years, and the average income was climbing seven per cent a year, almost triple the Read the rest of this entry »
eurozone average.
In today’s Globe and Mail, personal finance columnist Rob Carrick has some good news for those who have been trying without success to get into Toronto’s housing market before prices rise out of their reach. Carrick writes that, with housing markets cooling in several cities, including Toronto, many are forecasting that prices will plateau or even fall. Meanwhile, interest rates are expected to stay at their current very low levels for a while longer. That means first-time buyers can relax and take some time to build up bigger down payments, thereby saving themselves some money on interest payments and mortgage default insurance—and if new buyers do so en masse, it’ll bring housing prices down even further, saving them even more dough. Read the entire story [Globe and Mail] »
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The city’s condo boom may be keeping both Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney up at night, but at least one high-level economist is contradicting both (because when has anyone ever agreed about the real estate market?). Robert Hogue, a senior economist at the Royal Bank of Canada, insists there’s no bubble in Toronto and, while the market will likely see a bit of cooling, there won’t be an epic condo crash. In a report released today, Hogue argues that demand for housing remains strong—after all, there are roughly 38,000 net new households in the Greater Toronto Area each year and they have to move in somewhere.
We’ve been wondering what the new federal mortgage regulations will mean for Toronto’s real estate market (especially since Finance Minister Jim Flaherty’s worries over the local condo boom were a key motive for the rules). This week, some chilling words from Moody’s Investors Service: though the measures will likely cool home sales across the country, it already “may be too late to avoid a housing correction.” Moody’s analysts write that a massive build-up in consumer debt and the fact that disposable income is growing more slowly will make it difficult for Canadians to pay off what they owe, especially if interest rates rise—all of which could send house prices plummeting. Of course, as is always the case with housing market predictions, there are many willing to take a dissenting view, namely, that the regulations won’t have a significant impact on Toronto’s condo mania. [Financial Post]
(Image: Joshua Sherurcij)
The runaway real estate market in Canadian cities (and whispers and shouts of bubble trouble) is worrying Finance Minister Jim Flaherty enough that he’s again introducing new mortgage rules. Among the new measures, which kick in July 9: the amortization period for a government-insured mortgage will max out at 25 years, rather than 30; the maximum amount homeowners can borrow against their homes will be reduced from 85 to 80 per cent; and only homes with a purchase price under $1 million will be eligible for government-backed mortgages. Flaherty specifically singled out the increasingly absurd condo markets in cities like Toronto as cause for unease—but a recent Globe and Mail article suggests developers and some industry experts still aren’t concerned about things going south. The general belief is that, though Toronto’s market may be cooling slightly and buyers are becoming more skittish, the expectation of sustained low interest rates means the construction cranes aren’t going anywhere. [Globe and Mail]
Turner outside his Caledon home, a former inn built in 1855
If the Toronto real estate market has nine lives, so, too, does its most famous prophet of doom, Garth Turner. Over a 40-year career, Turner has worked as a journalist, a broadcasting entrepreneur, a newspaper chain proprietor, a hotel and restaurant operator, twice as a federal MP (including a stint in Kim Campbell’s short-lived cabinet), a PC leadership candidate, and a financial author and speaker (or, as his critics put it, “seminar shill”). Most Canadians still know him best as the rebellious member of Stephen Harper’s government who was kicked out of caucus in the fall of 2006 for blogging about party business, then crossed the floor to join the Liberals.
Turner, you may be surprised to learn, is also a self-professed real estate junkie who over the years has bought and sold—very profitably—about 50 commercial and residential properties; he moved four in 2011 alone. But as he has watched prices and consumer debt levels soar, especially in Toronto and Vancouver, he has come to see the housing market as a grossly distended balloon that will—any day now—explode, raining debt and misery on the Canadian populace. Each delay to the inevitable reckoning, he argues, more deeply entrenches our delusion that the real estate boom—“the biggest bubble economy in history,” as he puts it—can continue forever, and leads a few thousand more naive young couples to sign five-per-cent-down mortgages on wildly overpriced fixer-uppers in Leaside or Riverdale. “The real estate correction will hurt,” he warns, “and the longer this thing goes before it tips, the more pain there will be.”
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After years of crushing mortgage payments and escalating maintenance costs, one homeowner sold her house and signed a lease on a place a few blocks away. Life has never been sweeter
Our last house was a little gem. Few homes in Leslieville are stately or architecturally impressive—it’s a neighbourhood of unremarkable brick semis with the rare Victorian or Tudor flourish—and the one my partner and I owned for two years was no exception. But inside, stripped down to its simple bones, with Benjamin Moore cloud white walls and dark wood floors, a cute IKEA kitchen and mid-century decor from local vintage shops, the place had charm. We bought it for $450,000 in 2007, a deal, if not a steal, for a home on a coveted street less than a five-minute walk from all the amenities required by the middle-class hordes: good coffee, a busy playground, decent restaurants. Soon, however, our house began to make exhausting demands: the furnace needed to be replaced, then the roof; the basement felt damp in the summer humidity, and in the winter our barely insulated bedroom, with its ancient windows, was so cold we had to run a space heater through the night.
There was no money to fix any of it. Our line of credit and credit cards were maxed out. We had two comfortable incomes, but after mortgage payments, utilities, property taxes, car payments, insurance, daycare and groceries, there was little left over. We added up the sums, living expenses against income, on increasingly complicated spreadsheets—it would be years before we would be in the black. Meanwhile, the company I worked for faltered during the recession. First the frills were cut: fewer couriers, no fancy Christmas parties, no taxi chits. Then jobs; I lost mine in early 2009.
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We had caught wind that Justin Bieber was house hunting, and it appears he has finally found the home he’d like to make dinner, love, pranks and “Call Me Maybe” videos in: a 9,000 square-foot estate in Calabasas, California. Although he could easily afford the $7 million price tag, his manager advised him to take out a mortgage, which has since been declined when appraisers found the property is significantly overpriced. The current owner refuses to budge on the price because he’s put so much work into the property, but maybe a back-end deal will be reached (perhaps he too can be swayed by money and some concert tickets for his grandchildren). Never say never.
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The rock-bottom mortgage rates that have characterized Canadian real estate of late are going up, which could help ease Toronto’s bidding war insanity. The Globe and Mail reports Bank of Nova Scotia has stopped offering its 2.99-per-cent discount mortgage rate, while Moneyville says both Royal Bank of Canada and TD Bank will do the same this Thursday. But don’t expect the market to suddenly ease—Moneyville talked to an analyst who sounded rather befuddled by what it all means. “Is it the end of low rates, and are rates going to start rising a lot?” he wondered. “Probably not. But who knows?” Add it to the list of Toronto real estate mysteries. Read the entire story [Moneyville] »
The head of Toronto’s most prestigious business school has a seditious idea, and it might save us from financial catastrophe
(Image: Daniel Ehrenworth)
Last fall’s Occupy Toronto protest was more of an idea than a place, a kind of free-floating rage against what is perceived as an unjust, morally skewed, out-of-control, soul-sucking machine. The number of protesters ranged from a few hundred people to 3,000, depending on the day, and the camp at St. James Park possessed a vibe similar to Occupy camps around the world. Gordon Lightfoot and Rachel McAdams dropped by. The placards that hung from tents or rested on the grass—“Corporate Greed Hurts Everyone,” “Reclaim Your Life!”—could just as easily have been found in London or Atlanta or Calgary.
Almost from the beginning, critics were quick to say that Occupy Toronto was misguided and irrelevant, a copycat protest at best, and a case of rich envy at worst. Corporate kleptocracy is not nearly as bad here as it is in the United States, the argument went, and our economy has triumphantly eluded any deep, lasting meltdown. Canadian executives are not, for the most part, cut from the same overpaid, underhanded cloth as American CEOs. In Canada, super-elite is just a passenger class on Air Canada. “We obviously have a very different situation here,” Stephen Harper said in response to the claims made by Occupiers. “We didn’t bail out our banking sector. Our banking sector is the strongest in the world.” In other words, put down the sign, comrade, nothing to complain about here.
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While it’s true that economic disparity is not as pronounced in Canada as it is in the States, and the European Union could take a few pages—maybe even a whole chapter—from our playbook, the smugness is unwarranted. The Conference Board of Canada, a not-for-profit economic research organization, has found that we’ve been outpacing the U.S. in income inequality since the mid-1990s. The ratio between the top 10 per cent and the bottom 10 per cent of earners is now 10 to one (in the early ’90s, it was eight to one). The country’s wealthiest one per cent account for 32 per cent of all income growth between 1997 and 2007—the largest percentage in our recorded history. In 2010, the average Canadian income was $44,366, while that same year the average compensation for the country’s 100 highest-paid CEOs was more than $8 million. Frank Stronach, the former head of Magna International, received roughly $40 million a year over the last decade and in his last year at Magna pocketed $62 million. (In 2007, he set a Canadian record by collecting over $70 million in compensation.)
Lawyer Ron Allan Hatcher has been suspended for his role at the centre of some rather unorthodox home sales in the west end. In the deals, houses were flipped in quick succession, the same buyers kept popping up again and again, and each sale saw a dramatic price increase—sometimes as much as 60 per cent—which, in turn, allowed later buyers access to larger mortgages from financial institutions. In one case, a woman bought a house with her brother-in-law for $270,000, only to sell it back it to herself that same week for $310,000. Former Richmond Hill real estate agent Jennifer Sau San Wu handled that sale—before she ended up in prison for being involved in marijuana grow ops and tax evasion, among other things. Of course, all the drama was made possible by the fact that property valuation is an art, not a science. Which is the same problem that has us, and everybody else in the city and beyond, wondering whether Toronto’s condo market is in a bubble state or not. Read the entire story [Toronto Star] »
Toronto condo towers—they’re everywhere! (Image: 松林 Ｌ)
We’ve been trying to sort out whether Toronto’s housing market is in the midst of an unprecedented bubble for awhile now. Some banks have long-seemed to fear the worst, while others have long-argued that homes in the city are so expensive simply because of the fundamentals. But that ambiguity might be on the cusp of being resolved, and not in the way we would’ve wanted: turns out banks are increasingly worried that the housing market in Toronto—especially when it comes to condos—is, in fact, in a bit of a bubble and prices could drop by up to 12 percent over the next two years.
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It’s been three years since the mass cull of the Great Recession began.
Three years since all those jobs were zapped into oblivion, and the people who remained employed were left to shoulder double, triple or quadruple loads.
For my generation, the timing couldn’t have been worse. My close friends and university classmates are exiting their 30s and have mortgages and kids and barely enough minutes to shovel the driveway. They’re entering the phase that used to be called “mid-life,” which in the best of times is a moment for evaluation and maybe even reassessment. But after the worst economic upheaval we’ve ever known, they’re reeling. A financial analyst in her early 40s tells me how 12-hour days—which used to be the exception—are now the norm: she puts in full and breakless stretches at the office, then keeps the laptop burning for hours every night after her two young kids have gone to bed. Another executive was burned out after her company took on dozens of new projects and she was left to run everything. She now works up to 100 hours a week and gets phone calls from friends she hasn’t seen in months, asking if she’s moved or died. Read the rest of this entry »
(Image: Rhett Maxwell)
A new report out from BMO Capital Markets suggests that Canada is in increasing danger of a housing price collapse—especially if prices keep going up. The good news for Toronto is that while other provinces are steadily inching closer to the danger zone, Ontario doesn’t seem to be.
The problem is that the value of homes have increased much faster than incomes. The bank says average home resale prices compared with personal incomes are 14 per cent above the long-run trend, up from last summer, although still below the 21 per cent peak that preceded the 1989 crash.
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