2016 - Should We Bother With Real Estate Predictions Anymore?

People don't like to be wrong. And when it comes to real estate predictions, wrong is what most people are. It doesn't matter if you're a crazy troll making comments on how dumb all Canadians are for buying real estate in the past ten years, or if you are from an analyst from a think tank with all the real estate data and economic algorithms at your finger tips to make predictions. It's not  an easy game.

For the 2016 real estate predictions, I think the predictors are becoming aware of how wrong they have been in the past. So, the sky-is-falling predictions seem to be less common this year. I'm seeing a lot more levelled, even non-commital predictions. CMHC, for example, says the housing market in Canada will barely keep up to inflation until 2017. This basically tells us, according to them,  that house prices will not rise by leaps and bounds like it has for the past few years, and it tells us that it won't sink either. Not too extreme one way or the other.

In 2015, no one was right on their predictions, not even the very optimistic real estate brokerages of Canada. Everyone called for less gains than 2014, and for some, there were certainties that some kind of correction would occur. Everyone complained about affordability and the number of condos in the Toronto real estate market. What really happened? A better year for price appreciation in 2015 than 2014, one of the stronger years for condos in a long time, and all of those new condo units still seem to have been absorbed in 2015.

It's not just 2015. It's 2014, 2013, 2012, 2011, 2010 and the list goes on. Each year there are predictions on where the real estate market goes, and each year, it's wrong. It's not to say there there could never be a correction or a temporary price slip. Of course there can be. When or if that will happen in 2016 cannot be guaranteed by anyone.

So, instead of offering my 2016 predictions as a whole,  let's look at what I think are important factors that could effect the real estate market in 2016.

1. House Supply I'm sure some of you are tired of hearing me say this, but I am saying it again because it is an important point: There is a limited supply of houses in Toronto. This will not change. As the city grows, very few houses are built. So, demand goes up. You are still going to see news stories about how dumpy house in an established hood sold for a million dollars this year in my opinion.

2. Condos Are The New Sponge Condos will absorb more people than ever before. I think over the past five years we are seeing more families with kids in condos. This includes families who prefer to live in condos in central neighbourhoods and those who do not like their options for houses in Toronto. We'll also see a lot more boomers selling their houses for the easier-to-maintain condo. Overall, we still see reasonable demand on condos. In turn, we'll see more demand for community centres and places that would benefit kids in condo neighbourhoods. Condos will not be for retirees, those who hate yard work and young folks exclusively. It will be for everyone.

3. Poor Economic News  This may bring some of the air out of the real estate tires as news of a poor Canadian economy over the next year will make Canadians feel less inclined to buy property. It may instill enough fear to disrupt the steam engines of Toronto and Vancouver real estate. Of course, the flip side of this: Ontario and British Columbia will benefit from the low dollar. Alberta, you may be out of luck until oil rebounds.

4. Greater Investment In Toronto Infrastructure This is a good one to look at for investors or for those who would like property with better appreciation. With Trudeau in, we should see a lot more money coming for improvement of our infrastructure. At long last! So, keep an eye out for improved transit lines or even a few new ones.

5. Size Adjustment This is a hard pill to swallow, but Torontonians will have to learn to live with less space. There are a lots of benefits to living in the city. Space is not one of them. The good news is that there will be less to clean. Living in Toronto, like many big cities in the world, will be for the spatially challenged. More so than ever.

6. More Investors Though there are much more foreign investors going to the improving U.S. market, our lower dollar sure makes our higher prices seem lower to others, particularly Americans who will start to see our property as a kind of bargain as the  Canadian dollar slips.

7. Interest Rates  They won't budge. I could be wrong here. There will be inflation, but I suspect the government won't increase interest rates if they feel the GDP won't grow all that much in 2016, and projections are on the lower side.

8. Conversions, Low Rise and Boutique Condos No matter where the market, houses will still be king. Low rise condos, conversion lofts and townhomes will also do well. This year giant condos may do well depending on their location and the fitness of their reserve fund.

I think that covers most of the broad strokes. Now if I dare to generalize a little, even though I said I wouldn't, I don't think we'll see the wild increases we saw in 2015, but that's exactly what I said after a very strong showing for real estate one year ago.  I was wrong then. Maybe I'll be wrong again.

Are suburbs really dead?

Many books and reports have come out in the past ten to fifteen years regarding the death of the suburb. There's "Death By Suburb", "Death of A Suburban Dream" and "The End of Suburbs" to name a few. Of course, many of these books focus on the American city and how their inner suburbs are failing as opposed to the outer suburbs which are often still growing in successful cities.

The suburbs came into prominence after World War II, though the existence of suburbs have been around well over a hundred years. Returning war vets came home and purchased a slice of the good life. Buyers back then craved spacious homes, large lots and trees where there was generally a low crime rate and decent schools. The city centres at this time became a place where minorities would go whether they were poorer folks, outcasts or new immigrants from other countries.

So, what happened? Well, in the 80s and 90s young university-educated adults started returning to the  cities in great numbers attracted by jobs, and the urban culture which was often a reflection of the immigrants and outcasts who came before them. Plus, in growing cities like Toronto, the commute became too long. You couldn't be done work at 5pm and expect to be at the dinner table by 5:30pm like when Toronto was much smaller. We have seen the number of city dwellers explode in the past twenty to thirty years. Toronto, and most growing major cities now have a thriving downtown. The suburbs no longer pull businesses and wealth away from the city. In many cases, it's the opposite.

Strangely, Toronto's downtown never quite lost its appeal. It always maintained a village atmosphere and never had the flight from downtown that many American cities had. Still, the big return to the city centre has changed this city too.  And we have the condos to prove it.

It would appear that suburbs do not serve the purposes they once had, and now they are even more expensive for municipal governments to support because of their low density. There are simply just not enough taxpayers to go around. At a quick glance it would seem that the suburbs are doomed.

But wait! What was the fastest growing city in Canada last year per capita? Toronto? Calgary? Edmonton? Nope.  That would be Milton, ON, a suburb of Toronto.

So, the suburbs are not dead yet. They just serve a much different purpose than they used to serve. In my opinion, there will be some suburbs that will deteriorate and ones that will not. Many of the outer suburbs have a better shot because they serve a purpose right now. The reasons many people are going to the suburbs have changed. Now, it is because many buyers cannot get the space they want in the city. Plus, it's hard for places like Toronto to grow when the city has limited land. Suburbs are not the promised land, but a compromise for buyers to find space while understanding they may have a long commute if they work in Toronto.

Suburbs have not really changed with the times though. The problem with suburbs is their poor design. They often lack good public transit and mains streets for people to form communities. As an investment, it has become a greater risk than the city. Cities are becoming more affluent and location is key to your investment. In the suburbs, you need to invest wisely. There are rich suburbs, like Oakville. There are new suburbs for the middle class like Milton. Increasingly, there are suburbs where the poor are being pushed toward. Not just the usual neighbourhoods like Rexdale or Jane and Finch, one of the few Toronto pockets where real estate prices have not increased in recent years, but there are increasing poverty rates in Mississauga, Brampton, Oshawa and Markham. To make things more complicated, there are suburbs like Etobicoke that were once a small town, then a suburb, then part of the city of Toronto. Even within Etobicoke, the change varies widely. Many parts of Etobicoke below the 401 that are becoming more city than suburb. There is  higher density and still decent access to Toronto. The same goes for Scarborough. Some parts of Scarborough would be a poor investment area, others would be great with access to the highway, the lake and the city. It's much closer than Milton!

In the end, location is becoming more and more important. It's not as simple as the further you go from the city, the cheaper housing will be, though there is some truth to that. You need to be in a neighbourhood with some potential or some current success, or a walkable main street, a community hub, something distinctive and appealing, or you need to be on a transit line or future transit line.

The suburbs are not what they used to be, but some are alive and thriving.  People are still going there... at least in some suburbs. In others, the suburban dream is over, like an old amusement park or an abandoned mall. Their time has passed.

Maximize Your Rental Unit

These days, I'm running into two different kinds of buyers. One type of buyer, whether we're talking about a couple or a single person, wants to buy a house, but they are finding affordable houses in the neighbourhoods they would like to live a challenge to find. So, they would like to rent out a portion of their house, whether it's the basement or another part of the property. That way, they can help pay down the mortgage or pay for some of the renovations that may be required on the house in the years to come. I also come across the condo buyer who either wants to buy a condo as a real estate investment to rent out or as a buyer who has bought a condo but is going to be moving to Vancouver or Europe or Asia for a few years and needs to rent it out while away. Whether it's a condo or a part of your house, there is a lot of rental questions coming my way as a real estate agent and as someone who owns rental properties. Any one with a computer will know prices have gone up a lot in the last 10 years in Toronto, but rents have gone up too. And the vacancy rate in Toronto still makes renting fairly easy if you are priced right and are in a decent location. So here are some tips for those looking for renters: 1.THE SITES WITH MIGHT: Probably the best new web site to find renters would be pad mapper. (www.padmapper.com). The layout allows you to search a map of the city to see what rentals pop up in different neighbourhoods. It's like a GPS for rentals. If you are using a real estate salesperson, the MLS is still a great way to draw in renters, particularly for condos. If not, standbys like Craigslist and Kajiji do a pretty good job as well. And if you are feeling adventurous, and have the money to furnish your rental unit for short term use, then give air bnb for Toronto a shot. It's incredible just how much travellers use this service all over the city right now. You do have the potential to make more money, but you have to put in more work. 2. TENANT REVIEW. Depending on the price point of your rental, your potential tenants may carry some valuable information when they come to see the unit. They may bring their own credit reports, employment letters and references. I often have an application form ready for potential tenants to fill out. At the very least, I would ask for the past landlord who you can call and an employer to make sure they can pay the rent. If you are going through a real estate salesperson and the MLS, they will require credit checks, references, letters of employment and past landlords. It will cost you the equivalent of one month's rent, but the the prep work and the advertising will be done for you. 3. SPEND MONEY ON THE RIGHT STUFF. Sometimes, when you obtain a property, beit a condo or a unit in a house, things could look a little dated or scrappy. If you are going to do a reno, focus on the kitchen. That's the place the renters are going to judge the most. If you can swing it, make sure you have storage, and good appliances. Stainless steel is always a good option, and can be a lot more affordable than they used to be. White gets dirty fast. If you are renting a basement, make sure there is no musty smell. Buy a dehumidifier for your tenant, if you must. They will be happy, and it will keep your basement healthy too. Finally, use good paint. Cheap paint needs too many coats. Good paint will cost more, but really save you time and you'll need less of it. 4. BE NICE BUT FIRM. Most tenants are decent people. If you treat them with a little respect, they will usually return it. Salt the walkways in the winter. Keep the thermostat at a decent level, and attend to problems promptly. If tenants try to break the terms of the tenancy, be firm and let them know that there are some things that are not negotiable. 5. DO YOUR RESEARCH. Check out with other units in your area to see the price point you should rent. Your unit won't budge if it's overpriced and you could miss a month or two of rental income if no one comes knocking. Also, keep in mind that January and February are not the best moving months. If you can swing it, wait until the spring, summer or fall to rent out your unit. If you follow most of these suggestions, there is a good chance you will find quality tenants and make the most for your apartment. Yes, rental units can be tough to manage sometimes. Pipes will burst on Christmas Day. Your tenant will get a cat stuck behind the radiator or the heating system will break down on the coldest day of the year. All of these things happened to me! Problems will pop up, but most of time, it's fairly easy and you make money with minimal amount of work. And that money can be put to good use: You and your mortgage!

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.