Scarborough: Disaster or Opportunity?

What do you think when I say Scarborough? If you haven't grown up there and don't know much about it, you probably think crime-ridden disaster, poorly planned screw-up, a wasteland of highways and 70s high rises. One thing I know for sure: It's brand is not working. It's been dubbed: Scarberia, Scareborough and Scarr Town. Not terribly flattering stuff.

For the past few years, however, there's been a number of real estate watchers and investors who have claimed that Scarborough is ripe for a renaissance. A few years ago, it was considered one of the top 10 cities/zones for real estate investment in Canada. To date, it is consistently priced much lower than the rest of the GTA as a whole. Like Hamilton, Scarborough is seen as an underachiever, a place that has been  undervalued for too long. And I agree: It's reputation has dragged down the real estate market more than it should.

Now, I don't want to take this too far and say that Scarborough is a hidden gem. But I do think that Scarborough has been viewed as one big messy lump.  This corner of the GTA is mix of a wide variety of neighbourhoods. Some with much more promise than others.  And by promise, I mean a bargain to buy a house.

Personally, I'm not sure all of Scarborough will be experiencing a renaissance, but I certainly see changes happening, especially in the neighbhouroods that border Toronto. I would not classify them as emerging neighbhourhoods, but I would say there are ones to watch. And they may be suitable for those first time buyers who are tired of the bidding wars and the rising prices of so many Toronto emerging neighbourhoods that are just a touch out of their budgetary limits at the moment.

Recently, the bidding wars occurring with some regularity in the Danforth Village and even up in Lumsden  have been pushing new buyers east of Vic Park into Scarborough. Places like Oakridge or Birchcliffe are beginning to seem more appealing because of their affordability. Lots of people can't get passed the Scarborough address, but your money does go much further our here. You will get more house and probably less renos. Life may actually be easier in Scarborough.

Of course, you don't have to be bordering Toronto be a viable Scarborough neighbourhood. West Rough and Port Union are not bad options as well. It's got the waterfront, the GO Train, and a lot of green space.

This is not an official endorsement of Scarborough. This is not the latest emerging neighbourhood to emerge, but I do think if you can live that far east, and you can get passed the Scarborough home address, you may find yourself a pretty great house.

The Last Affordable Toronto Neighbourhood?

Lately, I've been receiving some pretty discouraging emails, first time buyers who feel they are taking the right approach when it comes to buying a starter home in an emerging neighbourhood. They're not condo folk, and they want a house with a yard. Fair enough. For the most part, they know they have to look a little further afield from the downtown neighbourhoods. So, they go to the Junction and Leslieville, but realize prices are pretty high there for a starter home these days. The word is out certainly out on these hoods.  So, they go to the less-emerged  emerging neighbourhoods like Danforth Village and Mimico/Long Branch. But I gotta say, the word is out on these neigbhourhoods too, though they are more affordable than the Junction and Leslieville.  Depending on your budget, you could find some thing here for a starter home, but there are those well-paid, middle class buyers who still feel discouraged in these neighbourhoods.

So, that leads to the emails: Is there any where left? As I've mentioned many times before, there are only so many houses left in Toronto. Condos keep getting built. Houses do not. So, at some point, it may be a bit of a luxury to own a house in this city. But not yet. There are still pockets. Places where you have to be a bit of a pioneer to go, but may be well worth it. 

One such place is Weston Village and the neighbouring neighbourhood of Mount Dennis, just to the south of it. WestonVillage runs up Weston Road and it's main street intersects Lawrence Ave. Many have compared this neighbourhood to an early Junction because like the Junction, it used to be a small town that was eventually taken over by the larger Toronto. So, the main street has a bit of a small town feel to it. And the big news: There is a GO station opening soon right in Weston Village. So transportation will be very easy there very soon. The area itself is pretty, but some times scruffy. Up on a hill, older homes. A nice park-like ravine nearby. It has a growing community group, a farmer's market and even it's very own Santa Clause parade. So, why hasn't every one already moved here? Two reasons. There are some drab, and crime-ish high rises sprinkled in, though due to community involvement, the crime rate here has dropped significantly since 2009. And the second reason: The distance. It's further from downtown, and does not yet have the best transportation options, though the GO Station will help out a great deal. Still, Weston Village and Mount Dennis are in the very early stages of  emerging. So, you don't know how long it will take for these neighbourhood to take off, if they fully do. The commercial strips need more va-va voom, but there are much fewer bidding wars and the prices are still some of the least expensive places to buy a house in the city. And of course, if the housing market marches on as it is, these places could be worth a lot more, just like the Junction and Leslieville evolved over the last 10 -15 years. 

The Greenbelt and the Future of the GTA

All in all, I'm a pretty big fan of Greater Toronto's greenbelt policy.  It protect 1.8 acres of prime farmland and green space around the Greater Golden Horsehoe from St. Catherine's around the bend of Lake Ontario to Oshawa. It runs north to Markham, Vaughan and Newmarket. It provides clean waters and healthy local food at a time when buying local is practically a religion and the number of farmer's markets continue to grow around  Toronto. It also curbs the urban sprawl that has led to some pretty ugly and almost unfixable corners of Scarborough, Mississauga and beyond.

But what does a greenbelt policy have to do with real estate? Well, lots. There's a reason why places like Vancouver and Manhattan cost so much. They're land locked. So in a place like Manhattan, there's nowhere else to build but up. And it ain't cheap.  When there's no where else to build, the cost of the existing real estate shoots up. And now that the GTA has borders, the same thing could occur. So, hooray, there's no sprawl, hooray for more local food, but not hooray for higher prices for homes. Land is becoming increasingly less available and the land that's left is becoming more expensive. You can't just keep building out because now there's a green wall to stop you.

Developers cannot afford to build houses on the land that is inside the greenbelt. So, they build condos. Really big ones when they can. That is one reason there are so many condos being built in the GTA, more than any where else in North America. It's not cost effective to build houses. Developers will lose money unless they go beyond the green part of the green built and build far outside of greater Toronto. 

You can't blame the green belt exclusively for causing higher prices in our city and the incredible increase in the number of high and mid-rise condos. Toronto has demand.  Young professionals increasingly want to live closer to work, near friends and great restaurants.  Interest rates are also low, which makes it easier to qualify for larger sums of money. 

And of course, the greenbelt policy in our area can change at any time. It is, however, considered one of the best greenbelt policies in the world. I can't see it changing any time soon. Plus, I like it. It encourages smarter growth, better planning and in the long term, just makes Toronto a more pleasant place to live, even if it's a higher premium. 

Lamest Real Estate Article of the Week

This article (http://bit.ly/IzU6xr ) called "The Hidden Threat of Home Ownership" that hit the Globe this past week has to be the most riduculous thing I have read in a long time.

In it, the writer argues that homebuyers between 30 and 50 years old are contributing very little to their  RRSPs these days and have instead contributed only to the value of their homes, thereby turning them into "slaves" who have ignored their retirement by failrf to invest their money wisely. The implication in the article:  The only way to save for a retirement is by investing in RRSPs. The article does hit on some obvious problems. Home equity lines of credit are usually not the best way to take a loan, and some Canadian are overextended financially. To that I agree.

But for the rest, come on. I can tell you why I have not invested in RRSPs. They don't make any money - at least not for a looong time.  If I had to compare someone who invested in real estate vs. someone who invested in RRSPs in the past ten years in this city, there's  a very good chance that the real estate investment has been overwhelmingly more lucrative than the RRSP contribution, whether you're using it for retirement or not. In fact, I would say there has been more investment in real estate since the financial crisis because people view it as safer than stocks and more profitable than GICs. It's not perfect. There will not always be huge price appreciations. Things will slow down. There's  ups and downs, but over the long haul it has historically yielded profits.

Of course, where and how you invest in real estate does make a difference. If you invest in the right emerging neighbourhood, you could yield better results financially. Here's a wiser article from the Toronto Star, in my humble opinion, that breaks down the price appreciation numbers in five Toronto neigbhourhoods that are considered "hot spots".(http://bit.ly/J0LD2n )

Here we see how real estate has grown the money of buyers over time, how some neighbourhoods have moved from affordable outposts to cool in a matter of years. I wish my RRSPS would perform like these neighbourhoods have.

Low Inventory: The Recipe for Pricey house

According to the latest round of stats, the average price for a house in Toronto is almost $550,000.  And by Toronto, I mean any where that has a 416 or 647 area code.  In March,  prices of houses are up just over 10% from last year. Pretty sweet for people who are selling in this market. Kinda lousy for those who are trying to get in. 

It's a little nuts considering that we just came out of a giant recession. Condo appreciation is not nearly as much, but they have gone up around 5% since last year on average. And even though there are a lot of them being built, they are also being sold. Much fewer bidding wars than houses, on average, but a healthy market nonetheless. 

So what gives? Does every one suddenly have more money? It's true that rates are very competitive among the banks, within the last year, but the interest rates have not changed much since 2011. And salaries have not gone up 10% in this city.  I do think that rates may have some thing to do with it though. There is a group of buyers out there that really don't want to pay a lot in interest. So, they want to buy now while the interest rates are very low and before they go up and make buying property even more expensive at the same price. Even if they buy high at a low interest rate, they can still lock in for 5 or even 10 years before they may have to pay more at a higher interest rate. 

As far as I'm concerned, though, it's not the buyer side that is really effecting prices. It's the sellers. There's just not enough of them.  And because of that we have very low inventory with houses. I can say first hand that I have not seen many houses hitting the market these days considering it's the Spring. It's a simple equation for price appreciation. More buyers than sellers means more competition for fewer homes and higher prices. 

So, why aren't the sellers selling? I mean, if prices are up 10%, wouldn't it be a great time to sell! I think so! I guess many of the sellers don't want to sell and become buyers who have to pay land transfer tax and compete for new homes. At least that's what they tell me.  Some just have been in their home awhile and don't see it as a cash cow to cash in on.  It's a place where they live. 

I imagine there will come a time when prices are not so crazy, but in any market, a house will often do well in the city of Toronto. There are very few being built. The demand for them is out there. And this city isn't getting any smaller. Maybe there will be some change in the inventory when the boomers, the Western world's bulkiest demographic, start selling off their houses in larger numbers and start retiring and downsizing. But I don't see that coming any time soon. Even then, there are no guarantees.