What Neighbourhoods Have the Best Price Appreciation?

In the spirits of the Olympics, I thought I would discuss something of a competitive nature. That is, I thought I would explore some recently compiled stats on homes in Toronto neighbourhoods and how they stack up against one another. These statistics were based on the sales from the Toronto Real Estate Board from January 2012 to January 2014 for detached homes. Out of the 36 Toronto districts, the top 5 districts were as follows:

1. C9: The Richie Rich (Rosedale and Moore Park)
2.  C2: The Centre of the Universe (including Annex, Wychwood, Yonge-St.Clair)
3. C1: Also the Centre of the Universe (including Niagara, Trinity-Bellwood, Dufferin Grove, Palmerston-Little Italy)
4. W02: Emerging Neighbourhood Emerging Fast (including the Junction Area, High Park North  Wallace-Emerson, and the Junction Triangle)
5. W03: Early Emerging Hoods Rising From Their Inexpensive Past (Rockliffe-Smythe, Keelesdale-Eglinton West, Westom-Pellam Park)

For a complete list of detached home sales in Toronto please click here for complete results.

Now lets look at the winners. Clearly the top spot speaks to the amount of money that is entering the high end market in the past two years. C09 had an increase of 115.63% in just two years.  I do find these stats to be a little questionable. I will discuss this below, but it does indicate that high end is back in Toronto. The centre of Toronto is still very strong showing us how much demand there is for detached houses in these neighbourhoods. C02 has a increase of 71.25% and C1 had an increase of 54.02%.

I think some emerging neighbourhoods really showed their growing value in past two years. A more advanced emerging neighbourhoods can be found in W02, that has increased by 51.69%. And for a place where houses have been remarkably inexpensive by Toronto standards, the early emerging neighbourhoods of W03 have increased by 40.61%.

Now all, this info may be a little overwhelming.These are remarkable increases. If you have bought in the top neighbourhoods, especially if it is a detached house, you will be thrilled. You may be crying over your keyboard if you wanted to buy in these areas but decided to wait a few years.

But before you get too smug in your foresight or crushed by your buyer position, let's look at these stats with a critical eye.

First of all, let's be clear that these are detached homes only.  Detached homes are king. Even if you want to live in a dense city like Toronto surrounded by people, Torontonians still covet the detached home. And these stats prove it. More than any other housing type, detached homes in this city have surged ahead in value. Detached homes across Toronto sell for a much higher average than other housing types, though semis, row houses and many low rises have also done well in the past few years. So, if you cannot afford detached, the other property types are still great investments that are appreciating in value as well.

Another pattern you can see from these stats: Emerging neighbourhoods, whether they are newly emerging or later in the cycle are good investments. Neighbourhood is still key to the success of a purchase whether it is a condo, a detached house or a town home. Pick wisely.

Despite what these stats may hint to us, I do tend to be fairly critical of them too, and for good reason. One of the fundamentals of gathering statistics is to have a large enough sample. If you don't have a large sample, your stats can show some pretty wild variation that may lead to a misrepresentation of a given neighbourhood. So, take Rosedale and Moore Park, for example. In the last year, there were less than 100 detached houses that sold in Rosedale and Moore Park. That is not a large enough sample to give meaningful results, making it much more prone to wilder fluctuations. It could simply mean that bigger and fancier homes have sold more in the last year than two years ago. So, in a nutshell, its #1 position may just be a lucky fluke.

Other neighbourhoods have some unlucky results based on these statistics. This past year I have experienced detached homes in bidding wars in the Oakwood-Vaughan area, and yet the statistics position this neighbourhood, along with Forest Hill, in dead last. The results just don't add up for me when I see demand in Oakwood increasingly outpacing other areas of Toronto. Again, I believe the small sample of homes reflects the wild fluctuations in the detached homes that have sold.  If you look at the sales statistics for each year in the district of C03,  you'll find that in January 2012 detached homes sold for $1,355,000 then plumetted to $635,000 a year later,  then shot back up to $1,210,000 by January 2014. There was really no reason why home prices would have been cut in half between January 2012 and January 2013 only to shoot back up again between January 2013 and January 2014. If we just regarded the statistics from the last year, Oakwood-Vaughan would have been one of the best performing neighbourhoods in the bunch. Clearly, there was just not a big enough sample of sold homes to give us clear results.

Another reason these statistics may be a little off has to do with how the neighbourhoods are grouped together. Take again the Oakwood-Vaughan area. Homes south of Rogers usually sell for much more than homes north of Rogers. Then we have the wealthier neighbourhood of Forest Hill mixed in C03 district to make three very different neighbourhoods slotted into the same sample with very different communities and styles of homes for sale.  Detached homes in C03 range from sprawling city estates to very neglected homes in need of some serious love.

Regardless if you live in the overwhelming lucky Rosedale-Moore Park or the neighbourhood unfairly disadvantaged in these statistics like Oakwood-Vaughan, it still does show us how home sales can be like the Olympics. Some athletes, like some neighbourhoods have shown us a remarkable improvement on their performance. Other athletes, and some neighbourhoods, often perform well, but were a little unluckily or treated unfairly by the judges. So,  have fun with the stats, but don't take them too seriously.

The Early Signs of an Emerging Neighbourhood

Once a neighbourhood starts emerging - and I mean fully emerging - there is no stopping that kind of momentum.  In some part of Toronto, some locations have transformed from grim and even creepy to celebrated travel destinations raved about in the New York Times. We all know Ossington went from criminal gangs to fashionable night spot, and Leslieville went for Riverdale's ugly sister to the belle of east Toronto. But the ones who are really patting themselves on the back are the ones who got in early. The ones who had the foresight, the bravery and maybe just the dumb luck.

My first home in Leslieville I bought for 242K. It was sitting on the market for weeks. The sellers really didn't do much to improve it's curb appeal, and Leslieville was kinda cool, but still a little unknown eight years ago. After 5 years, some renos and a stager, plus the rise of Leslieville as a neighbourhood, I was able to sell for almost 540K after 15 offers. I know. Aren't I the greatest thing? Well, not really. I thought those who bought it paid way more than they should have, but they turned around and sold it for 680K two and a half years later. So looks like the the emerging continued once I sold. It goes to show you that an emerging neighbourhood can still outpace the rest of Toronto, even at its later stages, but that's not what I"m talking about today.  

I'm talking about getting in early and holding on long enough. So some things to look for in a potential emerging neighbourhood that is still in its budding phase:

1. a good commercial strip: Even one indie coffee shop is a good sign. If you don't have that, is there a commercial strip that has a community feel? Is the city planning on fixing up the area? Is there a growing community involvement? Some areas are not near a great commercial strip. Neighbourhoods like Alderwood, though, are near great parks and ravines. So, that helps too. 

2.Proximity. If you're close to an emerging neighbhourhood, people will start to become priced out of that neighbourhood. So, they will look to live nearby. 

3. Transit: Can you get to it? Weston Village will have the Go transit stop soon. That will work well for them. Junction Triangle near Lansdowne and Bloor is right on the subway. 

And of course, you have to be okay with living there. You have to be that person who can see the potential. And if you are, then you'll be happy, and hopefully richer in 5 to 10 years. 

Lotsa Space or Perfect Location: What Hooks You?

This past week, I toured a few properties with a new client from Montreal. After spending over a decade living in Canada's second largest city, she decided it was time to call our country's largest city home.  As with many incoming Montrealers, you have to manage their disappointment somewhat. Toronto is not New York or Tokyo, but compared to Montreal, it might as well be. Living in Montreal is easy - beautiful homes and condos for a fraction of the price. Montrealers often live, whether they rent or own, in stylish conversion lofts in very central parts of the city. At a similar price point in Toronto, they will not get the same space, sexy location, or level of fanciness as they had in old Montreal. It's a harsh reality that most of us already know: Toronto is more pricey, and some adjustment in moving here has to be made.

This led my buyer to make some sacrifices, sacrifices many of us make, even if we're not coming from Montreal. Do we sacrifice space to live in a great neighbhourhood? Can you be happy with a murphy bed in a 350sq ft condo in one of the best addresses in Yorkville? Or would you prefer to be further from the city core in a larger condo unit or house where you have the space, but you you're practically back in Montreal in terms of the time it will take to drive or take transit into the city.

It's a tough sacrifice, and it's usually a personal one. Some people are never home and need the city to be at their doorstep. They can't bare to walk more than 10 minutes to their downtown office. In their case, size does not matter. Location does. Some need space - a big, private yard, a lot of rooms for kids and visitors and storage. A small box in the middle of the city to live in would be prison.

Chances are these personal preference will guide you for the most part,  but if you could set the personal stuff aside, there are some shrewd business choices you can make. First, you can try to have a little of both. A little more size, but only a small distance from the downtown. A condo or house in an emerging neighbourhood will often lead to a better return down the road in 5 to 10 years in comparison with other neighbourhoods. Why? Because the neighbourhood is still changing. If things are changing for the better, that change will likely continue. 10 years ago you would never find a New York Times article raving about Leslieville or the Junction as you would today. They were both run-down, drab places that looked that they would never make it. Even Yorkville in the 60s was a haven for hippies and the counter culture movement, not the haute couture movement of today.

But back to my Montreal buyer. I think she has determined that she's definitely a city girl, though ideally she  would like to buy in an established Toronto neighbourhood with an emerging neighbourhood budget. Ahh, those Montrealers. They dare to dream!