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With all the towers U/C, in sales, or in the pipeline, how can the market absorb all these new units? I also really wonder about the high end stuff. Look at the Winston. I think it's only around 20 units in Forest Hill, and has been on the market for a very long time (previously called the Russell Hill). It still hasn't broken ground. With Trump, Ritz, Maple Leaf Square, possibly TIFF all in the high end price range, plus a few projects around Yorkville and Forest Hill, does anybody think it will be tough, if not impossible to sell all these units? Then you have the mid to low end, where the sheer number of units planned may overwhelm demand. Inflation is on the rise, which means interest rates will follow. With rental vacancy rates around 7% (a 40 year high), how much longer can this real estate boom last?
 

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The Greatest
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I seriously doubt Maple Leaf Square and Tiff are anywhere near the range of the other high end projects underway in the city

The number of units under construction may drop in the next few years but the number of towers probably won't - The mid to high end of the market still has a lot of growth potential and the low end is demanding larger units

Look at the Winston. I think it's only around 20 units in Forest Hill, and has been on the market for a very long time
Personally, I would never buy into a project that is having difficulties in attaining approval

With rental vacancy rates around 7% (a 40 year high), how much longer can this real estate boom last?
Doubtful high rental vacancy rates will in any way affect the condominium boom.
 

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I'd say the condo boom is very close to being done but that it's only going to fall by about 30% rather than a complete crash. However, I would expect the same number of towers to go up with a portion of each tower being office or hotel development as both office and hotel vacancies are fairly low.
 

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I think the number of sales will drop, but even if it gets cut in half it will still be a thriving market by any standards...the sales of the last few years have been massive. As long as mortgage rates remain low, and there's nothing indicating they will skyrocket, the market will remain strong. I don't see the population growth slowing much either...in fact, if anything, it may increase. And given the diverse economy, I don't see jobs or the economy tanking either. I think Toronto will continue to do what it always has...always grow...sometimes steady...sometimes booming...but always getting bigger.






KGB
 

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Go back and look at the real estate reports from 1998, they been saying the condo boom would end every year for the last 7 years now. Eventually they'll get it right but I don't think anyone can predict the exact time.

Also, a high vaccancy rate is a good thing except for the speculators.
 

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Does the condo market slowing down mean that many of Toronto's 200+ approved and proposed buildings won't get built? It would be a shame if all of them go to the never built catagory. :(
 

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"Does the condo market slowing down mean that many of Toronto's 200+ approved and proposed buildings won't get built"

No - just look at the average age of our office tower proposals
 

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valantino said:
"Does the condo market slowing down mean that many of Toronto's 200+ approved and proposed buildings won't get built"

No - just look at the average age of our office tower proposals
Hehehe:D I bet one day we'll get tired of our impending office boom and wish we had a condo boom again.;)
 

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^ Nearly 4 million will be added to the extended Golden Horseshoe over the next 26 years. Of course, the great majority of that will be in the Toronto area.
 

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Monday » April 25 » 2005

Dreaded 'flip' absent in Canada's housing market
'No speculative bubble'

Garry Marr
Financial Post

April 25, 2005

It's the dirtiest four-letter word in real estate and few will utter it.

Flip: Talk to most people in the industry and they'll tell you it's not happening. Their fear is very simple, the flip is usually the final phase in the real estate cycle before the bubble bursts.

It means the market is out of control.

That's what happened in Toronto's red-hot condominium market in the 1980s. Prices were shooting up so fast people bought condos and sold them within weeks. It was easy to make money.

You bought a condo from a builder and before the highrise was even completed you sold the unit to someone else and made a tidy profit in the tens of thousands of dollars by doing nothing but putting up a paltry down payment of $5,000 to $10,000.

Investors could pull off the move because overall real estate price increases were running well into the double digits and it was not uncommon for a condo to jump 50% in price before it was even built.

"That was before the developers got smart," says Jamie Johnston, with Re/Max Condo Plus. These days, some builders make investors put down 25% to 35% of the purchase price.

The other big obstacle to flipping is changes to the condo rules that make it difficult to transfer ownership of a unit until the condo has been officially registered.

But the No. 1 issue in today's market for someone looking to make a quick buck in real estate is prices are not rising fast enough, once transaction costs are considered.

"There really isn't much speculation in this market. We don't have the speculative bubble," said Adrienne Warren, an economist with the Bank of Nova Scotia. "The market has been more about how much your carrying costs are. It's a market that is attracting first-time buyers [not speculators]."

Recent data from the Canadian Real Estate Association shows prices continue to climb, but mostly at moderate levels. March set a new all-time high for the average price of a home sold at $259,736 but that's still only up 8.6% from a year ago. That is a nice increase but hardly justifies the risk of speculative investing.

Furthermore, economists such as Ms. Warren are predicting price increases will slow the rest of this year making the opportunity for a quick turnaround less likely.

Peter Norman, an economist with Clayton Research in Toronto, figures the total transaction costs on any deal are in the 8% range once you factor in the 5% commission real estate agents get, plus legal costs and land transfer taxes.

"Flipping is not really an issue. You have to remember from 1986 to 1989, prices were up 33% a year in Toronto. In that environment, you can sell and cover your costs," Mr. Norman said. Nationwide, prices have climbed about 40% in the past five years.

The best example of flipping is called the "renovation flip" and it's not really the same thing. "You buy a house, fix it up and six months later sell," Mr. Norman said. But that's not really a true flip. A true flip is when you sell the property before you've even taken possession, he said.

Prish Jain, an architect who restores or renovates older homes, doesn't even like to use the word flip. "It's pejorative," he said.

He and his business partner Michael Krus will buy an older home, upgrade the wiring and plumbing, open up the space and then sell the product months later for a profit. "We make the homes suitable for modern lifestyles," he said.

Mr. Jain feels his profit is based on the expertise he and his partner bring to a project, rather than just taking advantage of rising real estate prices. "You can't buy something, sit on it for a couple of months, put it back on the market and expect to make money," Mr. Jain said. "You can't flip like that."

Ted Tsiakopoulos, a market analyst with Canada Mortgage and Housing Corp., said the evidence shows current home buyers are not speculators. Recent data indicates 63% of homebuyers in Ottawa were purchasing for the first-time while the figure was 57% in Toronto. Those people are buying to live in the home.

Even in Toronto's red-hot condo sector, the data indicates there is limited speculation. CMHC says only 20% of condominiums are being bought by investors, compared with 40% 15 years ago.

While the majority of investors may have a buy and hold philosophy, Toronto realtor Brad Lamb says more than a few of them are still "flipping homes," namely buying condominiums from floor plans and selling them immediately after taking possession.

Mr. Lamb, who says he personally owns 80 condominiums, said the flip can still be done if you get the permission of the builder. Most of the contracts signed by condo buyers include a provision not allowing them to sell the unit before the condominium corporation is registered -- something that usually happens six months after a condo opens.

"Their contracts are iron clad but for a fee they will let you out," he said.

Some people are avoiding that fee but it requires some degree of stealth. One option is to agree to sell your property to a third party in advance of taking ownership.

Either way, there is still money to be made, Mr. Lam bsaid. He gave the example of someone buying a condo three years ago for $150,000. When that condo finally gets built three years later, it's probably going to be worth about $210,000, he said.

"Let's say you put 15% down, that's $22,500. You pay brokerage fees and others costs of says $15,000. That still leave you with a profit of $45,000. That's a 100% return on your money."

It all sounds very good but is based on the assumption the value of the condo you purchase from floor plans will increase by the time the building is constructed. That didn't happen at the end of the last housing cycle.

"I had a couple," Mr. Lamb, said about condos he purchased when the market fell apart last time. "Eventually, I got my money back."
© National Post 2005




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...
Unparalleled boom drives housing

By JANE GADD

Tuesday, April 26, 2005 Updated at 9:27 PM EST

From Wednesday's Globe and Mail

Shawn and Tammy Reain, two Calgary accountants in their mid-30s, made so much money on their first house, bought four years ago, that they have been able to double their fun — they just bought a condominium in the city core and a recreation home in Canmore.

“We paid somewhere in the mid-200s in December, 2000, and sold for more than $400,000,” Mr. Reain says. “We've been able to divide our lifestyle into recreation space and business space.”

Now the couple can walk to work from their condo in the Mission neighbourhood and ski and hike in the Rockies on weekends.

The Reains are among a tidal wave of home buyers feeding an unprecedented swell in housing market activity and prices in the past decade. A report released Tuesday by Re/Max Canada says Canadians have flocked to the housing market in every major city, preferring the security of housing to the vagaries of the stock market and mutual funds.

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Since 1995, 3.6 million housing units have been sold in 16 urban centres across Canada, a 25-per-cent increase from the decade of 1985 to 1995, Re/Max reports.

The average price appreciation of homes across the country has been 53.7 per cent during the decade — more than 5 per cent a year.

Prices have zoomed up most spectacularly in Montreal, Calgary and Halifax-Dartmouth.

In Montreal, where increased economic stability and a cultural shift away from renting has driven up the market, prices rose 85.9 per cent over the decade. In Calgary, the booming oil market led a housing market surge that saw prices inflate by 81.7 per cent. And in Halifax, which also owes its rejuvenation to oil and gas and the jobs they have created, prices soared by 77.3 per cent over the decade.

Vancouver, despite having the most costly real estate in Canada, had only a modest rate of price appreciation in comparison to other cities — just 19.1 per cent.

The report's ranking of the top 10 markets by price appreciation put Saskatoon fourth at 76.2 per cent, followed by Kelowna (76.1 per cent), Edmonton (71.4 per cent), Ottawa (69.8 per cent), Victoria (66.1 per cent), Prince Edward Island (60.5 per cent) and Toronto (60.3 per cent).

“It's the kind of investment Canadians like ... one you can have control over,” says Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada. “People are very uncomfortable or uneasy about RRSPs; for many their house has become their RRSP.”

The Re/Max report showed activity levels in the housing market — the number of units bought and sold — doubled in Ottawa, Toronto, St. John's, Calgary, Montreal, Victoria and Edmonton from 1995 to 2005 and tripled on Prince Edward Island.

Mr. Reain, the Calgary accountant, said he definitely had investment on his mind when he bought the recreation home in Canmore.

“We think the condo will only rise moderately because so many are going up in town. But we're very bullish on the Canmore property.”

Earle King, an optician in Halifax, jumped back into the housing market this month after renting a condominium for four years.

“The investment part was important — that's what drove me out of the condo,” Mr. King said.

Before he moved into the condo in 2001, he had made $100,000 on a home he bought 20 years ago for $22,000.

Although Mr. King and his wife are empty-nesters, they have chosen a four-bedroom home in Dartmouth, in Halifax's north end, because of its investment potential.

“I was quite keen on a condo, and looked at some, but you know you pay $120,000 to $150,000 and then you have condo fees of $300 a month and taxes on top of that,” Mr. King said. “I thought this is ridiculous. You virtually double your value [with a house].”

The semi-detached home the Kings bought cost $142,000.

“I'll be retiring in five or six years so I didn't want much of a mortgage,” Mr. King said.

In Montreal, the past 10 years have seen a huge shift in mindset away from renting toward home ownership, Mr. Polzler says.

“In the past, Quebec was more like Europe with people preferring to rent.... The mindset has really changed and people are looking to make the investment.”

Mr. Polzler also credits an increased sense of stability in Quebec after the turmoil of the early 1990s and the 1995 referendum for the huge property value appreciation.

“In the early 1990s prices dropped so low that people began to say we're dummies not to buy it up,” Mr. Polzler says
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* © Copyright 2005 Bell Globemedia Publishing Inc. All Rights Reserved.

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