Traffic and Toronto Real Estate: A Dysfunctional Relationship

Sometimes in Toronto we need to be grateful. We didn't have a real estate crash like most cities in the world back in 2008 and 2009. We were not dragged down to half our population from the 1950s like other nearby post-industrial cities such as Detroit or Buffalo, and we are considered one of the smartest, most livable, most future-proof cities in the world. Of course, not all cities can be so wonderful  and successful without having their downsides.

As Toronto changes from big city to a mega-hub of a city, we are going to experience some growing pains. And one of the most painful results of of this growth is traffic. As a real estate salesperson who spends a great deal of time in his car, I have to admit that driving in this city is worse than it has ever been. Don't believe me? Well, maybe you will believe Forbes Magazine that places us as the 6th worst city in North America for traffic this year. On average, we are 27% slower at arriving at our destination than without traffic.  In the mornings we are 49% slower. During the evening commute home, we are 62% slower. And the scariest thing of all: Our standing as the worst North American city for traffic is moving up in the ranks. Just a few years ago, we were in 9th place.

Clearly, this is not the kind of top ten list where you would like to reach the top. If  the city, the province and the federal government could get their act together in the transportation department, we might be able to get off this list and live a little better. Still, I think we are going to see more traffic. And this traffic is going to effect how people make real estate decisions in this city. In fact, it already has.

So, with traffic going nowhere soon,  you may want to buy close to something that is not affected by traffic. Namely, the subway. Even if you never use the subway, it will make a difference to your sale price when it comes time to sell. Can't afford near the subway? Well then, you need to be a forward thinker. Look to locations around the Eglinton Crossways (currently under construction) that will be able to usher you downtown with relative ease. It's not a subway, but most of the light rail route is underground and therefore, not subject to automobile traffic.

Also, keep an eye on new subway plans like the relief line, though allow yourself to be cynical on this one. Make sure the work has started before you buy close to a new subway line here. We've all seen how much governments can change their minds on transit in this city the past ten years.

If you work out of the city, you may want to locate yourself near the highway like the Gardiner or the DVP. Still, just because it is close to the highway, does not mean you can get on it easily. Take the City Place condos that are right by the Gardiner. Getting on that thing from Spadina, at the best of times, is an exercise in waiting.

Of course, if you are looking to buy in downtown Toronto, the need for a car is less of a concern for more and more people. In fact, traffic is, in part, responsible for making downtown and local neighbourhoods better because people don't need to leave their six block radius to live their lives.You can walk everywhere in many neighbourhoods - walk to work, the gym, the grocery store, the farmer's markets, the bakery, the butcher, the health food store, the yoga studio and to your fave brunch hangouts. Traffic has strangely had a positive effect here. More people will be giving up their auto because you don't need one downtown. It's hard to believe there was a time when you could not find a grocery store downtown because the demand wasn't there. You may not need to leave your enclave. And if you do, you can rent a car.

Even in neighbourhoods outside of the city's core like Mimico or Danforth Village, they are becoming self-contained entities with their own coffee shops, restaurants, and local events. This is the reason why I am seeing the walk score appear a lot more in Toronto listings. Walking is important to many Torontonians. People want to be able to walk to where they want to go, and they only want to drive if they must. Why? Because driving drains the life force out of you. It is a soul crushing event. A little driving here and there is very manageable, even fun, but after 3 or 4 hours a day, it will take its toll. Walking allows you to easily exercise and bump into your neighbours and interact with your shopkeepers.

Of course, the biggest effect of traffic does not have anything to do with downtown and its surrounding villages. The big change has been in the suburbs which rely on easy access to the downtown.When Toronto was just a regular city, it was easy to leave work downtown and drive home to the green suburbs in time for dinner. Those days are gone. People don't want take up a big chunk of their day traveling in and out of the city. They lose too much quality time with their significant other, their kids, their pets, their gardens, their bowling teams or their TVs.  It's wasted time in a busy schedule. So nowadays, the further out of town you go, the less expensive most suburbs become. You exchange cheaper housing for more time in the car.

Even in the suburbs themselves,  the GTA's traffic woes have led to better real estate prices around the GO stations. So, keep that in mind if you are buying outside the city in the future. Near a GO station is often a good place to invest, especially if the GO station is under construction.

All in all, traffic is not going anywhere, even if there are improvements and serious long term commitments from all levels of government. Even with improved transit, this city will continue to grow. So, the best plan is to know how traffic is going to affect this city. And then you can make wiser real estate choices when the time comes to buy and sell.

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!

The Return of the Condo

It goes back as far as 2004, the crash talking on Toronto real estate. At first, this was just a few naysayers, but once we cleared the 2008 recession, this group grew louder and more insistent. Only two years ago, a Toronto Star headline declared that real estate prices in Toronto will fall 20 -25% based on RBC's official prediction for 2012. And we can see that this has not been the case. If fact, it has grown by that much or more in many neighbourhoods.

The crash talk has been particularly amplified for the condo market. Fewer new houses are built in Toronto these days so there is not a lot of additional product being added to the mix. Condos have exploded in number, not only in the past few years, but going back 40 years.  In 1971 condos accounted for 2% of Toronto housing. Today, it is 28% of Toronto housing. And when all of the current projects are built, it will be closer to one third.

Condos have not risen in price as much as houses have. In some parts of the city, a few condos have even dipped in price. 2013 and 2014 were supposed to be the years where so many new condo units entered the Toronto market that prices should have begun to fall. Too many units and not enough buyers send the prices on a downward spiral.

But it's not happening. The question is: Why not?  And why is 2014, the supposedly worst year for Toronto condos, turning out to be the best so far in the 2010s?

Well,  some of it has to do with how many investors are handling their condo units. Often, when a condo market starts to slip, a large number of investors try to dump their condo investments so they are not caught with a condo that has fallen tens of thousands of dollars in value year over year. When the crash talk started happening and condo prices leveled off in Toronto, the idea of investors dumping their condos didn't happen. Investors held on to their condo units and rented them out because rents in this city have risen over the past decade as well, and they are making money off of their investments.

Another reason: new condos are not pricing themselves as high as they once were. Not too long ago, the gap between resale condos and new condos was much larger than it used to be to the point that new condos felt a tad overpriced. I would certainly not have recommended a purchase to my clients. Now, the gap has closed. New condos average at $549/sq ft and resale at around $519/sq ft. New condos are offering strong incentives to attract buyers. Resale condos are showing some gains in price in certain condos and the number of condos sold has increased from last year.

The biggest reason for the sustainable condo market in Toronto has to do with the demographic shift in the city's core. Adults aged 25-40 are seeking downtown as a place to live and work much more than their parents ever did. We are even seeing the arrival of young families in the condo world in much larger numbers than ever before. High density neighbourhoods downtown are scrambling to keep up with child care facilities, schools and parks where children can play. Some parents are even grouping together to form play dates in their condos’ outdoor amenities. Then there is the retiring set. Tired of the yard work, they want an easy-to-take-care-of condo within a walkable distance to restaurants and grocery stores and a little entertainment.  Because of all this, the downtown core is still a strong area to invest in the GTA. It is currently showing some of the best returns this year in the GTA condo market, though you still have to pick your condo wisely.

So, for those of you that have ever been beaten down by the barrage of grim media and institutional predictions from the past decade on this city's condos, it may be time to set the worry aside. I don't claim to know where the condo market is going. Predicting can be a dangerous sport. Still, the current indicators are saying that the Toronto condo market is not so bad.  2014 may even be a healthy condo year in Toronto instead of the year of the condo crash.

Are Auctions Better Than Bidding Wars?

Most people in Canada associate auctions with art, your grandma's antique dresser, or maybe some cattle. Lightning speed auctioneers take bids working the crowd up into a frenzy until they have reached the highest bid for that prized item. In some U.S. states, a few areas in Canada, and in countries like Australia, an auction is also a way to sell your home.

There are many ways to auction a property, but generally an auctioneer has an opening bid or some may even have a minimum starting price they are willing to accept before taking higher bids. This style of home buying doesn't have to happen at an auction house. In Australia, it can happen at a brokerage or even at someone's house. Not every property goes to auction. Like here in Canada, it would only attract the kind of houses that would likely draw in multiple offers in a given market. Recently, there has been more of a push for Canadians to adopt this Australian way of selling properties. Why? you may ask. Is there something wrong with how we sell properties here in Canada?

Well, some buyers feel that there is something wrong. They do not like the secrecy with how bidding wars happen in in-demand cites like Toronto. An auction is different and more transparent.  In an auction, you may start the bidding off for a house at $750,000. Let's say you have several bids and the highest bidder lands on $825,000 to buy this property. No one at the auction is willing to go higher. All buyers know exactly how much the seller will be receiving for the house, and they have decided not to go higher.

In Toronto, we often hold back offers until a certain day where we present the offers to our sellers. We may list the house at $750,000 and receive five offers. The difference here is that none of the five buyers know what the other buyer has offered. So, the top bidder may be $80,000 higher than the second place bidder. In an auction situation, the top bidder would know all of the other bids as they roll in.

Now, the auction system does not necessarily mean you will have lower bids resulting in a lower sale price. In fact, the adrenaline of the auction has been known to boost prices higher than market value. Sydney, Australia does, after all, have higher prices than here in Toronto.

Still, there is a transparency there that may put some of the buyers at ease. Some will argue that they don't like to have others know what they are bidding on a property. Canada is a place that does value privacy more than other countries, even in this day and age where privacy is becoming less prevalent.

At the end of the day, there have been very few auctions here in Canada as far as real estate is concerned. I don't think it will threaten to change the current Canadian system of selling real estate any time soon. It's true that trends in real estate can change quickly, and we may find ourselves auctioning off our houses in the future. If buyers become more frustrated with our current system of handling multiple offers, then auctions may be selling off more than a prized heifer or a signed space helmet from Neil Armstrong.

Hardcore Renters

Recently, I have learned that renting an apartment can be as tough as buying a place in this city.   As a landlord,  I did minimal advertising for my main floor, recently renovated, one bedroom apartment in a house with no tenant parking in a west end neighbourhood. The response to my ad was the best I have ever had in my 10 years of being a landlord. Usually around 10 - 20 % of the folks who go through to see a given apartment express an interest. I had everyone who came through fill out an application form. I think the rent was set near market value, but I had folks offer me more than I was asking. No doubt it appears that the rental market can be competitive in this city. I had to pick from some pretty magnificent renters to the point where I felt bad telling certain people they cannot live in my available apartment. 

As a real estate salesperson, I'm overwhelmingly associated with buying a property, but there are some circumstances where it may be smarter to rent than to buy. If, for example, you are not sure if you will be staying in Toronto for a longer period of time, then you should probably rent. Maybe you are arriving in Toronto for the first time and you want to get to know the city neighbourhoods a little before buying. Then by all means, rent.  And it's possible that you don't like the stress of home maintenance or maintenance fees. Then you should be a renter.

Still, those are not the renters I usually come across. I come across the hardcore renter. Those who have the means to buy but who just don't want to pull the trigger. Some are concerned the market will crash. Many will say that they can find more space in a better location if they rent than if they get a mortgage. And to a certain extent, they're correct. However, over a ten year period, your rent will likely increase, and the principal on your mortgage will decrease. In other words, the unit that cost $1800 now to rent, may cost $2500 in 10 years. There's a very good chance it will cost more than your mortgage.

And then there are those who argue that they make more money by investing with a financial advisor in stocks or bonds instead of real estate. And though the returns have been weak for those investments over the past twenty years on average, I suppose there are still some out there who can rent and invest their money wisely. Not all equity is built in real estate. There are other options out there.

But let's be honest. Most renters are not avid savers.  When buyers purchase a property, they do pay a lot of their mortgage payment to interest, but a portion of their payment builds equity in their property. So, you are building equity instead of giving your landlord the money. And I'm a landlord. So, thank you renters.

Also, most renters who have been renting for forever and have the money to buy a property have some anxiety around commitment. Not to their significant others, but to committing to stay in the same place for five or more years. They may have rented the same place for 20 years, but they still don't want to have the responsibility.

My point with all this: Sometimes you have to rent. You don't have the money yet. You're retiring to make your life easier. You're not ready to commit to a long term plan or you are not planning on staying in Toronto. But if you do have money and you can get started, buy. If I could have bought earlier than I did, I would have. Sure, your place may feel smaller or further away than when you were a renter, but with enough time, you will have a nest egg and you'll be astonished at what some people pay in rent in future Toronto.

Zoning out: How Important are School Zones to Your Property Purchase?

Some parents are obsessed with school zones. And to some extent, they should be.  Those mouldable minds of your children are important tools to sharpen. In Toronto, for the most part, you go to the school to which you are zoned though some cities like Vancouver or Edmonton allow kids to go to the schools they want in any zone.

In my real estate experience, when it comes to looking for homes in the right zone, I usually come across two kinds of parents. The ones that don't look at school zones at all and those who are obsessed with it. Reality falls somewhere in the middle.

I can certainly understand why you may want your kids to be at a good school. A good school will better prepare them for the future with better tools for their life ahead. It will make them more competitive in a competitive world.

With that said, don't get too obsessed with school rankings. Yes, they do mean something when done right, but they can lead to some crazy moves to areas far from work in a house that is ill-fitted for the size of your family. 

Note that some methodology in these rankings leaves some schools ranked much higher one study over another. It also polarizes some of the schools making some appear much better or much worse than they are. 

Now, with that said, school zones are worth reviewing, especially if you want/have kids and you plan to be settling in for awhile. In parts of the Greater Toronto area, school rankings tend to be more steady and impressive in some of the suburbs. If you have a richer neighbourhood like Port Credit in Mississuaga, you have a good school to go with it. Same with somewhere like Glen Abbey in Oakville. In Toronto, the extremes seem a bit more pronounced. So, you do have the great schools like Jackman School in the wealthier Playter Estates, and lower ranking ones in more challenged neighbourhoods. Income data from Statistics Canada shows that the divide between higher and lower income groups is usually reflected in the higher and lower ranked schools  High-scoring elementary schools are primarily concentrated in high-income areas and vice-versa. In lower-income neighbourhoods, a higher percentage of students fail the reading, writing and math tests.

Another thing to consider is the French factor. Whether you are in the suburbs or the city,French immersion schools often rank at the top. In some areas the Catholic Schools rank higher, and some people will have their kids go to these schools even though there is not a stitch of Catholic in them. 

Now, if you live in an inexpensive neighbourhood, it does not necessarily mean you have a low ranking school. It's worth doing your homework, even if you are only going to check the Fraser Institute‘s top schools in Ontario. If you are in an emerging neighbourhood, you may witness a rebirth of the commercial strip with yoga studios and indie coffee shops, but the schools will be the last to improve. Still, as the new families move in, the parents are more involved, and the schools do better. 

Some parents prefer that their kids be in a top academic school and will live in a shack for two million to ensure that, but some parents prefer that their kids go to a more diverse school with a more progressive curriculum and less formal approaches to learning. Some parents just want the school close by.

My suggestion: Do your research. Have an idea of how long you want to be in the neighbourhood. You may find a great elementary school, but a less stellar high school. Also, even if you do buy in a neighbourhood zoned for a top-notch school district, you may find yourself on a waiting list to get into the school because they are at capacity. Make sure you can get in. Also, take the ranking with a grain of salt. I think these rankings amplify some of the differences. Look for patterns from past years. Is the school improving from one year to the next? 

Now, if there is any one reading this who does not have kids and never plans to have any, I'm surprised you've made it this far. Nonetheless, you may want to pay attention to school districts as well. If you happen to buy in a great school zone, your property will be worth a lot more when it comes time to sell. It's a wise investment to buy in a good school zone.  As we have seen, there is no shortage of kids in Toronto. Downtown has probably seen more kids in the city than it has in decades. So, the demand for good schools will continue.

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.