Can the Magic of Little Italy Strike Twice?

You have to love Italy. Sure, they messed up with Benito Mussilini, but wow, they sure know to make a meal and play (or cheer on) an outstanding soccer game.

It seems that wherever larger city you visit in North America,  you'll find a successful and bustling neighbourhood called "Little Italy".  It will be lined with busy restaurants,  though not always serving Italian food. It will be  surrounded by an established and impressive residential area, though not inhabited exclusively by Italians any longer. New York, Chicago, San Francisco - all have a thriving Little Italy. Just like here in Toronto.

So why is this Little Italy phenomenon such a success? Well, some of it has to do with timing. The first wave of Italian immigrants arrived in major North American cities at a time where the local mangiacakes were heading to the suburbs. When the Italians arrived, they were able to pick up real estate in areas of the city that were central and inexpensive at the time. Once they had a foothold in that area, the other Italian immigrants would follow them, and join their growing Italian community. They shared the same language, recipes and religion.

The second reason has to do with food. Italians make delicious food that appeals to almost everyone in the world. Italian food is almost a guaranteed success. People will travel to go to a good Italian restaurant. I would say that most restaurants in this city will default to an Italian cuisine because it is so universally beloved across most cultures.

So, it's not surprise that Toronto's Little Italy at College and Clinton is one of the most desirable neighbourhoods in this city to live if you want to be central and have great restaurants nearby.  Times have changed though.  I would say the majority of the Toronto residential population here is no longer Italian, though the commercial strip does have a strong Italian theme with many Italian restaurant options. (See this video for more on the first Little Italy)

But can the success of a Little Italy strike twice in the same city? Can there be two neighbourhoods with an Italian theme?

The short answer is yes, but the emerging neighbourhood named Corso Italia has some way to go before hitting the success of the first Little Italy. This neighbourhood runs along St. Clair from Lansdowne to just east of Dufferin. It is no College and Clinton. It is not as central, and does not have the strong Italian branding that Little Italy has had over the decades, but it does have a growing population of top notch Italian restaurants including some of the best pizza in the city. This strengthening commercial strip often attracts new homebuyers, whether they are Italian or not. The St. Clair streetcar has easy access to the Yonge line. So, it's not as far away as some people think.

In my opinion, Corso Italia and the bordering areas of Silverthorn to the north and Ealscourt to the west, are going to be neighbourhoods to watch for home price appreciation, especially when you consider the future Eglinton Crossway that will be going in to improve transit in the area. In my opinion, these neighbourhoods are a little undervalued right now and do need some improvements, but with the pressure on the houses we have continued to see in Toronto year after year, this is becoming the new frontier of new homebuyers who cannot afford a million dollar home closer to downtown. It is a neighbourhood that has already shown us some of the best price appreciations over the past year.

So, if you are looking for a house and you love Italian food (and Portuguese food too), then you may want to focus on the Toronto's other Little Italy for your search.

Toronto's Emerging Neighbourhoods 20 Years Ago

It's been almost 20 years since I moved to Toronto from Montreal, and I can confidently say one thing to Toronto: "You've changed". The changes have been huge.  In 1994, Toronto was not yet the amalgamated mega city it is today. Ford Nation was not our problem. We were a lot less dense with many more parking lots, and less traffic. Many of today's real estate investors look back fondly 20 years ago. Sure, rates were higher then, but housing prices had been in decline since 1989, and it may have been one of the best times to buy in our city.

As someone who is a little crazy about the best emerging neighbourhoods in which to invest, I can see that what was emerging back then became, for the most part, quite different neighbourhoods today. So what were the emerging neighbourhoods during the same year that Pulp Fiction was released, OJ Simpson was pursued in his Ford Bronco and  Celine Dion was Canada's top export? Where were the real estate risk takers heading to?

In 1994, when I arrived in Toronto, I rented an apartment on Shaw Street, just  north of Queen West. At the time, my landlord questioned his early 90s purchase of his Shaw Street house because it was so close to the CAMH, or as he called it,"the mental hospital". He was concerned the proximity to this institution would affect home values.

Queen West was still forming back then. There was some activity going on just west of Bathurst to Trinity Bellwood parks, but I still remember there were boarded up shops right across from Trinity Bellwood Park and discount hookers along Queen West. The Queen West coolness had not yet rolled into Trinity Bellwood, and most folks looking to buy property could find incredible discounts just west of Dufferin Street.

Little Italy was certainly an emerging neighbourhood in 1994. The College and Clinton intersection was considered Toronto's main hipster street, though, like Queen West, it was very cool just west of Bathurst, but started to become dull once you approached Ossington. Ossington was derelict and run by gangs. Still, if you were a first time buyer, this was probably the place you were going to get in.

One of the few places that has not changed all that much is Kensington Market. It has managed, for better or for worse to keep its collection of shops and small businesses. Sure, some of the businesses are different now, and maybe there are more restaurants in the mix, but the flavour of the neighbourhood is still the same.

In the east, the Danforth was where some of the entertainment artists and students lived. I remember seeing it for the first time in the opening of "Kids in the Hall". Apparently, many of the cast lived there before they became more well known.

In 1994, my sister lived in Roncesvalles, which was a little more hippie and emerging back then. I even recall a Burkenstock store, exclusively dedicated to the iconic hippie sandal. West of Roncesvalles was considered better. Discounts were available east of Roncesvalles.

Many of the successful emerging neighbourhoods of today like Leslieville were scary outposts, places that you had to travel through to get downtown from the Beaches, back when the Beaches were called the Beaches, and not the Beach.

If you wanted to buy a condo,  it was more of a lifestyle decision, rather than a financial one. It wasn't that they were the cheaper option to a house. There were a lot of cheap houses for sale back then. Condos were much fewer in number at this point. They were just easier to live in. No cutting the grass. No mowing the lawn. No replacing the roof. They were certainly made bigger than they are today.

In 1994, real estate was not hot. RRSPs were hot. Tech stocks were hot. Nowadays, many buyers lament: "Oh, why didn't we buy then? We could have bought a Victorian near Trinity Bellwood for $150,000!" And you know what? I'm not going to disagree. If I had a time machine, I would go back and buy myself a lot of Toronto real estate. That is, if they would accept my future currency.

Still, there is something to be learned from going back to Toronto of 20 years ago. Yesterday's scary or bland or too far-from-downtown neighbourhoods are the areas that will be coveted in 20 years. There's no promise of that, but if current trends continue as they are, Toronto will grow. Houses in the city and even in some of the old suburbs along with some condos in the right areas will be worth more some day.  You may not know where you will be in 20 years, but I'm pretty sure Toronto will change again. 2014's emerging neighbourhoods will be the solid neighbourhoods of 2034.

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. 

Can the Government Be Blamed for Toronto's High Housing Prices?

By now, many real estate professionals and enthusiasts have given us their two cents about the Perth Street property that received 32 offers and went for $208,725 over asking last week. It seems that we just can’t resist that "real estate gone wild" headline. Works every time. But why the huge offer over the asking price? Well, some real estate salespersons and watchers claim this Perth Street house was listed well under the market value. If the price was selected based on the sales of comparable homes in the neighbourhood, the difference between list price and the sale price may not have been so headline worthy. Still, there is no ignoring that 32 buyers have tried to buy this one house, and this lead to one solid fact: there are not enough houses for sale.

Part of this is seasonal. January does not usually bring a lot of new listings, but this low inventory of houses has been a chronic Toronto problem for quite awhile. So, the question becomes: Why are there so few houses available for sale in Toronto?

This is where I like to blame the government. Don't get me wrong. They're not all bad. They can take some credit for regulating the banks in a way the United States never did, avoiding a mortgage meltdown and a real estate crisis, and they have put in some policies that prevent people, who are not ready to buy property, from a costly mistake. Still, let's not get too smug in our Canadian ways because government policies often leads to the situation that Toronto is currently in with no houses to buy, but more buyers in a price range under one million. So, let's look how the buyers grew and the sellers shank in numbers due to government policies.

MORE BUYERS. Not too long ago, the Canadian government said the mortgage insurer, CHMC, would no longer insure properties over a million. It made sense. CHMC was taking on a lot of mortgage debt on behalf of Canadians and the government wanted to lighten their debt load. In Toronto, houses can easily exceed a million in many upper middle class neighbourhoods like Little Italy, Riverdale or High Park. Even if you think those neighbourhoods are too fancy for you, let me remind you that emerging neighbourhoods like Leslieville and the Junction can easily have homes reach the million dollar mark. And even then, you may be saying "I have no intention of buying a million dollar house. So, this doesn`t effect me." The truth is, this policy affects you too. 

Out of the buyers who want to buy a home worth a million dollars or more, some of them will not have the required 20% down to buy it. So, for those who cannot cover the 20%, they will be competing with everyone else who wants to buy a house under a million. At the end of the day, this makes the houses under a million more a lot more competitive.

LESS SELLERS. It's been a number of years now that the city of Toronto has begun asking for a land transfer tax when someone who lives in Toronto buys a property. Buyers used to only pay the Ontario land transfer tax until the city of Toronto needed more money. I understand that the city of Toronto needs a revenue source, but by creating a land transfer tax, the local government almost doubles what a buyer would pay in taxes if he or she bought a property. The municipal government has put a huge burden on those who want to sell their properties. Many first time buyers get a bit of a break on the land transfer tax. So, the burden is not as big for those buying for the first time around.

 If you sell, there's a good chance you'll purchase another property, whether it's a bigger place for your expanding needs or a smaller more manageable place. You'll still need the pay big dollars when you buy again. For example, a reasonable move-up house at $850,000 would mean $13,475 in Ontario Land Transfer Tax and $12,725 for Toronto Land Transfer Tax for a combined total of $26,200. That's a lot of money to hand over in addition to the cost of selling and moving and future renos. The result has been that people would rather stay put and not sell their home. Thus, we see the situations where there are less homes for sale.

I don't want to blame the government for everything, and I don't always disagree with some regulation of the real estate market. There are a lot of reasons why houses are becoming more and more expensive. They don't build many houses any more in Toronto. People want to live in the city again. The commute to the suburbs is too painful. I can go on. Still, whatever the reason you see, I'd say two things are clear to me. The government has created policies to cause house prices to rise, and this year, in most Toronto neighbourhoods, house prices will continue to rise because of limited listings hitting the market.