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!

Toronto's Next Best Neighbourhood - Did Toronto Life Get It right?

After many years, Toronto Life has finally decided to update their "where to buy next" list in their Toronto Real Estate Guide 2012. (I would attach this list, but it's only available in print at the moment.)

To be fair, they did do their homework including having a researcher call little ole me for my 2 cents on what neighbourhoods will be the next hot spots. They didn't necessarily select the least expensive Toronto pockets, but each of their neighbourhoods can be considered fairly reasonable with respect to affordability. They had ten neighbourhoods chosen. Many of which I would agree with. But at the very top of their list, the best neighbourhood to invest in right now is...

Drum roll please...Mimico! 

I agree, Mimico is a pretty good neighbourhood to get in on. The very best? Maybe. Top 5 for sure. It is amazing how you can find property so close to the lake. And the lake-side parks are amazing, no doubt about it. The commercial strip is a little weak, and could use an injection of cool into the businesses. And some people may find it to far from downtown, though all you have to do is hop on the Gardiner or catch the Queen Car and you're there. The truth is Mimico has been emerging for awhile. It was one of the big three 5 to 10 years ago when Leslieville and the Junction were ascending. Both of those neighbourhoods have become great neighbhouroods since then, and property values have gone up in these advanced emerging neighbourhoods. Mimico, has improved as well, just not as fast. Slow and steady is the Mimco approach. 

 I think Wallace-Emerson, Danforth Village and The Junction Triangle can give Mimico a run for its money, but all of these neighbourhoods, I believe, have started their renaissance, if you're looking to buy in Toronto's latest up and coming neighbourhood. 

Toronto: the new Miami?

Never would I have thought any one would compare Toronto to Miami, but alas it is now happened. in fact, I've read a few articles in the past week or two comparing these two seemingly incomparable cities.

Is it the tropical temperatures? The miles and miles of beaches? The art deco? Hmmm... not exactly.

The reason: new condos. Toronto will have some thing like 16 000 new condo units hit the market next year. Some like to compare this to Miami, who reached similar numbers in it's heyday.

Of course, Miami is not in its heyday any more.  Far from it. And some like to think Toronto will go the same way of the dodo bird (re: Miami).

It is true that Toronto does have a lot of new condos in the works and does have a certain amount of foreign investment in condo units now like Miami had 5 or 6 years ago, but there are some huge differences that cannot be ignored. Most notably: Toronto's market is not linked to a subprime mortgage crisis in the United States. And secondly, our four full seasons keeps Toronto out of the same league as Miami as far as vacation destinations go. Miami's crashing market probably had a lot to do with the temporary vacationers and not people who actually live/rent in the city. I have a feeling there are some secondary vacation homes in the Toronto market, but nothing compared to Miami. And lastly, Toronto has a much more diversified economy than Miami. Miami has oranges and  beaches. Toronto has entertainment, health technology, and it's the financial centre of Canada.  So, if people stop visiting, the city isn't going to have it's housing market plummet.

I'm not saying that Toronto's market will never see a price correction ever again. I'm just saying that Toronto is not Miami. So let's stop comparing Ontario apples to Florida oranges.

Is the Housing Crash Near?

Is it here yet, the housing crash? Lately, this question has been asked of me more and more. With the ups and downs of the stock market, a new plot twist every week with the European debt crisis, plus the endless uncertainty of another reccession, you can't blame someone for asking.

And to be honest, I don't know. Housing markets ebb and flow, and they can certainly head down. But, no housing market stays down for the count. It always rebounds eventually, So, it's important to look at the long term, and see what's pushing Toronto to higher property values, and a good place to invest for the long term. First, we have immigration. Twenty thousand new immigrants to this city every year. Second we have the momentum of urbanization. Culturally speaking more people want to live in the city closer to where they work, and closer to every thing a city has to offer -   fancy food options, entertainment, and boutique shopping.

And then there's the Green Belt policy to protect the lands from development around the city, and to encourage smarter, more densely populated vertical growth in taller buildings. This has led to some pretty unusual results as far as the city of Toronto is concerned. First, condo development and construction has exploded. Toronto has more condos being built than any other city in North America and possibly the world this year. That could sound pretty frightening, but on the other side, single family new houses being built in Toronto has fallen considerable. So, with these policies currently in place, it's not such a bad time to by a house. After all, there are only so many houses in Toronto, and not a whole lot more being built. All the development is happening in the condo market because developers want to maximize the use of limited land in the city, particularly close to the subways.

So, this may not be a crystal ball as to the state of the real estate market in 2012, but I think for the long term, buying in the city, especially a house, will likely be a very smart investment decision.

80 CONDOS VS. MODERN CONDOS

At least once a week I hear: "Who can live in a 500 square foot condo?" To which I say: "Someone who doesn't want to live in a 270 square foot condo." People love space. Even in in-demand Toronto neighbourhoods where it's at a premium.  I often find these space loving buyers are drawn to the 80s condos. They built them big back in the day. Much bigger than today.  Sure, they need some kitchen updates and may be a new floor, but wow, you have space to move!

Then there are those who won't even consider such a dinosaur. The people who love new condos. It's true that the design is nicer and certainly more up-to-date. The newer condos don't have the look of a Communist-style lego building of some of the older condos. There's better kitchen counters, stainless steel appliances, and cooler looking lobbies. But it seems that the newer the condo gets, the smaller they become.

Then there's that additional cost. With any one looking at condos, 80s or modern, the first question out of their mouth ( next to questions about parking) has to be: What are the maintenance fees? People are obsessed with this extra cost. And for good reason. High maintenance fees are almost a big enough stigma as a house that was a grow-op. Both push down the price of a given property.

 I can say wholeheartedly that people do not like high maintenance fees, even if the condo is priced low. They often think some thing is wrong with the condo.  And some times there is, but other times, especially with 80s condos, there are a lot of amenities like a gym, a concierge, or say, tennis courts. I would say the balk of the buyers with whom I have come into contact want low maintenance fees and would certainly cut out the extras.

Back in the 80s, when condos were really starting to take off in Toronto, developers wanted to project an image that living in a condo was a like a day at the spa where you didn't have a care in the world. You barely had to leave your luxurious building for any thing. We'll take care of you. So, condos bulked up on the extras - squash courts and indoor heated pools. And so, many of the 80s and 90s condos had some pretty hefty maintenance fees right from the start.

Newer condos, for the most part, tend to have fewer perks because they want to keep the maintenance fees down.  Does this always work? Not always. If a condo is not able to build a decent reserve fund for a rainy day, then they have to raise maintenance fees. I heard of a condo recently whose reserve fund had been largely tapped out because the elevators had to be replaced only a couple years after construction.  So fees went up. The developers, as far as I know, didn't pay a dime.

Still, 80s condos could have higher maintenance fees for another reason. Old things need to be replaced or updated after a few decades - a new roof, an updated  heating system, new fire codes regulations. This will also cause fees to go up.

I'm not trying to steer any one into choosing an 80s condo or a modern one, but it's a good idea to understand the pros and cons of both. There are great 80s condos and terrible ones. And there are lousy modern condos and excellent ones. Still, it's good to know the perks and down sides to each one.

So let's recap:

80s Condos


GOOD THINGS:  often bigger size,  often less expensive per square foot, a reserve fund that has been established.
BAD THINGS: Could have higher maintenance fees and older building systems and parts may need to be replaced.

Modern Condos

GOOD THINGS: Better finishes, more stylish, and less out of date, likely won't need to replace any thing just yet. Less amenities can mean lower maintenance fees.  Fewer renos required - just move in!

BAD THINGS: Often smaller in size. With brand new buildings, there's usually a small reserve fund to start. So maintenance fees can go up suddenly once the condo board has an idea of the cost to run the condo.

Do your future self a favour: Get Parking!

I recently chatted with someone who bought a condo downtown around Queen and Yonge for what seemed like an amazing price. A loftie, exposed brick, open concept place that sounded like a real find. But the dream became some thing less dreamy pretty fast when he told me he didn't have any parking at his new home.  So now this guy, who does own a car, is going to have to park on some of the most congested park-unfriendly streets in the city. And the funny thing is, he thought he found the deal of a lifetime. But the reason he was able to find a unique, large loft right downtown at a great price is because there is no parking. You take out the parking and the price drops significantly, and for good reason: People love it. And the older they get, the more they want it. Every time I hold an open house whether it's a condo or a reno'd Victorian, one of the first things out of peoples' mouth's is: Where is the parking?

Some might say parking on the street is fine, and they may be right, but that doesn't change the fact that most people don't want to do it. They don't want to come home from work on a rainy day and find every spot within five blocks of their home has been taken. They don't want to get up at 6am to move their car because they have to switch to the other side of the street that day. They don't want to shovel their car out of a snowbank that the plough going by just made.

 Even if you never plan to drive a car, you could always rent parking out and make yourself some money. And if you change your mind, maybe you can buy it once you need it- but it won't be cheap.  Some estimate that parking spots in key neighbourhoods in downtown Toronto condos can be sold for over $70,000.

I have never heard of a condo that has too much parking. In fact, I rarely hear of a condo that has available parking spots to sell. You may think you're are getting a big deal  on that house when you find a place with no parking, but when you go and sell it down the road, the big deal will repeat itself, but you won't be on the winning side of that deal. So, do your future self a favour. Get parking, get parking, get parking.

The Dream That Stays a Dream

Today I walked out of an open house in the Dufferin Grove neighbourhood, just south of Bloor.  It was a beautiful house and every thing had been redone from top to bottom with a professional design firm - open concept, top-of-the-line kitchen, high efficiency every thing. At the end of the walkway was a woman on a bike looking directly at me, waiting for me to be close enough to say some thing.

"How much is it?" she asked. When I told her the price tag of almost $800K, she almost fell off her bike.

Then she confessed to me: "I've been renting in this neighbourhood for years, and I am never going to be able to buy."

She seemed pretty dejected, but I told her, as nicely as possible, that you have to look for a neighbourhood with a bit more possibility, not one that has more or less arrived. The next Dufferin Grove, if you will. She didn't seem very happy with my speech. She wanted to live in THIS neighbourhood in a house that is affordable.  She wanted to be one of the smart people who invested in this neighbourhood 10 years ago when it was still affordable. But she wanted 10 years ago to be now.

So often I see this kind of dreaming. People fall in love with a certain neighbourhood, often a pretty one, and they wait and wait and wait for prices to change or for some amazing deal to pop up. The truth is, there won't be any great deal in a desirable neighbourhood. Sellers know when some thing is working. And they are not just gonna suddenly list some thing that's substantially lower in price than their neighbours.

I told her her she needs to head a little north toward Wallace Emerson for some better deals. Already there are clear signs that this location is improving. Still, some people will go to an emerging neighbourhood and see the glass half empty - the commercial strip that seems patchy, some houses that seem run-down, the longer car/bike-ride to downtown. And those people will be renting for a long time.