Daylight Savings Time – Don’t Forget to turn your clocks forward an hour!
Good morning everyone;
It has been an active week in the GTA Real Estate Market!
The average cost of a detached home in Toronto 416 tops (place your pinky finger to your lips and then say) “$1 million dollars”.
And that’s the kicker – $1 million only gets you something that is average, still need works, still needs renovations and depending on the neighbourhood $1million dollars might only be land value or a complete “gut” job. This stat as reported by the Toronto Real Estate Board this week took many by surprise who have not been active in the housing market.
Factors that keep prices increasing:
- Super Low Inventory – Lack of Supply
- Super Low Mortgage Interest
- Continued population growth in the GTA
Despite this $1 million figure the cost of actual ownership is in check. Interest rates have remained unchanged this week (after a rate cut last month).
Last year would have been a record transaction year but many buyers could not simply find a home to complete a successful purchase!
Although not getting the same amount of time in the spotlight the condo market is also enjoying modest price increases and there is no glut in inventory despite new units coming to market.
Re-sale and new units are being absorbed by the market!
GREATER TORONTO REALTORS® REPORT MONTHLY RESALE MARKET FIGURES
TORONTO, March 4, 2015 – Toronto Real Estate Board President Paul Etherington announced that Greater Toronto Area REALTORS® reported 6,338 home sales through the TorontoMLS system in February 2015. This result represented a substantial 11.3 per cent year-over-year increase compared to February 2014. Large annual increases in transactions were noted for most major home types, in the City of Toronto and surrounding GTA regions. “Even with the record low temperatures last month, we still saw an increase in the number of people
purchasing homes in the GTA. This speaks to the importance households place on home ownership and the fact that buyers continue to view ownership housing as a quality long-term investment in which they can live,” said Mr. Etherington. The overall supply of homes for sale, as measured by the count of active listings at the end of February
2015, was down by 8.7 per cent compared to the same count in February 2014. This means that market conditions became tighter, leading to more competition between buyers.
The overall average selling price for February 2015 home sales was $596,163 – up by 7.8 per cent compared to the average for February 2014. Driving this increase was the detached market segment. In the City of Toronto, the average detached selling price moved above $1 million dollars for the first time in a calendar month. “The strong year-over-year price growth we experienced in February points to the robust demand for ownership housing in the GTA, coupled with a constrained supply of homes for sale in some market segments, especially where low-rise home types like singles, semis and townhouses are concerned,” said Jason Mercer, TREB’s Director of Market Analysis.
Bidding Wars A Plenty – Real Life Example
Earlier this week I was representing clients in a home purchase -4 Elm Grove Ave (A detached trip-plex in Parkdale). The home was purchased 2 years ago for $815,000. The current owner did some minor fixes but by in large was the same that was purchased 2 years earlier. The apartments were charming and overall the home was very good condition. Based on market valuations, rental income and recent sales I estimated (on paper) that the home was worth approximately $930,000 ($115,000 more in two years!)
My clients were great in getting organised for the offer night presentation. We had a pre-inspection of the home carried out, we had pre approval for financing and we also had ready a certified deposit cheque with the offer.
10 Total offers were registered on the property. Our submitted offer was for $950,100 FIRM no conditions with a quick closing as requested by the seller and assuming all the existing tenants.
In the end we did not get a call back. The final selling price was $1,129,001! As a pure rental investment property this valuation was totally out of whack.
So how why did this happen? My guess is that the buyers were end users and not pure investors. In other words they plan to move into one of the apartments and continue to lease the other two spaces to subsidise their ownership. If you were to drill down the numbers it makes sense for this type of buyer.
If this buyer were to purchase a similar condo to their new living space it would be roughly a $550-$600,000 purchase. On top of this they would pay the costs of maintenance fees, property taxes etc. This purchase allows them to get a larger space and it actually costs them less to live with the rental income. In future, if the owners ever want to, they will be able to convert the home back into a single family home. The owners will have some tax sheltering abilities by being able to write-off the expenses against the rental income.
Now, the buyers own a detached home in downtown Toronto west rather than a condo which is not as “rare”. Short term and long term this makes sense.
If you had to ask yourself – “Self, who has the real power in the city of Toronto?” You may answer – Is it the mayor? How about the police Chief? Good answers but not even close.
In my comedic opinion the real power is held by the Urban Forestry department! Yes – After months of creating carefully thought out plans my wife and I needed to remove 9 trees from our property. The property has many mature trees and these particular 9 were literally in the way. I have to also state that we LOVE trees. It should also be mentioned that many of the 9 trees that were/are in the way are in poor condition and that 4 specific trees are of the species Scotts Pine not considered desirable by the city.
The steps I had to take
- I needed to obtain an Arborist report to submit with the application to remove the trees. The report covered our entire property and spelled out what we were planning to do and how we would compensate the city’ canopy.
- I then had to submit an application to the city to remove these 9 trees ($3100 L) and whether they grant permission or not the application cost is non-refundable.
- Along with the application and Arborist report you have to submit a re-planting plan to satisfy the city. It’s part of the approval process.
- When speaking to a city employee at Urban Forestry they said that I would need to replant trees at a 3-1 ratio (27 NEW Trees) – I don’t have the space to plant 27 new trees!
- I was told that I could get permission from neighbours to plant in their private yards as long as it was an approved tree and it met the city’s criteria.
- 3 nights later after much campaigning, I had 12 letters signed by supportive neighbours that would allow me to plant in their private yards to make up the balance of the 27 trees.
- The city then flagged that 1 tree in particular, a mature Honey Locust in good condition, cannot come down! They would not support the application as it was and I would not be able to get permits to begin construction! Remember all these trees are on private property. This situation would hold us up by months and months. They suggested that we simply revise our plans to accommodate the tree – Sure the tree was there first but really? That was the most frustrating part. The city officials don’t take into account that you have spent months refining your plans and think that it’s “no biggy” to move a garage somewhere else or change the shape of a driveway or anything else for that matter and really create something that as the homeowner you don’t like or even want. They don’t care as long as the tree survives.
- I then had to organise a meeting with the Urban Forestry Supervisor, the city case worker, my arborist and my architect. It was an hour plus meeting of negotiations.
- As a realtor I negotiate all the time and this was not all that different to be honest. It was give and take.
- I’m happy to say that after a few more consultations with the city we managed to come to an agreement. It did take significant re-working of certain elements of our project but It may actually work out better so all is good in that regard. We are taking down 5 trees (all in poor condition) and not 9. We only have to replant 15 trees (from the approved city tree list) now and not 27. And as a result I don’t need to bother my neighbours and plant trees in their yard. Which turns out I was not allowed to do anyway despite what I was told.
- It wouldn’t have mattered anyway because the City Supervisor said that they would not allow me to use my neighbours’ properties. I have to own the actual property that I replant on. This was contrary to what I was originally told. I specifically had asked about that. 3 nights wasted collecting signatures and property reports from neighbours. All good I guess.
Next week’s blog entry– Committee of Adjustments
Have a wonderful weekend, Anthony
Photo by Victor Porof.