Excerpted from the Financial Post
May 6, 2014
Canada's million-dollar housing markets: Look out Vancouver, Toronto's moving in
By Garry Marr
Toronto is on the verge of becoming the second Canadian city where the average price of a detached home hits the $1-million mark.
"We went over that mark a few years ago in Vancouver and now we are going to hit it in Toronto. It's not inexpensive to own a house in the city of Toronto," Brookfield Real Estate Services Inc. president Phil Soper said Tuesday after the the company's annual general meeting.
The Toronto Real Estate Board released its results for April sales Tuesday and those results show increased pressure on the single family portion of the resale housing market, pushing prices in the old City of Toronto close to $1-million for a detached piece of property.
"The good news is if you move outside of Toronto proper, into the suburbs, or into the ever important condo sector there is still product available across the price gamut," said Mr. Soper.
TREB said there were 4,878 detached home transactions across the city proper last month and the average price jumped to $965,670, a 13.2% increase from the average sale price for the same month a year ago. The average price of a semi-detached home reached $702,332 in the city, an 18% increase from a year ago.
Developers have long complained about government land use policies they maintain have restricted construction and created the widest gap between high-rise condominiums and single family homes in Toronto history.
"Price growth for the GTA as a whole was driven by the single-detached, semi-detached and townhouse market segments in the City of Toronto. So far this year, there has been no relief on the listings front for these home types in many neighbourhoods in Toronto and surrounding regions," said Jason Mercer, senior manager of market analysis with TREB. "Until we see a marked and sustained increase in listings, we should expect to see the annual rate of price growth above the long-term norm."
Toronto would just be entering lofty territory Vancouver has long occupied. The Real Estate Board of Greater Vancouver said this month the average detached home in the city sold for $1,198,828 in April.
Even in Toronto's 905 belt, the average sale price of a detached home reached $645,179 in April, a 9.6% increase from a year ago. By comparison a condominium apartment in Toronto's suburbs had an average sale price of $296,078.
Mr. Soper, who is also chief executive of Brookfield's Royal LePage brand, told shareholders at its AGM that the first quarter of this year was soft because of a winter that was unprecedented in terms of its impact on the Canadian market as a whole.
"The market came roaring back to life in the later weeks of the quarter and April was a very strong month," said Mr. Soper.
Brookfield is mostly shielded from the cyclical nature of the real estate market as 71% of its income comes from fixed contracts with brokers. The other 29% comes from a variable royalty stream.
"There was a downturn that lasted from the middle of 2012 to the middle of 2013. While home prices were not affected by the downturn, we did see double digit declines in volumes of homes sales during that downturn," said Mr. Soper.
Over the past 35 years though, the real estate industry shows a compound growth rate of 9.7% annually with about half of it coming from volume and half of it coming from price.
Brookfield itself is increasing its dividend to $1.20 per share in 2014 after three years of it being stuck at $1.10 which Mr. Soper said was partially due to taxation resulting from the company's conversion to a corporation from an income trust.
twitter.come/dustywallet
National Post
2014 National Post. Permission granted for up to 5 copies. All rights reserved.
Photos View photos
zoom
The towering brick house on Galley Ave. has the dubious distinction of being among the best — and absolute worst — houses for sale in Toronto right now.
It’s grand in both size and location: a five-bedroom, three-storey detached house within an easy stroll of sought-after Roncesvalles Village.
Realtor Chander Chaddah, who listed the home for $649,900 and has set a 4 p.m. Wednesday deadline for offers, is brutally frank with anyone thinking they’ve tripped across a big bargain.
“Please leave the kids at home when coming for a visit,” Chaddah warns right on the MLS listing. “Not for the faint of heart.”
The furnace hasn’t worked in years. Windows are missing. The roof needs replacing. The wiring is knob and tube.
Yet hundreds of curious folks — many of them desperate to get a toehold in the Toronto market — have fought back their shock the last few days and scaled the steep stairs to the third floor, past the peeling faux-wood wainscotting, the soot-smeared kitchen and the bathroom where plastic, duct tape and thumbtacks lost their battle long ago against a badly leaking roof.
(It could have been much worse if it wasn’t for kindly neighbours who got the elderly resident help and then filled two massive renovation bins with mouldy contents before she and her daughter put it up for sale.)
The house needs a gutting and about $400,000 in renovations to remove the layers of soot spewed from kerosene heaters used to keep the place warm in winter.
Realtors are warning clients the house could go for $750,000 to $800,000, given that spiffed-up neighbours have sold for well over $1 million.
“We may get more than a dozen offers here,” says Chaddah, in the wake of a 32-person bidding war that recently drove a Junction Triangle home to $210,000 over the $639,900 asking price.
“There are two types of houses that have the potential to blow the roof off in this market — the (renoed showcase) Martha Stewart house and the other end of the spectrum, Galley Ave., which is raw and needs everything.”
What makes homes like this particularly unpredictable is that they will draw two competing buyers: “End users” willing to spend what it takes to put down roots in desirable neighbourhoods close to the core, and contractors searching for increasingly rare raw material in the city, rundown houses in need of saviours.
“There was a time when you could go in houses like this every week,” says Chaddah, a Toronto realtor for almost 30 years. “Now these houses are few and far between.”
The old real estate axiom “location, location, location” doesn’t mean what it used to in a Toronto market that’s become a magnet for young professionals and families looking to ease their commute to work.
“Now we’re seeing there really are no bad locations in Toronto. There are just some locations that are more desirable than others,” says east-end realtor Desmond Brown.
Designer Alex El-Asfahani and her contractor brother Oliver Wigington have turned their passion for properties in need of a complete gut and a critical eye into both a business model and a spectator sport via the Facebook site for their year-old company, ModernKind Inc.
So far, they have bought, renovated and sold two east-end homes — one on Ivy Ave., the other on Ashdale Ave. — and are finishing a third home, on Logan Ave., which will go on the market in April.
“We don’t like to think of ourselves as flippers, what we do is transform houses,” says El-Asfahani, who believes breathing life into overlooked homes breathes new life into whole neighbourhoods, too.
She admits it is a risky strategy — one that makes even her realtor nervous: “I’m just looking for houses that have soul. I think we’re at the point in the city where the dream home … is eroding because there are fewer and fewer homes that can offer all that in (what’s considered) a great area.”
But renovating is no bargain, El-Asfahani stresses, part of the reason she and her brother post many of the gritty ups and downs of their renos on Facebook.
They paid over $600,000 for the Ivy Ave. house, in the Greenwood and Gerrard St. E. area, when you factor in land transfer and other upfront fees. It cost well over $265,000 to rebuild from the inside out.
But it drew so many interested buyers, many of whom had never been to the east-end neighbourhood before, it sold for a price that shocked even their realtor — $912,000 — a record for the area.