Why Bidding Wars Are Back Big Time for 2015

Bidding Wars. It's the FIFA World Cup of the real estate world. Several teams play in the competition, but there can only be one winner. It can be a crazy game with plot twists and surprises, or it can play out as every one expects. Of course, most transactions do not involve a bidding war. So don't expect one every time you set out to buy or sell a property. Still, 2015 so far is proving to hold many more bidding wars than last year, and in areas that did not have them before.

Up until recently most bidding wars were predominantly found in downtown neighbourhoods in the old city of Toronto (pre-amalgamation), and it pricier parts of North York. Many advanced emerging neighbourhoods draw in quite a few bidding wars when they are well located, well staged, well marketed and well priced properties. Since houses, as opposed to condos, are in low supply in Toronto, that is where most of the bidding wars have been, and will likely remain.

Some neighbourhoods are more prone to them than others. And some price ranges are more prone to bidding wars than others. A property in Leslieville, Roncesvalles, Trinity Bellwood or the Junction Triangle will likely bring in a higher number of bidding wars.

I should be clear that a neighbourhood that has more bidding wars does not necessarily mean the properties are more valuable. It means that some neighbourhoods have a more prevalent culture of bidding wars over others. Some neighbourhoods seem to expect bidding wars. Other neighbourhoods, such a Cabbagetown, you'll find the list price higher, but the difference between list price and sale price to be much smaller than in neighbouring Riverdale. Why is that? Are houses less valuable in Cabbagetown? Well, not at all. Buyers expect a more realistic list price in Cabbagetown than in Riverdale. It's just a different way of doing things.

The bidding war culture is spreading though. I'm seeing it in areas of north of the 401 that did not have them last year. I am hearing about them as far off as Durham Region. I am also seeing a few bidding wars with condos, though this is still much less common than with houses. Bidding wars were much more common ten years ago with condos, but have slowed down with the growing supply. This past year, however, does show that condos are increasing their level of bidding wars. I think it speaks to an increase in the demand for condos, particularly ones that are distinct and well-located.

Bidding wars are also a result of price point. A home for sale for $3,000,000 will draw in fewer buyers than a home for $600,000 (that will net a lot more buyers simply because there are very few people who can afford a $3,000,000 home).

The rise of bidding wars can also be blamed on real estate sales people. Yes, people like me. Some believe that bidding wars are a good way to reveal the best price for a given property. It's almost like a blind auction where the home goes to the highest bidder. It is a strategy that can yield great results for sellers. Of course, some agents price their properties so low  that they receive 20 plus offer, which I believe is a waste of time for buyers and their agents. Some agent like to pad their stats. So,  if they sell $350K over asking they can be talked about in the Toronto Star or use these stats in their next listing presentation. They can brag that are the reason that their sellers have received hundreds of thousands over the asking price when the reality is that the listing agent has priced the property far too low.

Not all properties that sell well over asking are a result of an agent listing low. Sometimes you can have a change in the market where one house makes a leap ahead of the other. It is the best home put on the market that week, and buyers flock to that particular property. But lets temper our expectations, sellers.  To have a competitive house there is a lot at play. Yes, it has to do with location, but also your marketing plan, and how your house is laid out and staged.  Not all houses are sold in bidding wars, and that's not a bad thing! Other strategies work too.

Buyers, don't let your ears hang low like a dog because of your fear or disappointment with the bidding war culture. There are strategies to buying as well. If you want to live in a certain neighbourhood, you'll have to be competitive, but if you don't have time, the stomach or the money, there are other ways too.

What Are Toronto's Best Established Neighbourhoods?

With a blog called Emerging TO, it's not very surprising that I go on A LOT about emerging neighbourhoods. But as we all know, not all neighbourhoods are emerging. Some will likely never emerge while others have already developed into established neighbourhoods.

Established neighbourhoods are ones where the schools are often top notch, and the homes have been tarted up inside and out. Often the age demographic can lean a little to the older side of Toronto's demographics. Many residents bought way back when prices were more reasonable, or they have had the opportunity to make more money in their first house or condo from another neighbourhood to purchase a move-up house in an established one.

Whether you’re younger or older, there are a lot of reasons to choose an established neighbourhood. Emerging neighbourhoods are great from an investment perspective - buy low and sell later when the neighbourhood becomes more desirable. Some of us, however, do not always think of a house as a mere investment, but as a place to live. If you have children, sometimes it isn't wise to wait for a neighbourhood to improve. You may need the good schools ASAP. So, if you can swing it, it may well be worth your while to invest in an established neighbourhood. And if you buy an investment property, you will certainly pull in higher rents. Established neighbourhoods are rarely the part of town where you are going to land a house at a discount price, but they are amazing places to live.  You will be happy there.

If you are buying a condo, the same rules apply. Price-wise, it will be easier to get into an established neighbourhood with a condo, but if you compare condos in an emerging hood to an established one, the price per square foot will certainly be lower in the emerging one.

The rules of buying in an established neighbourhood are different from buying in an emerging one, though with both, you want to keep an eye on the commercial strip. In many established neighbourhoods, the commercial main street may fall victim to what I call "The Established Hood Curse". This is when a successful neighbourhood falls victim to its own success. At one point, new businesses had rushed to get into the neighbourhood to open on the growing commercial strip. Soon after, the landlords noticed how in-demand the area has become. So, they jack up the rents. The small businesses can't afford to stay, and the landlords get too greedy. So, the local flavour is lost and more chain stores with deep pockets move in. New and innovative businesses that keep the neighbourhood interesting won't come here because of the rents. Some stores even close down in expensive neighbourhoods only to open up again in emerging ones down the street. Such is the case in the Beach. Don't get me wrong, it's a great place to live. The houses are in beautiful neighbourhoods, the beach is right there, but the commercial strip has become a little blah.

Other established neighbourhoods that are losing their lustre are the ones located far from downtown. At one point, if you had money, you wouldn't live downtown, but a respectable drive from it.  Our city has changed quite a bit since this point in time. We are moving in a direction where the closer you live to downtown, the more your property will likely be worth. The more affordable home you desire, the further you have to go out. In the future, this will only become more true.  So, rich suburbs will stay rich, but with increased traffic, it will not be the pleasant drive home it used to be.

So which established hoods are best? There are many. Some just stand out a little more than others. So, if you are going to buy in an establish neighbourhood, here is where you should consider:

1. Roncesvalles - You can't lose here. You're by the largest and best park in the city, and the main street has not suffered from the "Established Hood Curse" The commercial strip is thriving. It suffered a little when Roncesvalles was having the new streetcar tracks put in, but it’s back with a vengeance.

2. Cabbagetown - Some of the best Victorian architecture in the city is right here in the neighbourhood, and the residents have done an outstanding job of keeping the area looking good.  Parliament Street has been a work in progress, but it is getting better. They have Riverdale Farm, and it's close to downtown.

3. Little Italy and Trinity Bellwoods - This established neighbourhood has not lost its cool factor. College Street and Queen West are two of the most walkable and eclectic streets in the city.  Your houses will likely not be as huge here, but you will be part of one of the most distinct neighbourhoods in Canada.

Not all established neighbourhoods are created equal.  It's important to pick wisely. Sure, they make for big mortgages, but if you have the money or you are looking at purchasing your next home, then treat yourself to a neighbourhood where you can flourish.

The Spillover Effect: How To House Hunt Better

People trust their guts. And for the most part, guts tell people the right things to keep them out of trouble or intuitively lead them to the right decision.

When it comes to buying real estate, it's not always wise to trust your guts - at least not all the time. For example, guts can fall hard for a house that is staged well. They love a dream kitchen, beautiful lighting, edgy, yet tasteful art, and a backyard spilling over with colourful flowers, carefully placed shrubs and and a puppy sleeping by some garden gnomes. 

Guts can also really fall for a neighbourhood. With certain clients, if I drive through an established or some emerging areas with the right buzz on the nearby commercial strip, their guts start responding to the right mix of indie coffee shops, yoga studios and hip restaurants.  An appealing neighbourhood could set off the dream to want to live here. Clients imagine walking down the streets. They time how long it would take to drive to work or walk to the transit stop. They get hooked. 

Some neighbourhoods just sell themselves.  In Toronto, people's guts love Roncesvalles, Little Italy, Cabbagetown, and more recently the Junction, Leslieville and Wychwood. 

If  you can afford to buy in these neighbourhoods, then go to town. They're great! In fact I live in one of them and am quite happy here.  Competition is currently stiff for a great house in a great neighbourhood. If those are the kind of homes you like, then there's a good chance a lot of others will as well. So, there will be a lot of offers and you'll have to have the best one.   If you're the kind of buyer who is on your second home after building a lot of equity in your first house, then you will likely have the deeper pockets to live in some of the great hoods listed above. If you have the sizeable down payment and you can do it! Get in there.

If you are on your first place or are moving to Toronto from a place that is less expensive, you are going to have to look at things differently. If the numbers just don't add up for you to live in a great house in a great neighbourhood, you'll need to dial down the guts and  put on some potential goggles instead. 

Don't give up on your guts all together. At the start of your search, they can be quite helpful.  So, let your guts lead you to the neighbourhood you want to live in. Maybe it's the Annex or maybe it's High Park. Then ask your brain if you can afford it. If not, look at the neighbourhood right next to it. Because, chances are, the people who cannot get into the richer neighbourhood will live next to it, and these emerging neighbourhood transform fairly fast. 

Let me give you a few examples. Let's say you like the Annex. You want to live there. But it's your first house and you can't quite cover it. So, you go a little north to Wychwood. Ten years ago, Wychwood was actually quite a reasonable neighbourhood to look for some first-time buyers, but these days, this neighbourhood has developed a remarkable community with the Wychwood Barns as a centre piece plus better businesses have popped up along St. Clair. So, if you can't afford Wychwood, go north of St. Clair to Oakwood, and you have the same beautiful homes without the same level of reno. Already, I am seeing the desire to live here going up. Next it will be north of Rogers Road. Any way you slice it, it would be a good investment to be in the next spillover neighbourhood.

Now let's do one in the east. Homeowners love Riverdale. And if you can afford to live there, I suspect you will be very happy. Great location. Transit is a dream, and the Danforth has everything you need. If you can't quite deal with the typical million plus price tag, then you move over to the Danforth Village just west of it. The homes are much more humble here, for the most part, but the prices are better. The thing is, this neighbourhood is now becoming the terrain of bidding wars for many first-time buyers. So, then skip to the next one if you cannot afford it. I would suggest going over the Victoria Park border and into Scarborough. Yes, I said it. Scarborough. It's undervalued and you can get a lot more home there than even the Danforth Village, and with less money.  As each neighbourhood grows in value, it helps out the one next to it. 

To be clear, I'm not suggesting you move to a horrible neighbourhood and wait for it to turn around. That's a bad strategy. I'm also not saying that all neighbourhoods next door to great ones will be good investments.  You do need a real estate salesperson who understands the city to help out here. 

For those first time buyers or those looking for more house for less money, you have to cross the metaphoric tracks. You need to look at the neighbourhood beside the crazy bidding wars. Because once those bidders in those crazy bidding wars become exhausted or tired of competing, they are going to look nearby. And over enough time, that will be the new place for bidding wars and rapidly rising prices. Hopefully, after you have purchased there.

Of course, if you have to live in a walkable neighbourhood near good transit, your gym, your favourite eatery and cafe, then you have plenty of condo options.  In many great neighbourhoods, some condos are more affordable. With condos, you really need to do your homework on a given building too. If it's a house you really want, just make sure your guts are not the only thing calling the shots. 

Toronto Real Estate Predictions of 2014

As a kid I had an obsession about how the future was going to look in the year 2000, at which point I would be 30 years old. Young me saw myself as an old fart by that date, but life was going to be worry-free and dazzlingly different. There was a book at my primary school library that had a 3 month waiting list about what the future would look like in 10 years, then 20, then 30 years. It was intoxicating! According to my chosen literature, we should all be flying around in our Jetson-style cars. Work, as we know it, would all be done by robots while we sat around drinking Tab Cola, and we would be able to control the weather under our domed cities. As you can see, this book had less to do with realistic scientific advancements, and more to do with marketing books to the fantasy lives of 9 year old boys. I guess the big takeaway lesson here is to keep your predictions of the future a little more grounded in reality, and keep it to less than 30 years.

 Still,  I can't resist making a few of my own predictions for Toronto real estate in 2014. I don't believe we'll be flying around in our cars this year, but I do see some changes on the horizon.

So here is my thoughts on how 2014 will roll out in Toronto real estate:

1. PRICES WILL GO UP  Not everywhere. And not as much as in 2013.  Price appreciation will be neighbourhood specific, and the kind of property you buy will be key. Houses will rule supreme with continued bidding wars, especially in desirable and emerging neighbourhoods. Certain condos will also rise in price, but not by leaps and bounds. Some condos will sag in price or even level out. It's simple supply and demand. Very little supply of houses means more demand. Many more condos means less demand. The key with condos is to be in right neighbourhood and the right building.

2. IT'S THE YEAR OF RECKONING FOR NEW TORONTO CONDOS. The year the most Toronto condos were ever sold in pre-construction was 2011. Many of these are coming to market this year. There are closer to 20,000 units slated to be completed in 2014. So this will be the year to watch to see what happens with all of these condos. Can they be absorbed? I think so. And really, I find that new builds were too expensive compared to resale condos for many years now. So, it's about time that we are a bit more realistic about the price of new construction. Developers will continue to offer appealing incentives like free parking or lockers or a year of free maintenance fees to sweeten the deal without officially lowering the price of the condo while still lowering your purchasing costs. By 2016, the ample supply of units will begin to dwindle. So, those incentives won't stick around forever...

3. INVESTORS WILL LOOK TO GREENER PASTURES. When the financial crisis happened in 2008, it seemed that Canada was one of the very few countries that didn't have their real estate market crash. So, many folks from abroad who grew weary of the stock market and their own country's real estate market, came here to invest in real estate. Canada makes it relatively easy for foreign purchasers to invest in our country. So, foreign investment became a big deal in Canada. Nowadays, the deals are better in the U.S. cities where prices are starting to rebound after their huge slump. So, there will be far fewer investors and more buyers who actually live in the properties they purchase in 2014. This is a good thing. Though every condo has its fair share of owners who rent out their condo, it's good to have a healthy number of owners who live on the premises. They can participate on the condo board and be involved with the running of their building. It makes for a stronger board and well-maintained maintenance fees.

4. HOT HOODS OF 2014. In the east, the dismal portions of Leslieville's Gerrard will start to really take flight as businesses find the trendy Queen East sections too pricey and set up shop a few blocks away where the rents are much cheaper. Corktown will rise like a Phoenix with is excellent location, great urban planning and all the work for the Pan Am Games to be completed in the next year and a half. It's still a great place to invest and live. The Distillery will also benefit from all the PanAm Games preparations. In the West, the Junction and the Junction Triangle will continue to push up its cool factor even more as it moves from hippie outpost to hipster centre. In terms of downtown, the south core, in general, will become much more interesting than the north core of the city, as businesses and commercial demand shifts back from the suburbs with a stronger emphasis on the south city core. Cabbagetown's main street on Parliament will continue to improve particularly with the success of the Daniels condos that were once in the Regent Park area. With the continuation of this project, Cabbagetown will grow more solid as an established neighbourhood and Regent Park will shake its stigma after 50 years.

5. WHERE THE DEALS WILL BE. Emerging neighbourhoods will continue to be the best place for investment. In the west, I feel south Etobicoke is largely still undervalued, especially parts of Long Branch. Caledonia/Fairbanks and Weston are poised to be the next hot spots, but 2014 will only be the early stages of this. North of St, Clair in Oakwood-Vaughan, the success of Wychwood is starting to push into this neighbourhood with its massive houses. The east will have some deals in the Danforth Village, Woodbine-Lumsden and Crescentown, but, for the brave, the deals will be pushing into Scarborough. Pick your 'hood wisely here. Best Scarborough neighbourhoods border the old city of Toronto/East York or the lake, but you can find some great homes along the ravines or in areas like L'Amoreaux. Hamilton will continue to be your best investment out of the city with continuing price appreciations that made Toronto blush last year.

Okay, there you have it. My humble thoughts for the next year. Hopefully they will pan out a little better than the Future Predicting book of my youth.

The Financial Benefits of Happy Neighbours

Last week, I was staging a  house I had coming to the market. When I was done, I stepped outside to see about 20 neighbours waiting for me. As I walked passed them en route to my car, they closed in around me like a swarm of zombies. As most people know, it's not unusual to have nosy neighbours. If I was not working in real estate myself, I would be curious to know what my neighbour's house was selling for.  It's a natural state to be curious.  These particular neighbours asked the usual questions about prices on their street, but what I was noticing about them: They were a very united and diverse group who all seem to be buddies. It wasn't like some burbs where all the people with kids live in this area and all the people who are old live in that area. They were a mix of young and old, parents of kids and parents of dogs, singles and couples, the tres cool and the uncool.

Now, don't worry...This isn't a riff on how diverse Toronto can be, but I warn you that it does have a warm and fuzzy feel, with a financial benefit.

For me, it is very important to have a sense of community where you live, whether it's a condo building or a street that you bought your house.  I believe that a community needs to have a healthy mix of many kinds of Torontonians.

The listing I had coming up was in Cabbagetown.  It's in an established neighbourhood where walking down the street on a warm day can be a pleasure.  You have a great local butcher, long-time local pet store, and a diverse population. Plus, it's quiet and green. People take care of their properties. You know you are getting a ready-made community with a walkable main street nearby.

Emerging neighbourhoods are different from established ones like Cabbagetown. They are still forming. So in an emerging area like the Junction, you have the excitement of being one of the makers of a community. There's a group there now trying to turn an old police station into a community space for every one in the neighbourhood. In recent years, The Junction residents have formed a farmer's market and a flea market. This particular flea market was recently mentioned in Toronto Life as one of those things that makes Toronto so great.

But maybe you are not one who really wants to take part in the community, wherever it is. You may cower in fear at being invited to a neighbourhood potluck. And that's fine. But if you consider your big investment, a good community makes for a desired location, and an increase in the value of you home.

Buyers who are not as familiar with Toronto or a certain area want to feel welcome, and if they see nice neighbourly things happening, they will more likely want to buy there, even if they are not the friendly type themselves. They often carry around a certain amount of anxiety, and a little happy puts them at ease, and leaves them with a good feeling when they go home to consider what to buy. Even on the elevator ride up to a condo unit, you can get a sense of your neighbourhood. Happy condo people usually say hello or smile. Otherwise, no eye contact can make you feel like you're in a crabby office building.

I can say that those buildings or neighbourhoods that lack community involvement and are not near a vibrant main street where locals can bump into the locals, don't sell as easily.

Basically, there's really no way you can lose with a cohesive, well-mixed and involved community. If you are the neighbourly sort, then you will be happy in an area or building where things are happening and people are interacting. And if you would prefer to keep to yourself, then you can, and just reap the benefits of your neighbours doing neighbourly things. The better and stronger and more diverse your community, the better resale value for your house and condo.

Busy Streets: How to Pick the Ones Where You Can Live

I had an open house this weekend for one of those listings that packed a lot of wow when you came through the front door. The owner had great taste and made all the right renos - the granite counters, the spa washrooms, loads of lights, plus the whole main floor was opened up.  It looked like a humble townhouse from the outside, but once you came through the door...Shazam! No one was disappointed.

The only negative I heard all week was that this particular home was on a busy street. Fair enough. Some people just don't like busy streets. Can't say I'm a big fan myself, BUT not all busy streets are considered equal. In fact, you should be very careful when selecting your new home depending on what kind of noise your busy street makes.

Here are the things you may not want to get too worked up over:

1. Traffic - That's right traffic. It's the reason the street is busy.  Sure, cars can be noisy, but with most busy streets, it's done by the time rush hour is wrapped up. By the time you get to bed, most busy streets are much tamer. And you will sleep just fine.

2. Residential busy streets. Residential busy streets have less business customers and traffic on them at night when you are sleeping. The residents of the busy street want to sleep too. So, the noise you will hear is the sound of traffic passing through. If the cars stop, then it gets noisier. If the car passes by, it's just a swoosh in the night.

3. Busy streets with certain commercial properties. Okay living near popular restaurants or bars can be a nightmare, but if you live near a lawyer's office or a store that sells fabric, you're not going to suffer too much noise. Again, if the car doesn't stop, you are in luck in terms of the noise factor.

Things to worry about:

1. Public Transit - Enemy #1. If there is a lot of public transit on the street, it will be noisier. Buses stop and grunt and discharge. Streetcars can be okay unless they have to turn.  Because if they do, get ready for some thing that make nails on a chalkboard seem like a treat.

2. Honkers. I don't know why but some streets attract a lot more honkers. You really have to spend a bit of time at an intersection at rush hour to know how bad it gets on certain streets. Some busy streets have them. Some do not.

3. Fear the humans. It's not the driver who is on his or her way home at midnight that is going to wake you up in your sleep. It's screeching laughter, loud-talking drunks and general merriment that will keep you up. They're having a good time, but you've just been woken up. Mild traffic is just the sound of the city. Sudden noises is the stuff that jolts you outta bed. So watch out for human traffic. That's the kind you want to avoid.

Luckily, for my listing this weekend, at the corner of Gerrard and River, it isn't so bad. The house was build well enough that you couldn't really hear the traffic once you were inside. By the time you made it to the backyard, you would have no idea that you were not living on a quiet street.

Are All Heritage Homes Worth Preserving?

Toronto likes to take pride in its historical heritage. Cabbagetown, for example, boasts "the largest continuous area of preserved Victorian housing in all of North America". The Distillery District takes the claim of "the largest collection of Victorian architecture in North America." 

So, you would think that Toronto's preservation efforts have been a smashing success.  But the truth is heritage preservation is a relatively new thing for this city. And really, no one really started caring about preserving much in Toronto until about the 1970s. Before then, it was out with the old and in with the new. Highways ruled supreme and no one had any idea who Jane Jacobs was.  Cabbagetown and the Distillery District were largely feral before the 1970s. So, they were just flat-out ignored. And strangely, that may have been the recipe to their current success. 

Nowadays, things are very different. Cabbagetown has one of the most notorious and rabid heritage preservation group in the city. This group deservers their credit. I mean, Cabbagetown homes are a joy to look at. Of course, this group has also been known to be on fussy side. I have heard they (and the City) blocked some pretty exciting modern-design ideas because they didn't look like the Victorian houses around them. 

One of the latest Cabbagetown crusades has to do with the Toronto Community Housing Corp (TCHC) and all of the public housing they own in Cabbagetown. Before Cabbagetown transformed into its bastion of Victorian preservation, it was not exactly the best part of town. The city owned a great deal of the houses as public housing. Nowadays, this collection of City-owned houses, sprinkled in between all the reno'd Victorians, do stand out because they are essentially falling apart inside and out. And to fix them, especially to blend in nicely with their tarted-up Victorian counter-parts, would require a substantial pile of cash.  And we all know that the City does not have any money to fix them. Still, the locals are leaning on them to make sure that fixing them is a priority. Even without local pressure, it sure seems that these homes are in need of some attention if they are going to remain upright. 

What surprises me is that the focus seems to be around the City providing an influx of money to upgrade these houses that are verging on substandard or have already passed that point. But I have a better idea. Sell em! Now, I know that doesn't sound terribly surprising coming from a real estate salesperson, but I think doing so would benefit everyone. The buyers would likely be some one who wants in Cabbagetown to renovate and upgrade a house to their own liking, making the heritage group happy. The City saves money. In fact, it would make money off the sale of the house. Because there is a public housing shortage, the City can use this money to build more high-density or mixed-use housing for those who need public housing. A low-density house in Cabbagetown, or any where else for that matter,  is not exactly a cost-effective way to provide public housing, especially in a bastion of historic preservation. Let's face it, preservation looks great, but it ain't cheap.