The last minute surprise moderator Peter Massihe from Tigrent Education turned out to be a great compliment to the very complex topic of real estate investing in Toronto and its impact on North American and International investors. The panel consisted of Brad Lamb, Toronto’s King of condos, Hunter Milborne, Toronto’s grandfather of condos and Harry Stinson, a founding member of the condo market in Toronto, but now the King of Hamilton.
Brad Lamb started the commentary on Toronto’s slowing market by stating that Toronto is firmly cemented as a world class city to invest with four new 5 star hotels being built in the city’s core. That was referring to the Shangri-La, The Ritz Carlton, The Trump Hotel, and the Four Seasons Hotel.
Hunter Milborne went on to say that although there is a slowdown in the Toronto market, Toronto condos serve a much needed supply of housing due to the slowing construction of low rise homes in the 905 regions due to higher development levies coupled with rising infrastructure costs and the greenbelt.
To take condominiums in perspective, Hunter commented that in 2002 two-thirds of the properties listed on the MLS were low-rise homes and one third high rise condos with a spread of about $75,000 between the two classes of property. Today, two-thirds are high rise condos and the spread in value is about $175,000 between the two classes of property, so are condominiums really that expensive?
Lamb stated that the federal government has “engineered the slowdown in the condominium market” with explicit actions to cools the Toronto and Vancouver real estate markets, which is working.
Hunter stated that although federal interest rate policy has keep rates low, the policies to cutback amortizations from 40 to 35, 35 to 30 , then finally down to 25 years has essentially had a financial impact of about a three percent increase in the monthly carrying costs of owning a home in Canada.
Lamb says the cool off is not a bad thing considering that in 2002 the average price per square foot in Toronto was $200 and today it’s reaching as high as $1,000 in buildings in Yorkville and Shangri La. Toronto needs the slowdown because the market cannot keep up with building the condos that have already been sold. There is shortage of qualified labour and developers have been forced to push back occupancies.
Developers are listening to the rumbling in the market and have shrunk the number of launches from eighteen in 2011 to six launches in 2012 with a recent announcement by Vihant at Great Gulf in the Toronto Star stating they have put all new launches on hold until next year.
Stinson has seen a transition over the last ten years from condo fad to condo lifestyle, where individuals are choosing a condo over a home. Evidenced by the sale of Stinson Lofts in Hamilton where condos are priced at $400,000 in a neighbourhood where homes start at $53,000.
Answering a question asked about rules of investing, Hunter said Rule #1 Don’t buy more than you can afford and Rule #2 Don’t sell at the wrong time. Lamb said buy local and focus on one node or area before jumping on far away markets like the USA or Alberta. Stinson said know your market and don’t compare Toronto prices to small towns and be the stupid big city buyer that over pays. Educate yourself on a niche so when a deal comes along you will recognize it immediately.
When the USA market came up, Brad Lamb stepped up as the vocal proponent of the USA market being the “best deal on the planet” and he said prices will bounce back to 2007 levels as he feels the USA market is a great place to buy a second home. Brad also feels Detroit is the best investment market in the USA right now. “Major players are positioning themselves there “. Locally, the best deal right now is a Toronto apartment building at $550 per sqft. Also a $400,000 100 acre farm is a fantastic investment that could turn into a $50 million subdivision for the next generation.
When a comment was made about condo fees being a deterrent to investors, Stinson commented that investors need to participate on condo boards and be more vocal about the spending of the building. Also, he likes super large buildings that can afford professional property management.
When a question came up who to hire as your realtor, Stinson said to invest in your relationships with realtors and give them your contact info so that you can be informed of good deals personally. Most of the good deals go to connected clients on the “inside” who know the real estate agents involved in the deal. Lamb said hire the agent that has the most listings on the market. That agent is likely the most knowledgeable about the market.
Hunter Milborne commented infrastructure projects and areas affected in the GTA that investors should be closely watching like the LRT to Pearson from Union station stopping at two points along the way including Bloor and Dundas. He also likes Don Mills and Eglinton for public transit infrastructure investment and Yonge and Sheppard.
My conclusion, is that it is always good to hear it from leaders in the Toronto real estate market who have a long term view of the past comparing it to the present. I look forward to sharing these ideas and more at my Real Estate Agent and Mortgage Agent masterminds starting Tuesday November 6th in Toronto. Register at www.MREISeminars.com.
The author, is Randy Ramadhin, author of “Investing in Condominiums: Strategies, Tips and Expert Advice for the Canadian Real Estate Investor” and a professional real estate investor advising stay at home mom’s to multi-millionaires on getting higher returns on their real estate investment portfolios while keeping more money in their pockets with a life-balance strategy that fits. Randy is a licensed real estate broker, mortgage broker and member of the Appraisal Institute of Canada currently living in the GTA with his wife and 2 kids while serving on the not-for-profit Castles for Families teaching financial literacy to families.