What Momentum Does to an Emerging Neighbourhood

Sometimes it's tough to consider a neighbourhood "emerging" when the average detached home in some classic Toronto emerging neigbhourhoods clear a million dollars in sales. Emerging neighbourhoods have traditionally been the terrain of first time buyers and investors. The thing is, the emerging neighbourhoods of years past have now become more that just emerging neighbourhoods. They have become established neighbourhoods with some serious draw to them. It is where the demand can be very strong, particularly if you are buying a house. They are no longer areas on the fringe that offer inexpensive prices at a reasonable cost. They are destinations where buyers are clamoring to get in.

Once upon a time, the middle and upper middle class largely lived in North or Midtown Toronto, north of Eglinton where there was less social housing, less rental units, and less diversity in the population. There were a few neighbourhoods that were still appealing to some. Back in the 70s and early 80s, High Park was considered quite middle class, though likely more artsie and hippie. Roncesvalles used to have its own Birkenstock store after all. Same goes with the Annex and the Danforth. A little more artsie and distinctive.

Nowadays, you have to be making a lot of dough or inheriting a lot of money to buy in central High Park and the Annex. Don't get me wrong. There are always deals to be had, but they are few and far between, and usually require a reno in these neighbhourhoods.

And it's not just in these neighbourhoods. A lot of interest has shifted to the south core of Toronto (south of Eglinton) in the last twenty years. King West, Queen West, Trinity Bellwoods, the Junction, the Junction Triangle, Riverside, Leslieville Corktown, and Parkdale all draw in their share of interest. The good restaurants, the exciting condos are often below Eglinton between the Junction and Leslieville. Neighbourhoods like Leslieville may still seem a little rough around the edges in a few spots, but don't be fooled that this is an inexpensive place to buy. It's no Leaside in terms of the prices, but it has become a desired neighbourhood in which to live. Those young families have attracted more families creating better schools and engaged parents. Well-invested and aging parents move closer to their adult kids in Leslieville because of the walkability of the whole place. There are amazing places to go here. Not just Subway and Tim Horton's but a Circus School for your kids, an indie coffee shop an every corner, and some of the best bakeries in the city.

To be clear, this post is not here to make the buyers of Toronto feel sad or hopeless. You shouldn't be. This should be an inspiration to you. If you don't have a good mortgage and a healthy down payment, you may find it hard to live in Leslieville, but you can live in a future Leslieville. It doesn't look like Leslieville now, but it may some day. Danforth Village is still filling up. The west end between St. Clair and Dufferin is ready for its next shift. And if you're really looking for a bargain, head out to Hamilton. Yes, that city is on the rise, and the momentum is building. Look for the potential, not just the end product. The nice shops and the better schools will come. Momentum is a hard thing to stop.

Your Future Awaits! Sorting Out The Real Estate Predictions of 2015

By nature, predictions are whimsical. That's why many of them are wrong. The real estate predictions of 2015 that I have come across are often a mix of doomsday scenarios and rosy outlooks, like every year for the past decade. So, let me filter these predictions, analyze them for you and offer a few thoughts of my own for Toronto real estate in 2015.

Let me start by saying what is a little different in the predictions for this year. Generally, they are fewer of them that are alarmist than in the past. Yes, we are hearing that prices can fall by 15% according to RBC, and yes we have someone named Hilliard MacBeth, an Albertan based porfilio manager who wrote a book entitled When the Bubble Bursts: Surviving the Canadian Real Estate Crash, calling for a nasty downturn in Canadian real estate. She predicts that house prices will fall 50%. Ouch. This may sound scary, but keep in mind that a book like this comes out almost every year. Why? Because these books sell! Think of Garth Turner in 2008 who wrote The Greater Fool: The Troubled Future of Real Estate calling for a 30% drop in Canadian real estate that year and more to follow in the subsequent years.

Even though we have some negative predictions this year, there are  fewer doomsday predictions than in previous years. I have a feeling that the public may be suffering from what I call "CLF" or Chicken Little Fatigue after years of hearing the sky is falling in real estate.  I suppose at some point, someone will be right. Some Canadian cities will have a slip in real estate prices, but not this year in Toronto.

All in all, I find all predictions a little more cautious for 2015. There will be smaller gains, but gains nonetheless. That seems to be the general consensus. Price appreciation but not as much as 2014.

The focus of the 2015 predictions has been largely around interest rates. As the American economy improves, many believe the Americans will start raising their interest rates, and in turn, Canada will raise their rates as well. Most predictions I have read point to the forth quarter for such things to happen. Some worry that the rise in interest rates will effect the housing market. I agree, it will slow it down. Others, however, think the interest rate hike will be the straw that broke the camel's back for the indebted Canadian, leading to a downturn in the real estate market. I don't believe it will cause the real estate market to crash, but it may put the breaks on some very big price increases that have happened over the past few years. I imagine if the rising interest rates start to effect the housing market too negatively, the government will put the breaks on the increases or even reverse them. Housing has become too big of an industry to just let slip.

From a more localized,  more Toronto-centric perspective, some of the trends that have been happening the past few years will become more pronounced in 2015. The low supply of houses and townhomes will remain in great demand since very few of them are built any longer, and the demand continues to increase as the city and region grows. Houses will increase in value at a much faster pace than condos.  Small boutique style condos in improving or established areas will generally perform better than giant condos. The dream of owning a house will still be affordable for some first-time buyers in the right emerging neighbourhood, though condos will increasingly be the terrain of first time buyers were the prices are more reasonable and the supply of new condos keep growing as the city grows.

For those who want a house with a smaller price tag, house hunters will turn to second tier cities like Hamilton where detached houses with a yard are comparable to the price of a one bedroom and even a bachelor condo in Toronto. Access from Hamilton to Toronto will continue to improve. Hamilton will be a good choice for many who love the urban lifestyle. It is still a city of 500, 000 people. Unlike Mississauga or Brampton or Oshawa or any other Toronto suburb, Hamilton does not suffer from suburban sprawl or a dominant suburban culture. Its downtown is coming back after decades of decline. This phenomenon is not exclusive to Toronto. Such migration to second tier cities is happening all over North American. In San Francisco, many house hunters head toward Oakland. Expensive cities like New York or Chicago have triggered some middle class folk who want more space to head to Austin, Denver, Nashville or Charlotte. The thing about Hamilton is that it is close to Toronto and the new GO station will link up quite nicely. So, you can have your Toronto job or social life, and live in Hamilton. Commuting time is required though.

In terms of Toronto neighbourhoods, we will continue to see some of the advanced emerging neighbourhoods steal some of the sparkle from the more estalblished neighbourhoods. The general shift of wealth from duller north Toronto to the more vibrant south destinations will continue. The cool quarters will continue to attract more demand. Roncesvalles, the Junction, Leslieville, West Queen West and Brockton will continue their quick ascent. Danforth Village will continue to draw in many first time buyers, though not all houses will be in the first-time buyer price range in this neighbourhood in 2015. Areas along the Eglinton Crossway that is currently under construction will be a good bet for a long term investment. This includes Mount Dennis, a neighbourhood with some of the lowest prices in Toronto. Mount Dennis even has its own indie coffee shop opened in 2014! And that's always a good sign for a burgeoning community hub. Like last year, bargain hunters will see the western flank of Scarborough that borders Toronto begin to take off.  Corktown and the Distillery District will really start to shine as all the construction wraps up and the Pan Am Games begin. This may be one of the top spots to buy a condo this year and next. It is a well planned area with a lot of amenities near by. High Park, Leslieville and the Junction Triangle are all places where condos have not been overbuilt and fit in nicely with the neighbourhood.

All in all, it appears it will be a tame year. Of course, anything can happen! No one called for the price appreciation we saw in Toronto houses and a healthy condo market in 2014. 2015 could be just as surprising.

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.

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.

First-Time Buyer Blues: Don't Be Glum. Be Smart!

I conducted an open house this weekend for a comfy three bedroom house in Toronto that is priced under $500,000 with no parking. It was a cute place, in a part of the city that is improving. Not a bad area, but not a well-serviced one yet. Because I was under that magical $500K mark, there were many, many first-time buyers lining up to see the house. It was packed.

The thing is, I have never seen such a sad bunch of dejected buyers for quite some time. They were zombies,  marching through one open house after another with a visible sense of hopelessness. They have become aware of how competitive it is to buy a Toronto house in the starter home range so far in 2014. Bidding wars are expected.

Like a therapist, I listened to their tales of woe. Many of them have shared experience, and have drifted down the same path. They live downtown or in a nice Toronto neighbhourood in a pleasant rental unit. They thought: "Hey, how about I buy a house instead of renting an apartment?" I think it's a good idea. Why not build some equity to pay down your own mortgage instead of paying down your landlord's mortgage?  The thing is, they often rent in very central neighbourhoods like downtown, Trinity-Bellwood or Little Italy. At first, when they begin their house search, they check out house prices in the neighbourhood they live and realize it's not really affordable. Often, they then seek out an advanced emerging neighbourhood like the Junction or Leslieville. Yes, it's a little less central, but they are groovy hoods that are clearly on the upswing, already stocked with the obligatory hip coffee shops, Toronto Life-featured restaurants and all the yoga you can stretch out of your body. Some first-time buyers, who can afford certain emerging neighbourhoods, will look to the Danforth Village, and the Junction Triangle - but even these hoods have become highly competitive. If you're looking to buy a house under $500K, you may need to revisit your approach.

With all that said, it is easy to see why the first-time buyers become down. They are used to renting in a great neighbhourhood where they can spill out of their home and have a pleasant Spring walk to their local butcher or their favourite vegan bakery. The truth is, if you are looking for a house for under $500K, that can be tough, if not impossible. So, they wait for the market to change. The truth is, I don't believe any of the neighbourhoods listed above are going to become affordable any time soon. Even if we have a slow down in the housing market, there is still a shortage of houses in the city. Because of the province’s Places To Grow policies, all new construction is overwhelming high density. No more new houses are being built.

So, if you have a budget of under $500K and you cannot sink yourself  into bidding wars, you need to have a plan, and a little vision.  Here are some tips I think may get you to where you want to be:

1. Forget the House. Maybe you never lived in a condo before. Maybe the thought of them makes your skin crawl, but the truth is, you can find a great condo in a central area for a budget under $500K. Maybe you hate high-rises? No problem. Low rises and condo town homes are great investments. You can find them all over the city in your price range. That way, you can have a neighbourhood  a short walk to the nearest subway. You can linger at the espresso bar down the street before work or hit up the gym on your return.  And if you need a little outdoor space, you pick one with a rooftop deck and a bbq. Easy Peasy.

2. Save or Make More Money. This is a risky option. In the past five years, any one saving money has probably lost out. During that five years, the amount put aside likely wouldn't be enough to cover a home's price appreciation during that same time. Houses, in my estimation, will continue to rise in value. Still, if you can find a way to increase the amount you can qualify for, it will lead to more options. Also, if you have a larger down payment, you can afford a higher price point.  Maybe you are on the verge of a giant promotion or you have some family money coming your way. That may change your options. 

3. Pick An Emerging Neighbourhood That's Just Starting to Turn Around. So maybe as a first time buyer with a budget of $500K you want a house, and and condo won't do. You have to have a yard, and you just don't want to pay maintenance fees. Fair enough. Then you need to be a bit of a visionary here.   Forget about the all-star neighbourhoods. 10 years ago, Leslieville was the dumpy nowhere land between Riverdale and the Beach. Tumbleweeds would roll Queen East at night because there was nothing going on and no one was around.  You need to pick the next Leslieville.  In the east, there are still a few opportunities in the Danforth Village, though I suspect those days are numbered. You need to look to the neighbourhoods next to the ones exploding in price. In the east, you may want to consider Scarborough. It's one of the most undervalued parts of the city. In the west, you may want to try north of St. Clair in the Caledonia, Fairbanks, Keelesdale, Earlscourt and Corso Italia neighbourhoods. Sure the hip factor is not there yet, but it's coming. If you want the lower price, you have to get there before things change. For even lower prices, there is Mount Dennis and Weston. Yes, Weston is further away and hard to get to, but there is a GO station straight to downtown soon and I believe there is even a subway link in the works for Weston to the new Eglinton station.  These neighbourhoods can be the Riverdale and Roncesvalles of tomorrow. Get in now.

So first time buyers with a  budget under $500K, don't be so glum if you want to buy a house. You just need to tweak your dreams a little. If you just can't leave downtown, then get a condo. If you just have to have a house, then you need to go a little further afield. I know it will feel strange living in an area you may have never even visited. I've done it in Leslieville 2004! In time, though, you can make that area your home. Hopefully, with the other first-time buyers moving out there, the restaurants, the daycare, the cafe with the great patio will be right behind you.