Toronto Real Estate in 2013: Year in Review

In a few weeks time, the predictions will start rolling out for 2014 with regard to Toronto real estate. I know I will be making a few of my own! Of course, it may be a little premature to be pulling out the crystal ball just yet. So for now, I think it would be interesting to look back over the year to see the difference between what was predicted at the beginning of 2013 and what actually happened.

 I will acknowledge the art/science of real estate predicting is a tough one. It's very difficult to pinpoint when and if a housing market will tank or rise to new heights. Otherwise, we'd all be very rich on real estate. I am going to pat myself on the back because I made predictions that largely came true, but they were safe and less dire predictions not meant to create good headlines.

Many others went for the headlines. Maclean's magazine ran the story "Great Canadian Real Estate Crash of 2013" that claimed that the crash was already under way in Vancouver and Toronto in January of this year.  It's funny. I'm fine with the doomsday scenarios when they are acknowledged as educated guesses, but Maclean's said the 2013 crash was a foregone conclusion. I bet they must be feeling pretty dumb right about now. At the very least, I am thinking they are dumb right now.

They were not the only ones who were calling for a slip in prices. The TD Bank head economist also predicted a 10% drop across Canada in 2013- a less dramatic headline, but, off the mark.

In 2013, I think it would be save to say that the naysayers were wrong again. Maybe they can't be wrong forever, but the market didn't crash at all. In fact, the second half of the year was very strong, despite government intervention to slow it down. Even the real estate brokerages, that tend to have rosier statistics than the banks, the think tanks, or the media, underestimated the 2013 performance. Houses, for example, had the best price appreciation this year than any other year in the last five years.

Some other trends that we saw in Toronto real estate in 2013:

1. Condos and Houses Performed Differently. I have mentioned at the beginning of the year that condos will appreciate much less than houses. Condos are built in large numbers in Toronto. Houses are not. Condos have even slipped in price in a few areas, and have climbed in a few others. They have not crashed, like many have predicted. Picking your condo wisely was the key to finding the good ones in 2013. Giant, boring, bland condos in lousy locations performed the worst. Boutique style, well-locoated with great design or in an emerging or established neighbourhood performed the best.

3. Condo Rental Market Was Hot, Hot Hot. Since many condo sellers were not ready to sell their condo at market value, many people decided to take advantage of the tight rental market to make some money on their condo investment. So, condos took on a much more prominent role in the Toronto rental market. And quite honestly, the rental market could use a little help since very few rental properties have been built in recent years to accommodate the growing population.  I'm not sure we'll see such a strong rental market next year, but if first-time buyers continue to have a hard time finding properties, I suspect the rental market will benefit from that.

4. Year of Incentives. I predicted the incentives would be coming in 2013, and I was not disappointed! Since new condos have stubbornly priced themselves higher than resale condos, they needed ways to reduce their prices to more reasonable level. Instead of lowering their prices, they offer free maintenance fees for a year or free upgrades or a free locker. There were many ways of reducing your costs without the developer having to reduce their price. Regardless, you end up paying less in the end.

5. Mid Rise Revolution. Since the city implemented a plan to have height specification and certain building requirements on Toronto's Official Plan, more mid rises have been planned in streets outside of the core. In the core of Toronto, you can build pretty high, but along other city streets like Dundas West, the Danforth, Queen East, or Roncesvalles, you need cannot build just any old height you like. The sweet spot is between 4 to 11 stories with the possibility of asking the city for more or setting back your condos. You need to blend in with your neighbourhood. So, many midsize condos have come to market. My favourite of 2013 has to be the Duke Condo in the Junction on Dundas West. Cheaper than Ossington with the same style and proximity to a cool, local strip of independent and fresh businesses.

2014 will be different a different beast. Already, predictions for real estate in 2014 are wildly different. According to the Germans, Canada is the country most likely to have a real estate correction in the world. On the other hand, Central 1 Credit Union predicts that Toronto will have an excellent housing market where the cost of  a house will double over the next 25 years, and today prices will seem cheap by comparison. Any way you slice it, some predictors will be right. Others will be so wrong.

House Shopping at Christmas: A Good Idea?

Every couple of weeks or so someone usually asks me what is the best time of year to buy or sell their home. And to that, I usually offer the very vague and unsatisfying answer of: it depends...

Most of the time, the two months that are the slowest in Toronto real estate, with regard to the number of real estate transactions, tend to be August and December. Makes sense, doesn't it? August is hot and many people are on holidays. December is busy with Holiday festivities, visiting, family, friends, shopping, or escaping Christmas for sunnier options.

Does that mean it's a bad time to buy or sell? Well, that's where "it depends" comes in. In August, though there may be fewer buyers looking, there are also fewer sellers selling. So, you have less people looking at your home, but you are competing with fewer listings as well. Some August properties that have not sold in the rush of Spring sit on the market until August and can be ripe for the pickings, ideally at a lower price. Of course, even though they may be a lower price, there could be a very good reason why no one wants to buy that house. Still, this isn't always the case. I bought my first house in August, a house that was not very popular at the time because you had to go through the washroom to get to the back yard. When I told friends who were also looking at the same time about my purchase of the house, they remembered going through the house themselves. At one point, they coined it the "wait-in-the-backyard-until-I'm-finished" house. Luckily, I fixed that unusual quirk, and by the time I sold it five years later, I didn't have that layout any longer.

December is a different month than August though. It's true that some properties in December are ones that did not sell in the Fall and are still sitting on the market. Like with August, those properties may be have some serious hang ups, be overpriced, or just do not show well. It can be an opportunity.

This year has been a little unusual. As we approach Christmas, the bidding wars have still been going strong. There is still a lot of demand for houses, and little inventory hitting the market. This is why houses have had the greatest appreciation this year compared to the previous 4 years, up around 8% over the last year in the 416 area.

Regardless, I'm pretty sure we'll see a nose-dive in the number of new homes hitting the market, and buyer interest due to the Holidays, next week. I'm still shocked, though, that some sellers and their agents still put out new listings over the Holidays. Some argue that a number of cultures do not celebrate any of the religious/commercial holidays at this time of year. Why not list a property? People often have time off work to go and see properties, after all.

The thing is, there are a lot of people who are celebrating or visiting this time of year, and they won't come and see your new listing. Even the unreligious and the commercially displeased, sometimes leave town for a vacation. So, for the next two weeks I'm pretty sure a seller won't be maximizing his or her potential on the market with so many distracted buyers unwilling to come and look, despite the buyer interest right now.

If you are a seller ready to list, and you want to maximize your time over the Holidays, then use this time to prep for a 2014 launch of your home. It will be worth the wait!

Are Suburbs Always Cheaper?

Let me be clear. This is not a rant about the superiority of the city or that living in the suburbs is bad and doomed existence, but it is an attempt to clear up some misconceptions about the cheapness of living in the suburbs.

Now, before I dig into the cost of living in the suburbs vs. the city, let me put my cards on the table. I'm a real estate salesperson, and it would be very tough to do my job without a car. Though I am a city dweller, I do spend a lot of time on four wheels, and I have grown to adore, and even love, my auto. I do have that much in common with my suburban breathren. But that's about it. Don't get me wrong. The suburbs have their perks, and for those of you who appreciate those suburban perks, good on you. You made the right decision to live there. The traffic is easier, the home is bigger and maybe your friends and family live near by. Can't argue with that.

Aside from those who love and want to live in the suburbs, there are those who want to live in the city, but feel they can't afford to live here, and head to the suburbs. And that may be a mistake. Moving to the suburbs is not always less expensive. If you simply compare property prices, it's true. No one can deny that! On average, homes in Toronto are $250,000 more than the suburbs. That's a good chunk of change that you don't always have or would rather spend somewhere else.

But comparing houses to  houses is not always the best way to look at it. Because when you live in the burbs, your costs of other things required to live comfortably are higher. The big factor is the car. In the suburbs, because of the low level of transit and because of the culture of the burbs, there is usually two cars per family. In the city, it's a lot less. Sometimes no car is required at all because it's easier, and sometimes faster, to use public transit in the city. On top of that, most suburban folk work in the city. So, they spend a lot more on insurance, gas and car wear and tear. Though I do love cars, they are the worst investment in the world. They don 't make you any money and the start depreciating very quickly right away.

Another factor to take into account in the appreciation factor. I'm not talking about your car this time. I'm talking about your home.

There's no denying that prices have increased at a far quicker rate in the city than outside of it. So, a purchase in the city has, for several decades, allowed the owner to grow their equity over the long haul. The value of a  home in the suburbs has just not appreciated as much as in the city, on average.

Then there's property taxes. Since your house is worth more in the city, people assume you pay more property taxes. The truth is, Toronto has some of the lowest tax rates in the region. Plus, in the future, when infrastructure problems really need repairs, cities, with their dense population, will have a larger tax base to pull from. They can spread the cost out between more people. Suburbs, with their low density will have to fix streets and waterlines with a smaller pool of people. So, the cost will be spread out among fewer people and in turn, become more pricy.

Of course, the city is no longer as straight forward as it used to be. Scarborough can function more like a city than a suburb in some parts. Etobicoke is rapidly becoming more city than suburb. And then there's places like Hamilton that function as a city but also a suburb to Toronto. Those places are not so clear cut, and will likely function more like a city in the years to come. So, with that said, make sure you factor in all costs when you feel you have to leave the city to head to cheaper and far away locations. In the long run, you may not be saving yourself a whole lot of money.