City
Who is Buying All These Condos?
This year will go down as a banner year for the real estate market in Toronto. It is no exaggeration to say that nearly every month has been a record breaking month in terms of number of sales with condos driving the market momentum like never before. Toronto is now the number one city in North America for condo sales. Trying to buy a 1 bedroom condo in this city has become one of the city's greatest challenges, on par with climbing the stairs at the CN Tower or finishing a burger at Dangerous Dan's. So who are all these people lining up to buy condos?
One of the things I love about my job is the fact that Torontonians love talking about Real Estate. People are passionate about this city and it shows in that everyone seems to have an opinion on what is happening in the real estate market and where things are heading.
The problem is, opinions and a hot real estate market don't mix very well. Maybe it is our inherent Canadian defeatist attitude but any discussion about real estate in Toronto inevitably turns into, "There is too much speculation in the condo market therefore the market is going to crash". Reality check: Cold hard facts and raw data are the only things that can help tell us what the market is doing and predict where the market is going.
Finally we have some numbers. Market research firm, Urbanation, released a report this week that stated only 30% of pre-construction condo purchasers were investors. This is in sharp contrast to the ambiguous figure of 60-85% that has been floating around in several reputable *cough* media outlets lately.
When it comes to real estate, rampant speculation is often a sign that the end is nigh. Assuming this number of 30% is accurate, this is good news for the condo market in Toronto.
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Typical above artice is typical Real Estate Agent Spin, the figure of 60-85% was from a Re/Max report, not the Toronto Star.
"Speculation is now the key driving force behind the condominium market, according to a survey Re/Max released on Wednesday.
The real estate company estimates that 50% of all sales activity in downtown Vancouver can be linked to investors while the figure for downtown Toronto attributable to new sales is approximately 60% to 85%."
http://www.canada.com/nationalpost/financialpost/story.html?id=11b663fd-84f4-4afd-b601-4d46a0224dbc&;k=84965
More specifically here the link to the ReMax report:
?The impact of speculation, especially in Canada?s largest condominium markets, has yet to be
determined, but concerns for the future are relevant,? says Ash. ?In downtown Vancouver, an estimated
50 per cent of sales activity is attributed to investors, whereas as much as 60-85 per cent of new
condominiums sales in Toronto?s downtown core reportedly involved investors in 2007. This is a major
factor that could influence prices in years to come.?
http://www.remax-oa.com/MarketReports_PDF/Nov07_CondoReport/CondoRptPR2007_REL.pdf
Would you want a professor to write about education? Likely.
I don't see a problem with a real estate agent writing about real estate. He is likely *GASP* knowledgable about real estate!
Will he be writing posts that convey his own opinion on the matter? Of course. We all do.
Now if I could only find a condo I could afford. Grrr.....
First off, George, Mike M, Stan, and Jess: how is it that all of your five comments originated from the same IP address?
My point about the 60-85% figure was that it is ambiguous. The reason why it is ambiguous is because first of all 60-85% is not a number at all, and secondly it is based on hearsay, it's anecdotal.
The line between content and advertising is getting fuzzier and fuzzier in today's media and this is just another example of that.
Owned.
I'm visiting Canada for a couple of days only, 'cause I'm living in Spain.
BUT: There are truths in this world, working the same way everythere on this planet.
First truth: Markets are handled by supply and demand. If there is on a market a strong demand created by "investors", then we can suppose that we are looking at a bubble market. What's the problem? This demand is not offset, these houses and condos are sitting there and they will return to the market, creating an "oversupply".
Second: The final destiny of housing is...to give shelter and to live there. To analyze that function we use normaly a monthly payment called rent or lease. And the first important factor for the height of that lease is the avereage income. So if wages went up 30% and rents doubled, we got the next problem.
Because the underlaying risk in a bubbled market is far higher as in a market with steady growth. But the return on capital is getting smaller every year.
Ergo: The market doesn't "worth"to be entered.
In the US and in Spain the bubbled markets are just about to burst, England had the first reduction in house prices last month.
So I think Toronto will be getting cheaper too. And a lot.
Cheers,Ronald
Similarly, the housing 'analyst' are motivated to distort the truth because guess what, they work for banks or developers who make giant profits on the housing market. There are red flagged conflicts all the up the ladder, it's just that real estate agents are easy targets because they don't need any education to get certified and the industry such breeds a culture of dishonestly.
The irony of the Remax report is that they are only divulging that info because resales are getting hit hard due to all the demand being soaked up by the speculators at the front end. There aren't enough REAL buyers for the actual suites and I'm certain that's hitting Re/Max hard now.
When existing comparable units in a prime location are selling for $600 per square ft. why would any rationale person pay $800-$1000 per square ft. for an unbuilt building in an inferior location?
Answer-
Second, I agree with Don - Andrew's blog posts are always my favorite on Blog TO. I like his insights and believe that he provides something that only a real estate agent working in Toronto could. Looking forward to your next post Andrew!