From delivery robots and autonomous trash collection, Alphabet's Sidewalk Labs (sister company to Google) plans to build its first digital city in Toronto
A strengthening Canadian economy is projected to have a positive, cascading impact on the nation's high-end residential real estate market this fall. Montreal is forecast to emerge as a luxury real estate hot spot, with gains in sales volume and pricing expected in the $1 million-plus segment of the market. Strong economic fundamentals are set to foster healthy activity in the high-end Greater Toronto Area (GTA) market, even as it recedes from record highs following the introduction of the Ontario Fair Housing Plan. Fueled by strong local demand redirected into the city's condominium sector, Vancouver's $1 million-plus real estate market is anticipated to regain momentum in the coming months, while tentative optimism is set to gain ground in Calgary as the city emerges from recession.
Summer data compiled by Sotheby's International Realty Canada for the country's four largest metropolitan markets indicates the direction of the fall top tier market performance. Montreal's $1 million-plus real estate sales (condominiums, attached and single family homes) soared 60% year-over-year in July and August, pointing to exceptional performance to the end of 2017. GTA (Durham, Halton, Peel, Toronto and York) July and August sales over $1 million receded by 40% year-over-year from historic highs, while luxury sales volume over $4 million declined by 29%; meanwhile, city of Toronto sales over $1 million and $4 million decreased 27% and 28% year-over-year respectively. Calgary sales over $1 million were almost on par with previous summers', recording a 1% year-over-year gain that indicates stability for the coming months. While Vancouver's luxury real estate sales over $4 million fell 21% year-over-year in July and August, overall $1 million-plus sales increased 5% compared to the same months in 2016.
"The country's exceptional economic performance is expected to elevate top-tier real estate market confidence and performance this fall." says Brad Henderson, President and CEO of Sotheby's International Realty Canada. "Montreal, in particular, is emerging as an unexpected bright light on Canada's luxury real estate horizon, but the reality is that improvement in economic productivity, wages, and job gains will be positive for all of our metropolitan markets in the coming months"
Key National Influencers
- A strong Canadian economy is projected to propel consumer, business, and top-tier real estate confidence and activity in fall 2017. The economy expanded at its fastest annualized rate in six years between March and June, according to statistics Canada, recording an annualized 4.5% rate of expansion that outpaced earlier projections. These numbers followed upgraded economic growth forecasts from the International Monetary Fund (IMF) and Bank of Canada released in July; the IMF projected Canada will lead G7 countries in economic growth to 2.5%. The Bank of Canada also increased its projection for 2017 Canadian economic growth to 2.8%.
- Falling national unemployment rates and job gains in the country's major real estate markets are anticipated to bolster local demand for conventional and top-tier real estate. Canada's unemployment rate fell to 6.2% in August 2017, the lowest level since the onset of the Great Recession in October 2008. Vancouver continued to post the lowest rate of Canada's largest cities, with an unemployment rate of 4.7%, while Montreal's rate fell to 5.0%, Toronto's rate of 6.4% remained slightly elevated above the national average, however, the province of Ontario drove national employment gains with 31,100 net new positions. At 8.5%, Calgary's unemployment rate continues to pose a risk to the gradual stabilization of the city's top-tier real estate market this fall.
- Two consecutive key interest rate hikes by the Bank of Canada, the first in July and the second in September, positions the key interest rate at 1.00% leading into the fall. In spite of the resulting uptick in mortgage rates, the impact of the incremental increase from historic lows is anticipated to be minimal on top-tier real estate activity, so long as subsequent increases are well signaled and in line with real gains in the economy.
- In spite of the strengthening Canadian dollar, which hovered around 80 cents to the US in September 2017, foreign demand for Canada's top-tier real estate remains high. The gap in currency values remains notable. Vancouver, Toronto and Calgary, which are ranked third, fourth, and fifth by the Economist Intelligence Unit in its latest global livability rankings, as well as the city of Montreal, remain desirable destinations for immigration, work and study.
Even by Vancouver standards, it is a high-end sales pitch. Philanthropist couple Joseph and Rosalie Segal are asking $63-million for their mansion, a record list price in the city during a rebound in the residential market.
The Segals are co-owners of the property at 4743 Belmont Ave. – a scenic street where many of the most expensive properties in British Columbia are located.
The house contains nearly 22,000 square feet of space and is on 1.28 acres of land in Vancouver’s posh Point Grey neighbourhood. Built in 1992, the three-level house features five bedrooms, 12 bathrooms, an elevator and an indoor swimming pool, and can handle 100 guests for a private concert. There is a six-car garage and an in-law suite.
Prospective buyers will also be drawn by the view of the mountains, Burrard Inlet and waters beyond, not to mention a short walk to beaches.
Mr. Segal, a 92-year-old real estate developer, and his wife are well-known in Vancouver for their philanthropy. They donated $12-million to help build the $82-million Joseph & Rosalie Segal Family Health Centre on the site of Vancouver General Hospital.
The new listing has emerged as the region’s housing market perks up after a lull. The B.C. government imposed a 15-per-cent tax in August on foreign buyers in the Vancouver area, a move that contributed to a decline in sales and a drop in prices for detached houses for several months.
Christa Frosch, the Sotheby’s International Realty Canada agent who represents the Segals, calls the property Belmont Estate. She describes the extensive gardens as being inspired by Versailles in France.
“The fact that its long-standing owners are beloved in our community for their philanthropic dedication to the City of Vancouver only adds to the home’s heritage,” Ms. Frosch said in a statement Thursday. “I believe that the buyer of this home will have a passion for art, history, luxurious landscapes and timeless design.”
Belmont Estate stands out in a city accustomed to knock-downs commanding $2-million or more. In Vancouver, the average price for detached properties sold in May reached $2.76-million, up 1.3 per cent from the same month in 2016, although shy of the record $3.08-million in April, 2016. The average price for detached houses sold in Greater Vancouver reached a record of $1,830,956 in May, up 5 per cent from the same month in 2016 and just surpassing the previous regional high of $1,826,541 in January, 2016.
The Segals’ home had a total valuation of $41.9-million when BC Assessment released data earlier this year for July 1, 2016.
BC Assessment’s website now shows the Segals’ property assessed at $40.3-million for July 1, 2016, because the valuation was reduced by $1.6-million upon appeal. In Vancouver, land values are the key – $33.3-million is for the land assessment and $7-million is for the house. The $40.3-million valuation ranks as the eighth most-expensive residential property in the province.
Housing industry officials, however, caution that for luxury homes with only a few potential buyers, it is difficult to determine market values.
The Segals’ neighbours along Belmont Avenue include Mission Hill winery founder Anthony von Mandl, Vancouver businessman David Sidoo, as well as philanthropist Nezhat Khosrowshahi and her husband, Future Shop founder Hassan Khosrowshahi. The Khosrowshahis’ property has an assessed value of $45.7-million.
Lululemon Athletica Inc. founder Chip Wilson’s Vancouver waterfront mansion is on Point Grey Road east of Belmont Avenue. It tops the list of the most expensive residential properties in British Columbia on July 1, 2016 – the fourth consecutive time it has been No. 1 in the province for an assessment year.
The assessed value of Mr. Wilson’s home, which he owns through 3085 Point Grey Road Holdings Ltd., jumped to $75.8-million, up 18.7 per cent from $63.9-million on July 1, 2015, BC Assessment said.
In one notable transaction last year on Belmont Avenue, Peter and Joanne Brown sold their property for $31.1-million to Tian Yu Zhou, a student listed as having a 99-per-cent interest, and businesswoman Cuie Feng, who holds a 1-per-cent stake. Mr. Brown is the founder of investment dealer Canaccord Genuity Group Inc.
Former Formula 1 driver Enrique Bernoldi wants to upshift into a bigger home.
The Brazilian professional racing driver is listing his Continuum South Beach unit for $7.9 million and looking to move into a larger condo, Eddy Martinez of Worldwide Properties told The Real Deal. Martinez and Roland Ortiz are co-listing the 2,508-square-foot unit at the south tower, at 100 South Pointe Drive. It’s asking about $3,150 per square foot.
Records show MBRB Investments LLC, a company controlled by Bernoldi, paid $5.55 million for unit 1006 in 2014. It has three bedrooms, a 718-square-foot wraparound rotunda terrace, Miele and SubZero appliances and luxury finishes. Martinez said the owner invested more than $1 million into the condo’s interior design, new floor plan, sound and media technology, and furnishings.
The unit also has views of the ocean, Fisher Island and South Pointe Park.
The Continuum, completed in 2001, sits on a 12.5-acre waterfront site with three tennis courts, an 18,000-square-foot gym and spa, a private beach club and restaurant.
Martinez told TRD the unit was “priced to sell,” citing the unit directly below Bernoldi’s, which sold for $6.7 million in February of last year. That condo had not been renovated, he said.
Bernoldi isn’t the only professional driver to call South Florida home. IndyCar driver Helio Castroneves, F1 driver (and spec home developer) Eddie Irvine and IndyCar racer Milka Duno all own property in Miami.
Ontario's Fair Housing Plan introduces a comprehensive package of measures to help more people find affordable homes, increase supply, protect buyers and renters and bring stability to the real estate market. The plan includes:
Actions to Address Demand for Housing:
- Introducing legislation that would, if passed, implement a new 15-per-cent Non-Resident Speculation Tax (NRST) on the price of homes in the Greater Golden Horseshoe (GGH) purchased by individuals who are not citizens or permanent residents of Canada or by foreign corporations. Ontario's economy benefits enormously from newcomers who decide to make the province home. The NRST would help to address unsustainable demand in this region and make housing more available and affordable, while ensuring Ontario continues to be a place that welcomes all new residents. The proposed tax would apply to transfers of land that contain at least one and not more than six single family residences. "Single family residences" include, for example, detached and semi-detached homes, townhomes and condominiums. The NRST would not apply to transfers of other types of land including multi-residential rental apartment buildings, agricultural land or commercial/industrial land. The NRST would be effective as of April 21, 2017, upon the enactment of the amending legislation.
Refugees and nominees under the Ontario Immigrant Nominee Program would not be subject to the NRST. Subject to eligibility requirements, a rebate would be available for those who subsequently attain citizenship or permanent resident status as a well as foreign nationals working in Ontario and international students. See technical bulletin for further information.
Actions to Protect Renters
- Expanding rent control to all private rental units in Ontario, including those built after 1991. This will ensure increases in rental costs can only rise at the rate posted in the annual provincial rent increase guideline. Over the past ten years, the annual rent increase guideline has averaged two per cent. The increase is capped at a maximum of 2.5 per cent. Under these changes, landlords would still be able to apply vacancy decontrol and seek above guideline increases where permitted. Legislation will be introduced that, if passed, will enact this change effective April 20.
- The government will introduce legislation that would, if passed, strengthen the Residential Tenancies Act to further protect tenants and ensure predictability for landlords. This will include developing a standard lease with explanatory information available in multiple languages, tightening provisions for "landlord's own use" evictions, and ensuring that tenants are adequately compensated if asked to vacate under this rule; prohibiting above-guideline increases where elevator work orders have not been completed; and making technical changes at the Landlord-Tenant Board to make the process fairer and easier for renters and landlords. These changes would apply to the entire province.
Actions to Increase Housing Supply
- Establishing a program to leverage the value of surplus provincial land assets across the province to develop a mix of market housing and new, permanent, sustainable and affordable housing supply. Potential sites under consideration for a pilot project include the West Don Lands, 27 Grosvenor/26 Grenville Streets in Toronto, and other sites in the province. This builds on an agreement reached previously with the City of Toronto to ensure a minimum of 20 per cent of residential units within the West Don Lands are available for affordable rental, with an additional 5 per cent of units for affordable ownership.
- Introducing legislation that would, if passed, empower the City of Toronto, and potentially other interested municipalities, to introduce a vacant homes property tax to encourage property owners to sell unoccupied units or rent them out, to address concerns about residential units potentially being left vacant by speculators.
- Ensuring that property tax for new multi-residential apartment buildings is charged at a similar rate as other residential properties. This will encourage developers to build more new purpose-built rental housing and will apply to the entire province.
- Introducing a targeted $125-million, five-year program to further encourage the construction of new rental apartment buildings by rebating a portion of development charges. Working with municipalities, the government would target projects in those communities that are most in need of new purpose-built rental housing.
- Providing municipalities with the flexibility to use property tax tools to help unlock development opportunities. For example, municipalities could be permitted to impose a higher tax on vacant land that has been approved for new housing.
- Creating a new Housing Supply Team with dedicated provincial employees to identify barriers to specific housing development projects and work with developers and municipalities to find solutions. As well, a multi-ministry working group will be established to work with the development industry and municipalities to identify opportunities to streamline the development approvals process.
Other Actions to Protect Homebuyers and Increase Information Sharing
- The province will work to understand and tackle practices that may be contributing to tax avoidance and excessive speculation in the housing market such as "paper flipping," a practice that includes entering into a contractual agreement to buy a residential unit and assigning it to another person prior to closing.
- Working with the real estate profession and consumers, the province is committing to review the rules real estate agents are required to follow to ensure that consumers are fairly represented in real estate transactions. This includes practices such as double ending. The government will modernize its rules, strengthen professionalism and improve the home-buying experience with a goal to make Ontario a leader in real estate standards.
- Establishing a housing advisory group which will meet quarterly to provide the government with ongoing advice about the state of the housing market and discuss the impact of the measures in the Fair Housing Plan and any additional steps that are needed. The group will have a diverse range of expertise, including economists, academics, developers, community groups and the real estate sector.
- Educating consumers on their rights, particularly on the issue of one real estate professional representing more than one party in a real estate transaction.
- Partnering with the Canada Revenue Agency to explore more comprehensive reporting requirements so that correct federal and provincial taxes, including income and sales taxes, are paid on purchases and sales of real estate in Ontario.
- Making elevators in Ontario buildings more reliable by establishing timelines for elevator repair in consultation with the sector and the Technical Standards & Safety Authority (TSSA).
- Working with municipalities to better reflect the needs of a growing Greater Golden Horseshoe through an updated Growth Plan. New provisions will include requiring that municipalitiesconsider the appropriate range of unit sizes in higher density residential buildings to accommodate a diverse range of household sizes and incomes. This will help support the goals of creating complete communities that are vibrant, transit-supportive and economically competitive, while doing more to address climate change, protect the region's natural heritage and prevent the loss of irreplaceable farmland. As part of the implementation of the Growth Plan for the Greater Golden Horseshoe, 2006, enough land was set aside in municipal official plans to accommodate forecasted growth to at least 2031. Based on discussions with municipalities across the region, the government is confident that there is enough serviced land to meet the Provincial Policy Statement requirement for a three year supply of residential units. The Greenbelt provides important protection of natural heritage and farmland, and neither the area of the Greenbelt or the rules about what can occur inside of it will be weakened. The upcoming Growth Plan will promote intensification around existing and planned transit stations and will promote higher densities in the suburbs to support transit.
See map "Greater Golden Horseshoe".
Actions to Date
The government has taken a number of actions over recent months and years in order to support homebuyers, increase supply of affordable and rental housing and promote fairness. These include:
- Helping more people purchase their first home by doubling the maximum Land Transfer Tax refund for eligible first-time homebuyers to $4,000. This means eligible homebuyers in Ontario pay no Land Transfer Tax on the first $368,000 of the cost of their first home.
- Modernizing the Land Transfer Tax to reflect the current real estate market, including increasing rates on one or two single-family residence over $2 million. Revenue generated from the increased rates is being used to fund the enhancements to the First-Time Homebuyers Refund.
- Making it easier for not-for-profit affordable housing providers to buy surplus government lands.
- Introducing an inclusionary zoning framework for municipalities that will enable affordable housing units as part of residential developments.
- Amending the Planning Act and the Development Charges Act to support second units, allowing homeowners to create rental units in their primary residence and creating additional supply.
- Freezing the municipal property tax burden for multi-residential apartment buildings in communities where these taxes are high.
- Collecting information about Ontario's real estate market to support evidence-based policy development
Appendix: Data and Trends on the Real Estate Market
Ontario's housing market has seen very dynamic growth in recent years, with prices in the Greater Toronto Area and the Greater Golden Horseshoe rising significantly. This has been supported by economic fundamentals, including a growing population, rising employment, higher incomes and very low borrowing costs.
House prices have been rising at a robust pace in the Greater Toronto Area since the end of the 2008-09 recession.
After two consecutive years of double-digit gains, average house prices in the Toronto region reached $916,567 in March 2017, up 33.2 per cent from a year earlier.
See image "Toronto Home Resale Prices"
The Greater Toronto Area showed the sharpest rise in home prices in Ontario over the past two years.
While the growth rate of prices of homes in the Greater Vancouver Area have been slowing since August 2016 after the introduction of B.C.'s foreign-buyers tax, home prices have been climbing steadily in the Greater Toronto Area.
See image "MLS Home Price Index", "Greater Toronto Area Price Increases Outstrip Other Cities" and "Housing supply in Ontario seems to be aligning with demographics".
According to Urbanation, the average rent per square foot for new leases in the Greater Toronto Area condo market rose 11 per cent in the last quarter of 2016 compared to a year earlier, the fastest pace of growth since at least 2011.
See image "% change, year-over-year, GTA".
The number of owners with more than one residential property has been rising steadily since 2000.
See image "Number of Owners With More Than One Residential Property in the GTHA: 2000-16".
On April 20, 2017, Premier Kathleen Wynne announced measures under the Ontario Fair Housing Plan (see detailed plan) affecting the Greater Toronto residential real estate market ahead of the Ontario Liberal government’s 2017 budget scheduled to be tabled on April 27. The multi-faceted plan is meant to help moderate demand, address supply, protect buyers and renters, and promote affordability in the provincial housing market – all of which is intended to increase market stability.
Political pressure has been mounting on the Liberals to intervene in the Greater Toronto residential real estate market given the very strong demand and continued double digit increases in price. In response, the provincial government announced the following policy measures:
- A 15% non-resident speculation tax (NRST) on the price of homes in the Greater Golden Horseshoe that applies to transfers of land that contain between one and six units.
- Prevention of reselling properties pre-construction.
- Allow municipalities to levy a property tax on vacant homes.
- Provide flexibility for municipalities to impose higher taxes on vacant land.
- Lower property taxes for new, purpose-built apartment buildings.
- Leverage provincial assets to help build a mix of housing stock.
- Introduce a $125 million program over five years to encourage purpose-built apartments.
Expanding Rent Control and Enhancing Standards
- Expand rent control to all renters and including purpose-built properties built after 1991.
- Strengthen the Residential Tenancy Act by developing standard leases, increasing rental standards and rules that govern the sales of properties, as well as several other measures designed to enhance efficiency and clarity in the housing market.
We are awaiting further details regarding the above announced initiatives and more analysis will be required. The following is some early commentary on what we know so far.
Tax on Foreign Speculative Activity
The new tax will levy a 15% Non-Resident Speculation Tax (NRST) on residential real estate transactions where a foreign buyer purchases a property and is deemed to be engaged in speculative activity.
Fortunately, foreign buyers who have work visas and students studying in Canada will be exempt from the tax. There were unintended consequences from the foreign buyer tax introduced in Greater Vancouver that came into effect on August 2, 2016, which the BC provincial government subsequently reversed.
In addition, the new tax will apply to transactions initiated after April 20, 2017. This is unlike the Vancouver tax, which applied to closings after August 2, and unfairly impacted buyers who had entered into contracts before the tax was introduced, but where the completion of the contract fell after the tax’s effective date.
While statistics are lacking, most experts agree that foreign buyers represent a small component of the market at somewhere between 5-10% of the market. We estimate that foreign buyers engage in speculative activity are +/- 1-3% of the total market. We expect there may be a slowdown in activity as all buyer digest the change and determine its effect. No doubt it will curb some pure speculative activity but in the longer run, the strong domestic demand twined with continued limited supply will keep upward pressure on prices.
While many point at the introduction of the foreign buyer tax in Vancouver as a policy success, it is too soon to gauge its ultimate effect. So far, the policy has attracted a class action lawsuit– there is a fear that it will be challenged from a constitutional basis and that it may contravene one or more trade agreements.
Unlike the Vancouver foreign buyer tax, the introduction of a similar tax in the Greater Toronto Area will not be as shocking. There has been considerable speculation in the press for some time.
Market observers have noticed that, while activity declined following the introduction of the Vancouver tax, most of that was due to market participants withdrawing and sitting on the sidelines. This constrained supply particularly at higher price points. This changed the mix of home sold to the lower end of the price scale giving the illusion that market prices were moderating or decreasing when in fact it was simply the average price of homes sold (rather than the average price of a home).
The Vancouver tax has done nothing to contribute to affordability and there is mounting evidence that pricing pressure is returning to the Vancouver market as buyers are coming to the belief that the market will continue to grow and supply constraints are still present.
Ban on Selling Pre-construction Units by Speculators
Most developers prohibit or dramatically restrict this practice. We do not expect that this policy initiative will have a significant effect on moderating the demand for housing or prices.
Initiatives Relative to the Rental Market Control
The government announced a series of initiatives designed to restrict increases in rents paid by tenants, while at the same time increasing the stock of rental units.
While rent controls are a popular solution in the short term, most industry participants and economists agree that rent control will no doubt stifle new rental construction, encourage conversion of existing residential multi-unit stock to condominiums, and add to the demand for new condominium construction. All of which will have the effect of reducing the stock of available rental properties in the longer run and not really contributing to affordable housing options.
On the other hand, initiatives designed to encourage continued and additional construction of rental units will provide relief to the tight vacancy condition and some relief on rental rates.
We will be watching the market carefully over the coming months and reporting on our observations. We expect a period of adjustment where we might see activity subside somewhat. We expect the effect to be much less significant that what we observed in Vancouver. Ultimately, the fundamentals of demand remain strong so until supply side measures take effect, we believe that there will continue to be more buyers than sellers, that many properties will continue to see multiple offers and that there will continue to be upward pressure on home prices.
Canadian mortgage growth is slowing as the country’s policy makers step up efforts to cool overheated housing markets in Vancouver and Toronto.
With four of Canada’s biggest banks reporting second-quarter results, the trend shows decelerating growth in home loan portfolios and, in some cases, shrinkage. It’s a welcome sign for officials struggling to curb house prices in two of the nation’s largest cities. The easing follows federal government moves in October to tighten mortgage insurance rules and other measures while opening the door to shift risks of defaulting mortgages to banks.
“It’s not that we’re pulling back, it’s just that the market is slowing a little bit and part of that is the supply in the market was lower," Royal Bank of Canada Chief Financial Officer Rod Bolger said Thursday in a telephone interview.
Royal Bank, the biggest domestic mortgage lender, said average home loan balances rose 5.5 percent to C$224.1 billion ($166.5 billion) from a year earlier, its slowest annual growth since the first quarter of 2015.
Toronto-Dominion Bank and Bank of Montreal saw their mortgage portfolios shrink from the previous quarter for the first time in years. TD’s home loan balances slipped 0.4 percent to C$187.5 billion, the first sequential contraction in two years. Home loan balances were up 1.2 percent from the same period last year -- the slowest annual growth in at least four years.
Toronto-Dominion is seeing the effects of “de-emphasizing" some parts of its mortgage business, including reducing purchases of private-label originations, CFO Riaz Ahmed said in an interview. He also said the country’s residential property market appears to be moderating.
“In the last two weeks of April or so, we did begin to see some cooling in the housing market as sales activity slowed and more supply came to the market,” Ahmed said. “We are happy with that because that’s generally good for Canada and our customers."
Bank of Montreal’s domestic mortgage book also contracted for the first time in two years, with average balances in the quarter slipping about 0.1 percent to C$98.3 billion from three months earlier, according to financial statements by the Toronto-based lender. Bank of Montreal, which has the smallest share of the domestic market among Canada’s five largest lenders, said home loan balances rose 5.2 percent from a year earlier, the slowest annual growth in three quarters.
“There is a little bit of seasonality in the second quarter," CFO Thomas Flynn said Wednesday in a phone interview. “It’s not as active of a mortgage season for us, and it’s also a slightly shorter quarter."
Toronto home prices slowed in the first two weeks of May, according to the city’s real estate board, after climbing 25 percent in April from a year earlier and 33 percent in March. Last month, Ontario’s government announced plans for a 15 percent tax on foreign buyers, following similar measures enacted in British Columbia in August.
“We do expect growth in mortgages over the next few years to be somewhat lower than it has been over the last five years," Flynn said. “That’s just reflecting the expectation that the market will continue to be stable but will cool somewhat.”
Canadian Imperial Bank of Commerce was an outlier among the lenders, with mortgage balances jumping 12 percent from a year earlier thanks in part to the firm’s efforts to ramp up a mobile mortgage sales force to about 1,200 advisers.
“It’s a strong part of our business, and something that we focus on," CFO Kevin Glass said in an interview. “We’re not compromising anything in terms of our growth. We like the business and it provides a very good return on capital."
Toronto’s home prices capped a record quarter of gains in March amid concern the market is in a bubble.
Prices in the nation’s biggest city increased 6.2 percent last month from February, according to a benchmark price index released Tuesday by the Canadian Real Estate Association. The gain is the biggest in records dating from 2000. Actual price gains averaged almost 5 percent in the quarter, the largest three-month increase in records dating from 1988.
“The drum-tight housing market balance in Toronto and nearby cities stands in contrast to housing market trends elsewhere in Ontario and other provinces,” CREA chief economist Gregory Klump said in the report.
The figures come hours before officials including Canadian Finance Minister Bill Morneau, Ontario Finance Minister Charles Sousa and Toronto Mayor John Tory meet to discuss surging sales and prices that some economists describe as a bubble.
Toronto is the last major Canadian city with such characteristics; demand in Vancouver slowed after new taxes on foreign buyers and federal measures on mortgage lending were introduced last year. The Globe and Mail newspaper, citing a senior government official, reported Tuesday Ontario is looking “intently” at a new tax on non-resident speculators.
Toronto home prices increased 29 percent from a year earlier. Nationally, prices rose 4 percent on the month and 19 percent on the year.
Sales rose 0.4 percent on the month in March and by 17 percent from a year ago. Nationwide, they climbed 1.1 percent on the month and 6.6 percent on the year.
Recent government regulations have created "unprecedented levels of uncertainty" for the high-end home market heading into the key spring buying season, Sotheby's International Realty Canada said in a report released Wednesday.
Data compiled by the realtor in Canada's four largest real estate markets predicts little deviation from ongoing trends.
Toronto is expected to continue to lead the pack in sales of homes worth over $1 million, while Vancouver's high-end home sales will continue to normalize. Calgary's market is forecast to continue its cautious recovery from the oil price shock and sales in Montreal are anticipated to grow modestly, according to the report.
But recent policy changes from federal, provincial and municipal governments remain "wild cards," said Brad Henderson, president and CEO of Sotheby's International Realty Canada.
Last fall, Ottawa introduced new rules requiring all insured mortgages to undergo stress testing to determine if borrowers would still be able to meet their mortgage obligations if interest rates climb or if their incomes decline. Such tests previously were not needed for fixed-rate mortgages longer than five years.
Also last year, the B.C. government introduced a 15 per cent tax on foreign buyers of Vancouver homes and the city of Vancouver imposed a tax on vacant homes.
"We are forecasting that we are going to continue to see the market adjust to this new reality," Henderson said of Vancouver.
Sales of homes for over $1 million in Vancouver fell to 531 units in January and February of this year, down 45 per cent from a year ago, Sotheby's said.
The luxury segment of the Vancouver market -- defined as homes worth over $4 million -- was even more dramatically affected, plunging 68 per cent from a year ago to 43 units, according to the report.
Many owners of top-tier Vancouver homes who were planning to sell are now sitting on the sidelines, Henderson said.
"The individuals involved have less pressure to sell the properties, so they can afford to take a wait-and-see attitude," Henderson said. "Arguably some of those properties would be the target of foreign buyers."
In Ontario, the provincial government has begun to mull increased regulations to temper house price growth, with Finance Minister Charles Sousa floating several ideas in recent weeks, including a foreign buyer tax and an increase in capital gains tax aimed at curbing speculation.
Sales of homes worth over $1 million increased by 87 per cent across the Greater Toronto region to 3,043 units in the first two months of the year compared to the same period last year, Sotheby's said.
In Toronto proper, sales of $1 million-plus homes rose 44 per cent year-over-year to 943 units, while sales of homes worth over $4 million were up 147 per cent from a year ago to 42 properties.
Henderson predicts that strength will continue in the spring buying season -- provided that the government doesn't implement new policies aimed at the real estate sector.
"We feel that the market is the best arbiter of supply and demand, and that government policies often have too many unintended consequences," Henderson said.
"They need to be done thoughtfully, not as a reaction to what has really become a very political issue."
Montreal saw sales of $1 million-plus homes climb 13 per cent year-over-year in the first two months of 2017 to 99 properties. In Calgary, sales of high-end homes were flat in January and February, with 64 properties changing hands.
Recent house price increases in Toronto are being driven by demand from foreign and domestic buyers who are caught up in a bubble of growing price expectations, and are not due to a fundamental lack of housing in the city, according to a new study released Monday.
The report, written by Simon Fraser University assistant professor Josh Gordon for the Ryerson City Building Institute in Toronto, argues the rate of new home building – including condo units – has more than kept pace with the population growth in Toronto based on historical norms.
Pre-existing homes are not coming up for sale in the same volume as in the past, however, because owners are hunkering down as prices soar – in some cases because they do not want to sell too early in a rising market.
Dr. Gordon said there is clearly a shortage of listings compared to current demand, but the shortage is not fundamentally a supply problem but one driven by an imbalance caused by speculative demand in Toronto’s market, which is fuelling rampant price increases and a market bubble that will inevitably burst.
“As housing bubbles are allowed to expand, many are hurt or drawn into unsustainable financial situations,” he warns.
“This is particularly the case for young Torontonians. When housing bubbles unwind, there is major collateral damage and people are hurt through little or no fault of their own.”
The report runs contrary to arguments from many in Toronto’s real estate sector, who argue the solution to soaring real estate prices in the city lies in bringing more housing onto the market for sale.
The Ontario Real Estate Association, for example, is advocating for increased housing supply.
But Dr. Gordon’s study argues the ratio of Toronto’s population to the number of new dwelling units has consistently fallen since 2012, which he argues means construction is keeping up with basic demographic demand.
“In sum, there is no compelling evidence that insufficient housing is being built relative to demographic needs,” he said.
While supply issues account for “a modest share” of Toronto rising prices, Dr. Gordon says key drivers of price increases are foreign buyers and purchasers of multiple properties.
Spurred by low interest rates, people are buying real estate for investment purposes, he argues, which is warping the demand side of the market.
“It is this speculative activity that is so powerful in generating bubbles,” he said.
Investors expect prices to continue to rise, and these “powerful expectational dynamics” are fuelling bidding wars, he says. As prices soar, domestic buyers who are purchasing for their own use also fear the increases will continue, which is creating panicked buying and a “fear of missing out” that is leading to a disconnect between offering prices and local market fundamentals.
“In a housing bubble, then, not even a substantial amount of new supply can meet speculative demand,” he said.
This demand pressure is having an escalating impact on active listings as some owners are holding off selling existing homes in a soaring market, Dr. Gordon says. That trend is intensifying into 2017, with new listings dropping further in the first two months this year despite rapidly rising prices.
The appropriate response is to cool speculative demand by shifting expectations, rather than adopting a strategy to spur more building in undeveloped areas, which will not tame prices and cannot be reversed, he concludes.
While demand could be cooled by raising interest rates or further tightening mortgage rules, Dr. Gordon says both solutions are too blunt because they would hurt the economy broadly and aren’t needed in markets outside the Vancouver and Toronto areas.
Instead, he endorses introducing a foreign-buyer tax in Toronto, similar to the one adopted in Vancouver last August.
Dr. Gordon said the experience in Vancouver suggests the market has cooled since August beyond a level that could be accounted for by reducing foreign buyers. That suggests the new tax in Vancouver has also had “powerful knock-on effects” in calming the panic and allaying the “fear of missing out” among domestic buyers.
He also endorses a progressive property-tax surcharge, which is an additional tax on properties owned by people who are not working in Canada. The surcharge proposal, which was developed by B.C. researchers but has not been adopted in the province, would not apply to people who have made Canada Pension Plan contributions above a certain level to ensure it targets non-residents. Various other groups such as seniors would also be exempted, he suggests.
China to Canada: International Home Buyer Insights*, a report released by Sotheby’s International Realty Canada and Juwai.com, reveals new insight into prospective homebuyers from mainland China, including trends in target pricing, motivation, and levels of interest between conventional and top-tier real estate in Vancouver, Calgary, Toronto and Montreal. The report also notes differences in the impact of the recently introduced 15% provincial property transfer tax on foreign buyers in Metro Vancouver.
Juwai.com and Sotheby’s International Realty Canada data and market insights revealed the following key trends:
Education and personal use, rather than investment and immigration, lead interest from China:
Juwai.com data and Sotheby’s International Realty Canada market insights clearly indicated that personal use was an implied or explicit motivation for Chinese interest in Canada’s largest cities:
- Education was the most commonly cited motivation for Chinese interest in Toronto, Vancouver and Montreal, cited by 41%, 44% and 46% of Juwai.com property enquirers respectively. This was followed by “own use” at 37%, 25% and 34%.
- The single highest motivation for Juwai.com property enquirers interested in Calgary real estate was “own use”, at 62%.
- 27% of Toronto and Vancouver enquirers, and 23% and 21% of Montreal and Calgary enquirers, indicated that investment was a motivation.
- Immigration was the least frequently cited motive.
Demand for conventional housing outweighs luxury demand:
Chinese homebuyers have been credited as an influential segment of purchasers within the Canadian luxury real estate market; however, Juwai.com data dispels the notion that their interest is limited to the high-end segment. Property enquiry data from Juwai.com indicates:
- 57% of Juwai.com property enquiries in Vancouver, 67% in Calgary, and 68% in both Toronto and Montreal fell below $655,050 ($500,000 USD) in 2016.
- The median prices for Juwai.com property enquiries –$590,200 in Vancouver, $531,115 in Calgary, $458,928 in Toronto and $488,012 in Montreal– were within the range of, and in some cases, significantly below the average sale price of residential real estate within the market.
Metro Vancouver foreign buyers’ tax shifts market sentiment:
The implementation of a 15% provincial property transfer tax on foreign nationals, corporations and trusts buying Metro Vancouver real estate introduced local consumer uncertainty and accelerated market moderation. The impact of the tax on property interest in major Canadian cities was swift:
- Vancouver listings enquiries on Juwai.com fell 81% year-over-year in July 2016, the month the foreign buyers’ tax was announced, and 78% year-over-year in August when the tax took effect.
- Interest from prospective real estate purchasers redirected into other major Canadian markets in the months immediately following the tax’s implementation.
- Sotheby’s International Realty Canada experts observed that increased interest from Chinese property enquirers did not result in matching surges in sales activity from this cohort in alternative markets.
Interest in $1 million-plus real estate comparatively resilient to policy shifts:
Interest in real estate over $1 million was less elastic to changes in policy than in the conventional real estate market:
- In Vancouver property enquiries for real estate over $1 million fell 67% year-over-year in the third quarter of 2016 in the month the 15% foreign buyers’ tax was implemented, but rebounded with an 18% year-over-year increase in the last quarter.
- Toronto properties over $1 million experienced only a nominal, 2% year-over-year uptick on Juwai.com in the third quarter of 2016 following the implementation of the Metro Vancouver foreign buyers’ tax, before ending the fourth quarter with enquiries up 18% year-over-year.
- As in the case of the conventional real estate market, rising interest in luxury real estate in Toronto, Calgary and Montreal did not result in matching gains in sales activity.
China to Canada: International Home Buyer Insights is based on Canadian property enquiry data submitted by potential real estate buyers from China on Juwai.com in 2016, qualitative research on Juwai.com users from the largest centres of mainland China, and local market insights from Sotheby’s International Realty Canada.
The Greater Toronto Area’s real estate market has broken new ground with prices for detached houses soaring to record highs while the debate intensifies over what is behind the boom.
The average price of $1.21-million for detached properties sold in the GTA this past month smashed the former peak of $1.07-million set in January and climbed 32.5 per cent from a year earlier.
“Recall, this is after the federal government took steps last fall to cool demand! If policy makers leave this market to its own devices, there is a real risk that a still-manageable bubble is pumped by rampant speculation into something much more dangerous,” Bank of Montreal chief economist Douglas Porter warned in a research note on Friday.
Within the City of Toronto, the price of detached houses last month averaged $1.57-million, easily eclipsing the former record of $1.35-million in November and surging 29.8 per cent from February, 2016.
For all types of residential housing, including condos and townhomes, the GTA had a record average price of $875,983 this past month, up nearly 28 per cent from a year earlier.
“Skipping past the semantics over whether or not to call Toronto a bubble, most reasonable folks would agree that a 28-per-cent surge would not qualify as a normal market,” Mr. Porter said.
He argues that increased speculation and foreign investment have combined with low interest rates, steady population growth and sizzling demand in general to produce an extreme imbalance in the GTA.
In suburban Toronto (known for its 905 area code), the price this past month for detached houses sold averaged a new high of $1.11-million, up 35.4 per cent from February, 2016. It marked the first time that the average monthly price for detached properties topped $1-million in the suburbs.
In October, Ipsos surveyed local realtors about foreign-buying activity on behalf of the Toronto Real Estate Board. Realtors told the polling firm that fewer than 4.9 per cent of home sales in the GTA involved international buyers.
But Mr. Porter said in a recent interview that is an important number: “In what is already a very tight and hot market, to add net new buyers can have a very big influence on prices.”
The board points out that the GTA’s active listings last month plunged to 5,400, down by half compared with 10,902 in February, 2016. The region posted 8,014 sales last month, a new high for the month of February.
While Mr. Porter plays down the impact on the housing-supply side, the real estate industry counters that much more attention needs to be paid to construction instead of placing the spotlight on foreign and domestic demand.
“Supply is longer term, and that’s why we see the focus on demand because it is sometimes viewed as a quick fix. But you got to look at both sides of the price-growth equation,” said Jason Mercer, the board’s director of market analysis.
Mr. Mercer and the Ontario Real Estate Association believe the provincial Liberal government should relax restrictions on the Greenbelt – protected land on the fringes of the GTA.
“It’s up to the government to get moving on putting a plan into action that will increase the supply of homes in the GTA,” association president Tim Hudak said in a statement.
“Too much red tape is preventing new homes from being built – let’s reduce the barriers to building and get more ‘missing middle’ type homes on the market like townhomes, duplexes and stacked townhomes,” said Mr. Hudak, the former Ontario Progressive Conservative leader.
The Canadian Home Builders’ Association echoed Mr. Hudak’s views, adding that the housing market in the GTA and Vancouver region both need more and varied housing supply.
The Vancouver area’s sales began cooling off in April, and the slowdown continued after the B.C. government implemented a 15-per-cent tax on foreign home buyers in the region in August. The price for detached houses sold within the City of Vancouver last month averaged $2.67-million, down 5 per cent from a year earlier. Condo and townhome prices, however, have been surging.
In October, the federal government tightened mortgage-lending rules, such as a new standard for gauging whether buyers can handle an eventual increase in interest rates.
NEW YORK – One of the most fascinating things about collecting wine (or anything for that matter) is the marriage of subjective appeal and objective import, relevance and demand – all of which translates into a sense of value. There are those whose interest may be piqued by 1982 First Growth Bordeaux or full cases of DRC, while others might only venture down the auction path in search of birth year vintages, rarely seen mega size-formats or the hunt for producers or cuvées no longer in existence or production.
In any sale though, there are some lots that seem to leap out of the catalogue due to their extreme value, the legendary renown of a particular vintage or the pure novelty of an uncommon treasure. To that end, here are five selections from Finest and Rarest Wines on 25 February 2017 that have the extra cachet of being “unicorn” wines of mythical status.
LA TACHE 1971 DOMAINE DE LA ROMANEE-CONTI
One of the most iconic Burgundies of the latter half of the 20th century, the 1971 La Tâche is a hall of fame type of wine. Single bottles reach upwards of $5,000, while magnums have regularly achieved $15,000–$20,000 each. To have a lot of six magnums of this legend is a rarity in itself. Furthermore, there are also three regular-sized bottles of the 1971 available in the sale.
CHATEAU LA MISSION HAUT-BRION 1945
Another absolute legend, this time hailing from Bordeaux – the sheer power and longevity of the 1945 vintage in Bordeaux is astounding. These wines are seemingly immortal. The esteem of the vintage, coupled with the renown and quality of a Second Growth estate (which many believe regularly equals or eclipses the First Growths in certain vintages), leads to an irresistible combination. And in this case, has the added bonus of being in magnum format. Beyond the liquid inside, a bottling in the year the Second World War ended reminds us of the resilience of winemakers in the face of even the greatest obstacles.
RIDGE, CABERNET SAUVIGNON, EISELE 1971
A true unicorn wine, if ever there was one, the Ridge “Eisele” 1971 is a wine that was only ever made once! The fabled Eisele Vineyard is one of the great terroirs in Napa Valley, recognised for a breed and class of Cabernet Sauvignon that can rival any from around the world. Still produced under an eponymous name, but also famously produced by Araujo and Joseph Phelps for many years, Eisele Cabernets enjoy a place in the pantheon of great Napa wines. In 1971, Paul Draper and Ridge only produced this wine one time, but stories of its age-ability, structure and rarity have made it a treasure.
HERMITAGE ROUGE 1990 JEAN-LOUIS CHAVE
Produced by Gerard Chave in the last years before he welcomed son Jean-Louis to run the domaine, the 1990 Hermitage is one of those true stunners in a long tradition of muscular yet elegant Syrahs that are coaxed from the steep hillsides of the Northern Rhône valley. Farming this land has been in the Chave family’s heritage since the 1400s, and you can see a deep understanding of Syrah at its apogee in the dark, brooding, yet somehow generous and lively 1990.
ORNELLAIA BIANCO 2014
From the vaunted Super Tuscan Tenuta del Ornellaia in Bolghieri, this coveted white wine from sandy Tuscan soils is seeing its second ever vintage released in the 2014. Its inaugural release, the 2013, was offered as an exclusive to United States collectors in last year’s Sotheby’s Wine sale, Finest and Rarest Wines Featuring Ornellaia Archivio Storico, and the 2014 will be offered to collectors in the same manner this year. A unique blend of Sauvignon Blanc and Viognier, the Ornellaia Bianco has the makings of a true vinous iconoclast.
Natural light benefits us in ways we might not even consider. Not only is a home with good natural light perceived as more warm and inviting than a darker dwelling, but it’s also better for our physical and mental health. And more natural light means less artificial lighting, so you can reduce your energy bills by up to 33%. Here are four ways to maximize natural light in your home.
Design for the Exposure
183 Wellington Street West, Suite 4904, Toronto, ON
If you’re building a new home or looking to purchase one with great natural light, look for one where the rooms used most often during the day have southern exposure. For most people, that’s the kitchen and family rooms. If your property has sufficient privacy, floor-to-ceiling windows offer spectacular natural lighting opportunities.
Use Effective Window and Door Treatments
#3001 – 50 Yorkville Ave, Toronto, ON
The right window treatments maximize the light available in each room, regardless of directional exposure. Light-coloured and light-weight draperies or curtains absorb less natural light than dark or heavy fabrics. Don’t forget the doors: exterior and interior doors with glass panels bring more light into your home.
If feasible, consider replacing smaller windows in rooms with natural light exposure with larger ones. Even the best window treatment can’t make up for a limited amount of light entering the house.
Make Use of Mirrors
39 Queens Quay E #1401, Toronto, ON
Mirrors can enhance natural light in a sunny room and make a dark room appear less dim. In a dark area, large mirrors that face each other produce more light with their reflections. Convex mirrors are especially useful for creating the illusion of light and space.
But mirrors aren’t the only decorative objects that reflect light. Polished or metallic light fixtures, appliances and objets d’art can all make a room look brighter, too.
Pick the Right Colour Scheme
300 Rue des Cimes, Shefford, QC
When choosing a colour scheme, look to the light. As the sun changes during the day, it affects the colour of a room. White or neutral walls maximize light in a room, but you may not want to live in a completely neutral colour zone.
For rooms with a northern exposure, a bold colour might look better than a light shade. A room facing east gets strong morning light, so complement it with yellows or reds. The opposite holds true for west-facing rooms, as morning light is weak but evening light is soft and warm. Cream or green are good choices to make the most of light in these rooms.
When choosing colours, examine swatches in the rooms you plan to use them for at varying times during the day. A hue you love in the store might not fit as well in your home setting.
By designing effectively and combining the right window treatments, colours, and decorative objects, you can maximize the natural light in your home. Your home will look beautiful—and you’ll feel better, too.
Looking for more renovation ideas that will add value to your home? Consult our suggestions for Environmentally-Friendly Upgrades.
Toronto city staff are looking for feedback from the public Monday evening on three proposals for the re-design of King Street in a pilot project that will see an overhaul of the arterial road from Bathurst Street to Jarvis or Parliament Streets.
All three designs focus on transit, dedicating lanes of traffic to streetcar flow. "The overall objective here is to prioritize the transit movement," said Jennifer Keesmaat, the city's chief planner.
"A lot of people, quite frankly, have given up on transit along this corridor," Keesmaat said. "It's the most rapidly densifying area of the entire country and yet the transit service is pretty compromised."
See the three proposed plans below.
In the alternating loop model streetcars are given priority, with separated lanes in the centre of the street for both eastbound and westbound streetcars.
It is referred to as an alternating loop because every other block vehicle access is limited to local traffic, meaning delivery vehicles, taxis and people who work and live on the block. The alternating blocks will have full public access. No vehicles will be able to make a left hand turn, crossing the streetcar lanes.
In this model there is also extended "bump outs" on the sidewalk on the alternate side of the street being used for vehicle access, giving pedestrians more space.
As the title suggests, this design provides physically separated lanes for streetcars. This model keeps vehicles on King Street moving in both directions, but vehicles still won't be able to turn left and stopping curbside will be forbidden.
Unlike the alternating loop design, this model doesn't include additional space for pedestrians, instead keeping the sidewalk portion of King Street as it is now.
"This option means that you have servicing and loading happening right along the street side," said Keesmaat. "You no longer have street-side parking but you in fact, might run into a scenario where one car stops to drop someone off and all the other cars are stopped behind it because they don't have a way out."
With the transit promenade proposal, pedestrians would be given preference on the King Street corridor stretching from Bathurst Street to Jarvis or Parliament Streets.
"Imagine the sidewalk doubling," Keesmaat said.
It also includes accessible curbside boarding for streetcars at all stops along the street, and dedicated streetcar lanes, though they won't be physically separated.
Keesmaat says the alternating loops model is her favoured option, addressing both pedestrian and transit needs.
Still, she says "all three options have merits."
Coun. Joe Cressy says all three options would make a big impact, something he says the city needs with some 900,000 people in the downtown area every day.
"It's not working for streetcars, it's not working for drivers and it's not working for pedestrians," Cressy said.
But, he says, he's concerned that the third option will mean drivers are backed up with just the one lane of vehicle traffic.
"You know what that's going to do, the minute a taxi pulls over to let someone off, it's going to back everything up for everyone," he said.
The Trump Residences Toronto has been embroiled in some controversy since it's very inception. Originally the building at Bay and Adelaide was pegged to be a joint venture with the Ritz-Carlton, however, after false starts, the Ritz then moved over to it's current home at 183 Wellington. Shortly after the disintegration of that relationship, the Trump Organization came onboard lending its name to the Talon Development. The rest as they say is history.
There is no doubt the building offers some of the most exquisite suites in the city. It's location is nearly unparalleled, and it is a destination for athletes, celebrities and business elite. However, politics and deception of investors in the building have marred this development over the years. That all appears to be changing. Here's an excerpt from a Toronto Life article detailing the current state of the Trump International hotel and Residences Toronto - Marco
The following article is from TorontoLife Feb 2nd
Although Donald Trump has moved on to a more prestigious role as leader of the free world and full-time Twitter antagonist, he’s still the face of a retail, real estate and hospitality empire with interests around the world—including in Toronto, where the Trump International Hotel and Tower has been tarnishing the Trump brand’s gilded patina practically since opening day. First there were lawsuits by buyers who say they were scammed into purchasing worthless hotel units, then there were structural issues with the tower’s giant spire, and now, finally, the tower is up for sale. Here’s everything you need to know about the status of Trump’s Torontonian outpost.
Trump has little to lose beyond his reputation
Although Donald Trump’s name is all over the Trump International Hotel and Tower, and although he, Ivanka, Eric and Donald Jr. all attended an opening ceremony in 2012, his actual involvement in the project was minimal. Trump has no known ownership stake in the building. He merely licensed his name and image, as a marketing tool, to a Toronto developer called Talon International. The majority owner of the tower is Midland Development Inc., a company chaired by Alex Schnaider, a Russian-Canadian billionaire who made his money in the steel industry.
In addition to the licensing deal, Trump also holds the management contract for the building, which means an arm of his corporate empire is responsible for operations and upkeep on all the hotel and residential areas. The exact terms of Trump’s deals with Talon are confidential, but, on Trump’s pre-election financial disclosure form, he claimed to have received $611,864 in management income in 2016.
The project’s actual owners won’t own the place for much longer
There have been lots of headlines saying that the Trump International Hotel and Tower is for sale, but the reality is a lot more complicated than that. When Schnaider and his business partners built the tower, they, like most developers, didn’t do it with their own money. Instead, they arranged a complex, $300-million loan agreement with Raiffeisen Bank International, an Austrian financial institution. Talon International used the money to finance the purchase of at least some of the land upon which the Trump Tower sits and then, eventually, to build the tower itself.
In the normal course of things, a developer pays back its debts using proceeds from the sale of units in the completed building. But sales of units in the Trump Tower were slow, and Talon had to go back to its lender twelve times for extensions and other adjustments, before finally defaulting on the loan in 2015. In September, Raiffeisen Bank sold Talon’s debt to JCF Capital ULC, a private investment firm headquartered in the U.S. Now, Talon owes more than $300 million to JCF.
JCF isn’t counting on Talon suddenly getting its act together. In November, the firm convinced the Ontario Superior Court to place the Trump Tower in receivership, meaning the building is now temporarily in the custody of a court-appointed officer, who has the authority to make business decisions on the property’s behalf, with an eye toward repaying anyone who loaned the project money.
Because it would be difficult (and possibly futile) to try recouping Talon’s debt by selling off each individual unsold unit in the building, the receiver instead won court approval for a bulk sale of every part of the tower that remains in the developer’s possession. This includes all the unsold units, and there are a lot of them: as of October, Talon still owned 74 out of 118 of the building’s residential condo units, and 211 of 261 of the building’s hotel/condo rooms, which were sold as investment properties to buyers looking to share in the hotel’s profits.
The official asking price is $298 million, but the tower could sell for significantly less
When someone sells a small piece of real estate, like a house or a condo, they set an asking price and see if anyone is willing to pay it. In the case of something as large as the Trump Tower, the process is a bit more complex.
JCF has made what’s known as a “stalking horse offer” of $298 million on the Tower. This means that if no other qualified buyers are willing to offer a sum of money larger than that amount, JCF will take ownership of the property at that valuation. But the payment wouldn’t be in cash. JCF pegs Talon’s debt at well over $298 million, so, rather than paying for the tower, the investment firm would simply lay claim to it, in compensation for the money owed to it by Talon. JCF bought Talon’s debt from Raiffeisen Bank at a discount, so the actual purchase price would be far below face value.
We’ll know if there are any other buyers interested in the property on February 15, when the first round of bids is due.
The Trump name will probably stay on the tower—at least, for now
There was a flare-up of hostilities between Talon and the Trump organization last year. Trump took Talon to court in a preemptive attempt to prevent the developer from moving to oust Trump’s hotel management company and hire another building manager. The two sides tried to resolve the conflict in mediation, but the tower’s financial situation deteriorated before they could do so.
The receiver isn’t making any move to remove Trump’s name from the building, meaning it will be up to the new owner to decide whether or not to try to sever the connection with the president and his family.
But Talon’s legal problems will go on
In October, a pair of people who bought units in the tower won an appeal against Talon. Under the terms of the court decision, both of those purchasers were allowed to collect damages, and one of them was allowed to rescind his sale agreement. It was a watershed moment in a long legal battle that began several years ago, when buyers accused Talon of using Donald Trump’s image to misrepresent the tower as a savvy investment opportunity, leading some unit owners to suffer huge financial losses when the hotel’s bookings lagged behind expectations. As a result of the ruling, there are 20 other Trump Tower unit owners who may now be entitled to similar compensation.
It’s a sign of what little $1-million now buys in Toronto’s soaring housing market – a tear-down home on a skinny lot fetching a premium price in a neighbourhood known for its blue-collar roots.
Last week, the detached bungalow with an asking price of $679,900 in the Greektown neighbourhood on Toronto’s east side attracted a bidding war.
This tiny Toronto house sold for $370,000 over asking (The Globe and Mail)
The front yards in the area, near the major intersection of Danforth Avenue and Pape Avenue, are often taken up by parking pads barely large enough to hold a car. Some properties have a small patch of grass that residents on the Prairies would scoff at for being a poor excuse for a lawn.
A million-dollar property is far from luxury in Toronto.
The sellers of 69 Muriel Ave. have owned their home for a half-century. They listed their property on Jan. 23, and began accepting offers on Feb. 1. “Attention builders, contractors, renovators and envisioners,” the listing blared. “Don’t miss out on this chance to build a fabulous new home.” For good measure, the feature sheet added: “With front pad parking!”
On Feb. 2, after only 10 days on the market, the bungalow built in 1912 sold for an astonishing $1,050,000.
In 1966, the owners paid $10,000 for their modest abode. Adjusted for inflation, it works out to roughly $73,000 today.
The residence had an assessed value of $443,000 on Jan. 1, 2012, and $645,000 on Jan. 1, 2016, according to Municipal Property Assessment Corp.
Multiple bidders competed for the tear-down on a tiny lot measuring 20 feet wide by 78 feet deep. The winning bid emerged 54 per cent above the list price and caught industry observers by surprise – $370,100 higher than the asking price.
The Royal LePage listing, which is slated to close in mid-March, underscores the scorching real estate market in the Greater Toronto Area.
For the GTA as whole, the average sales price for detached houses, condos, townhouses and other housing types reached $770,745 last month, up 22.3 per cent from January, 2016.
The average price of detached houses sold last month hit $1.34-million within the City of Toronto and $999,102 in the suburbs, rising 26.8 per cent and 27.8 per cent, respectively, compared with a year earlier.
Bidding wars and offers that are well above the list price are commonplace in the GTA’s skyrocketing housing market, said John Pasalis, president of brokerage Realosophy Realty Inc. “People are getting a little too excited,” Mr. Pasalis said in an interview.
Views vary on how much limited supply is behind the sharp rise in prices versus robust demand from foreign and domestic buyers.
Sales volume has been surging while listings shrink in the GTA. “Until you see a very sustained period of time where listings growth is outstripping sales growth, then we should continue to see strong price growth,” said Jason Mercer, director of market analysis at the Toronto Real Estate Board.
“If you’re a level of government that is looking at policies pointed at the housing market and affordability, as we move through 2017, those policy discussions and direction have to be pointed more so at the supply side of the market,” Mr. Mercer said.
Last October on behalf of the Toronto board, Ipsos surveyed local realtors about foreign-buying activity. Realtors told the polling firm that fewer than 4.9 per cent of house sales in the GTA involved international buyers.
“I would take issue with saying 4.9 per cent is a small number. I think it is a very significant number,” Bank of Montreal chief economist Douglas Porter said. “In what is already a very tight and hot market, to add net new buyers can have a very big influence on prices. With modest employment growth, there is something else going on.”
While Mr. Porter said an array of factors contributed to the GTA’s booming housing market, he believes the turning point came when the B.C. government implemented a 15-per-cent tax on foreign home buyers last August in Metro Vancouver. He argues that there has been a shift of attention among some foreign buyers to the GTA and the Victoria region.
Real estate website and brokerage Zoocasa said Wednesday that Toronto townhouses will be a hot commodity in 2017 as prices for detached properties jump even further out of reach for many consumers.
Back on Muriel Avenue in Greektown, future listings for skinny lots in the East York area will use the sale of the tear-down as a rough guide for setting real estate values.
The theme in Toronto has been one of rapidly rising prices. A renovated row house on the same street sold four months ago for $1.15-million after five days on the market, much higher than the list price of $899,000. A renovated detached bungalow on nearby Wiley Avenue sold last April after one week on the market for $776,000 – well above the asking price of $599,000.
Higher-end Toronto neighbourhoods with larger lots are also experiencing price spikes. The area that includes Bridle Path mansions saw an average price for detached homes of almost $4-million last month while midtown sales, including in the Annex and Casa Loma, averaged nearly $1.9-million.
~Courtesy of the Globe & Mail
"Sold Over Asking" -- a phrase those watching the Toronto housing market hear quite frequently these days.
This phenomenon has captured the attention of the news media, who have crafted such intoxicating headlines as "GTA house goes for $400,000 over asking: 'It was like a rock concert'" as seen in the Toronto Star, and "Toronto house sells for more than $1M over asking" as reported by Global News. Agents also cash in on the glamour, adding massive "Sold Over Asking" banners atop their sold signs.
With homes regularly being "Sold Over Asking," what does the phrase really mean?
A "sold over asking" sign is on display on a house for sale in Toronto, Ont., Oct. 21, 2016. (Photo: Hyungwon Kang/Reuters)
As reported by TheRedPin.com, out of a total of 17,862 homes sold in Toronto, 6,583 sold over asking, or 37 per cent. Markham had the second-highest numbers, Richmond Hill third.
The report said the number of freehold homes, which include detached, semis and townhomes, that sold by at least 10 per cent over asking last year clocked in at 16,000 in the GTA -- up more than 160 per cent from 2015. That's 1 in 5 (22 per cent).
Likewise the number of GTA freeholds that sold by at least 20 per cent over asking reached 4,800 or six per cent -- up more than 251 per cent from 2015.
Traditionally priced homes in the GTA are becoming few and far between. In a market where inventory is low and demand is high, prospective buyers are bound to see higher than normal prices. The homes in the aforementioned news headlines both sold for market value.
Sellers and listing agents are loving this flurry of fruitful activity.
In many cases, realtors and their seller clients are strategically pricing their homes competitively and letting a property go to the open market to create a sense of affordability and desire. This makes the terms "asking price" and "listing price" irrelevant. Case in point: Some realtors are listing their properties at $1, so those will obviously sell over asking. Further, introducing terms such as "holding back" and "offer date" have become the new normal, creating an auction-like setting for prospective buyers, which leads to the coveted "Sold Over Asking" designation.
On one hand, sellers and listing agents are loving this flurry of fruitful activity. They are obtaining record-setting prices for homes in record-setting times.
Prospective homeowners hoping to buy, however, are faced with largely stressful, emotional experiences in which many end up empty-handed.
When individuals are ready to submit an offer, there are many different types of buyers they might be competing against. There is the buyer who might have just begun looking, who submits an offer under asking. This unfortunately drives up the purchase price, as they appear to be competition. There are usually a couple of strong offers over asking, some with conditions and some without, and these are probably in and around the true market value of the home.
Sometimes, one of the offers is substantially higher than that of the closest competitor. That offer can be $10,000, $25,000, $50,000 and in some rare circumstances in excess of $100,000 more than the next highest offer, usually with no conditions, or what we call a "firm deal." This buyer is not just any buyer, but the "Right Buyer."
This Right Buyer is what every listing agent and seller dreams of. He or she is often fed up with looking, fed up with losing other properties, and in some cases is an investor or foreign buyer. The public is led to believe that all properties are selling for hundreds of thousands of dollars over the asking price, but the important question to ask is how much the home sold over market value. Market value is much different than asking price.
Regardless, many buyers are sitting on the sidelines waiting for demand to lessen, supply to increase or rules to change so there is transparency within the offer system.
If you are a prospective buyer, choose to work with a realtor who will leave no stone unturned.
Elsewhere in the world, like in Australia for example, agents choose between arranging a traditional offer or hosting an open auction. Just like an art auction the house goes up for sale with a starting price, and a crowd openly auctions for it. Everyone can hear what the top bid is, and the choice is theirs if they want to go higher. Having a system like this could certainly end the hysteria and the act of overpaying for a property. The Right Buyer would have to outbid his or her competition, but would know by exactly how much, so we probably wouldn't see someone outbid their closest competitor by ridiculous amounts, as they wouldn't have to.
Would something like this work in Toronto? It could certainly cool the chaos.
In this lively market, it is that much more imperative to choose the right real estate agent. Sellers, interview several prospects. Choose someone who knows how to make your home stand out and can find you that Right Buyer to get you the best price for your home. Be sure they have a steadfast marketing plan and they go over the shortfalls of the standard listing agreement.
If you are a prospective buyer, choose to work with a realtor who will leave no stone unturned, someone who will do anything to help you find your home and has the tools to make your offer stand out in a multiple offer situation.
As for "Sold Over Asking," what it really boils down to is the house was competitively priced to attract that coveted Right Buyer.
~Courtesy of the Huffington Post
What is the “Trump risk” to Canada’s economy and the lofty real estate markets in many big Canadian cities?
Royce Mendes, senior economist at Canadian Imperial Bank of Commerce, is one of many Bay Street players grappling with the question. Mr. Mendes recalls the uncertainty of U.S. election night, when he finally left CIBC’s downtown office tower at 3 a.m. Financial markets have been weighing the impact of President Donald Trump’s tweets and pronouncements ever since, he says.
The new U.S. administration’s impact on the outlook for the Canadian economy is mixed: Alberta could receive a boost from Mr. Trump’s stance in favour of pipelines, Mr. Mendes notes, but his protectionist impulses could put this country at a disadvantage.
“I don’t think I’ve ever heard him say he would make Canada great again,” Mr. Mendes told a recent gathering of Sotheby’s International Realty Canada agents and clients.
The Bank of Canada, meanwhile, has its own aims: The central bank is warning Canadians that the housing market is a major risk, he points out, and policy makers would like to see the country’s economy move away from debt-fuelled investment and real estate.
In 2015, housing accounted for one-fifth of Ontario’s growth in gross domestic product and one-third of British Columbia’s.
The economy hasn’t been getting the help from exports that many economists expected to materialize with the decline of the Canadian dollar against the U.S. currency in the past couple of years, Mr. Mendes adds.
Even though the loonie has fallen, some other U.S. trading partners such as Brazil, Great Britain and Mexico, have seen steep depreciation in their own currencies, and they have been able to sell more to the United States as a result.
Mr. Mendes is forecasting that the dollar will fall to 72 cents (U.S.) by the third quarter from its recent level of about 77 cents.
Mr. Mendes acknowledges that it’s difficult to forecast around “Trump risk” because of the contradictory signals coming out of the United States. But with threats of a border-tax adjustment and renegotiation of the North America free-trade agreement, there’s a chance his 72-cent forecast will turn out to be too optimistic, he acknowledges.
Mr. Mendes figures that trade with Mexico and China will draw more of Mr. Trump’s attention because of the U.S. trade deficits with those countries compared with Canada’s more balanced trading relationship.
Some market watchers see it as a positive that Mr. Trump has revived plans for TransCanada Corp.’s Keystone XL Pipeline, which would run from Alberta’s oil sands to Nebraska.
However, Mr. Trump’s threats of tighter trade restrictions would push the U.S. dollar up.
“If he thickens borders in the United States, the U.S. dollar shoots up. He has to recognize that.”
That in turn could do even more damage to the U.S. manufacturing sector, which has already been decimated by the strength of the U.S. dollar.
While speculation that the United States will cut taxes, boost spending and dismantle regulation has sent equity markets soaring to new records, Mr. Mendes says his forecast for U.S. economic growth moved up only by a barely perceptible amount.
For example, Mr. Trump is promising to bring back jobs to the United States but Mr. Mendes doubts that he will succeed.
“These policies sound great in theory but when we work them out, they don’t actually translate into massive economic growth.”
The United States central bank, the Federal Reserve, has already raised its key interest rate and forecasters expect more hikes. In Canada, many are expecting the central bank’s next move will be down.
Mr. Mendes says rapidly rising rates would definitely be a risk to Canadian housing but he doesn’t expect that to happen.
As for governments on this side of the border, they need the tax revenue generated by the housing market, so Mr. Mendes figures politicians will be careful not to tinker too much.
“When policy makers talk about cooling the housing market, they have to worry about cooling it too much.”
Canada likely won’t see higher short-term interest rates before 2018, Mr. Mendes says, and he is not alarmed by the overall indebtedness of the average Canadian.
Only a drastic hike in rates would cause severe pain, in his opinion.
A less dizzying climb in prices in the Toronto market would help, he adds, while markets in Calgary, St. John’s and Vancouver have already cooled.
Mr. Mendes is not worried about the rapid rise in real estate prices in Toronto in the past couple of years because he says that employment has been strong in Ontario and lots of immigrants and migrants from Alberta have been settling in the Greater Toronto Area.
He adds that buyers who are looking for an increase in value from condo units should be cautious about purchasing now, but investors who simply want cash flow will find that this is a good time to be offering units for rent.
If fiscal easing in the United States drags up Canadian interest rates or the U.S. government takes a more aggressive trade stance, Mr. Mendes would be more pessimistic about the outlook for Canada.
“Those are macro-economic risks that would hurt the whole economy, not just housing.”
In the market for single-family houses in the GTA, he still predicts price increases, but not at the same velocity as in recent years.
Mr. Mendes says Canadians are starting to take on too much debt but the level is still not as high as it was in the United States when their housing market slid into decline in 2008.
The Bank of Canada will be able to navigate the shifting landscape, he believes.
“I would put my faith in their getting it right.”
~Courtesy of the Globe & Mail
The first chapter of this year’s Toronto-area real estate story reads a lot like the last, with January delivering a 22 per cent year-over-year increase in home prices, according to the Toronto Real Estate Board’s (TREB) benchmark index.
The average selling price of a home in the region was $770,745 last month on the index — $140,552 more than a year ago, TREB reported Friday.
Low-rise housing — detached, semi-detached and town homes — saw the largest year-over-year price growth of 26 to 28 per cent compared to last January. But condo prices also rose 14.5 per cent across the region, to an average $442,598.
Condos also saw the greatest gains in the number of sales, increasing 26.7 per cent across the region, year over year.
Overall, the number of re-sale home transactions of all types rose 11.8 per cent compared to January 2016. There were 5,188 sales last month, compared to 4,640 last January.
But with the exception of condos, the majority of sales were in the 905 communities surrounding Toronto.
Detached home sales dropped 5.5 per cent in the city, compared to an 11.9 per cent increase outside Toronto's borders.
"You can't buy what's not available," said Jason Mercer, TREB’s director of market analysis, who noted that inventory of re-sale homes in the Toronto region is about half of what it was last year.
The shortage is particularly severe in Toronto.
"If you look at the 416 as a whole, 50 per cent of transactions are accounted for by low-rise (detached, semi-detached and townhomes) and so when you're seeing the detached number off on a year-over-year basis, mainly that's just a lack of inventory," he said.
But that supply shortage has also affected the luxury condo market in Toronto, said Royal LePage agent Caily Heaps Estrin, whose practice is concentrated in the core.
She called January a "decent start" to the new year.
"We've seen a little more activity than we did last year, but I wouldn't say it's as dramatic as these stats would have you believe, unless you're working a broader market," she said.
That lack of inventory and Toronto prices are pushing buyers outside the city limits where there are more homes to buy, said Heaps Estrin.
"Our turnover is so low in the central core because people who would typically be moving out of their forever homes and downsizing are finding it hard to get into a size they would like to retire to, whether it's a condo or a smaller house," she said.
Heaps Estrin said she's had clients lately indicate that the municipal land transfer tax, which TREB says costs the average home buyer in the city about $11,000, is increasingly a deterrent to moving house in Toronto.
Toronto city council is looking at harmonizing that tax with the provincial land transfer, which would add $750 a year to all but first-time buyers, who would likely get a bigger rebate to compensate for that difference.
TREB is urging the government to address the supply side of the housing sector in areas such as land use policy instead of focusing solely on demand by adjusting lending rules.
New-home builders are also pushing the province to go slower on its new population density targets in the Toronto region and municipalities to clear residential development approvals sooner.
TREB is predicting a strong year for Toronto region real estate with gains between 10 and 16 per cent with single-family homes in greatest demand.
But with half of home purchasers expected to be first-time buyers, condos are also expected to continue to perform strongly.
"As you continue to see prices increase, you are going to see people look at other home types within the housing continuum. Some of that focus, especially when you're talking about first-time buyers, is going to be on that condominium apartment segment," said Mercer.
"Prices are lower and it makes sense that's the entry point for these households," he said.
Right At Home Realty agent Ian Serota says he's not convinced that the cooling off that was predicted for 2017 will actually happen, although rising interest rates — something that began late last year — could have an impact.
But the employment picture, a major contributor to the property market's health, continues to look strong.
"Job growth outside of Toronto is minimal and there is no reason for people to move to another city," he said.
Detached houses in Toronto remained the most expensive category, averaging $1.34 million last month. But the cost of a detached house in the 905 was also edging up to about $1 million.
In the Toronto region, Simcoe registered the greatest price gains — 28.46 per cent — followed by Durham Region, where the index registered a 26.43 per cent price increase year over year. Homes in Toronto saw the lowest increase of 16.33 per cent.
~Courtesy of the Toronto Star