How the Toronto Real Estate Market has Evolved in a Decade

Values in real estate will either slowly or rapidly trend upwards over time. You can look back anywhere from 5 to 50 years and see a steady rise throughout the decades. Regardless of what transpires nationally or globally, Toronto has and will remain secure. Prices of condominiums, townhouses and detached homes have all increased substantially in the past 10 years. This is due in large part to the ever increasing demand created through significant population growth from immigration and the echo of the baby boomer generation. Our job sector is also what appeals to so many, as we are heavily service based and entertainment industry driven, with corporate offices of the world’s largest brands, including FaceBook and Coca-Cola. Our technology industry continues to boom, rivaling that of Silicon Valley. The fact that we have several of the best schools in the country is also what aids to the ever increasing demand.

The biggest change since 2009 was a vast increase in population, which the market undoubtedly reacted to. We have an average of 150,000 people coming in year over year from outside the country and other provinces. The Greenbelt Legislation maintains that we keep a certain ratio of natural landscape which has hindered are ability to build out. This has resulted in a Manhattanization effect, as we become more dense, we become more similar to New York. High-rise condos are continuously dominating our skyline as we have moved so far away from the principal residences being detached houses.

Property values specific to the GTA market double approximately every 10 years. In the city of Toronto, we have seen a drastic increase in gain on all forms of properties. The average price as of 2019 is $826,034, which is an additional $470,000 from 2009. Even with slight dips in the market, the values have raised. Condominiums, town houses and detached homes are all following this trend as demand each year is surpassing supply.

Buyer attitude has also evolved as the market changed. As population has continued to increase, people became more inclined to live in smaller spaces. There was essentially no choice but to become more comfortable with it. In this more business-focused world there is more emphasis on convenience and proximity to work. There is also an increased desire to experience the community. The biggest trend we saw in accommodations was people purchasing more condos than detached houses than they were in 2009. It all comes down to affordability.

The United States suffered from the Great Recession in 2008 due in large part to the housing crisis, this also impacted us as well due to our deep ties. This created a large dip in values for us the following year, but it became a significantly less issue in 2010. The Canadian economy is secure enough that it will ride back up. In order protect yourself in real estate from significant financial loss, ride out the recession until the market improves if you have the option.

The main thing influencing purchasing other than availability is government policy. The mortgage stress test was introduced in 2017 to protect buyers from mortgages they might not be able to afford by requiring a higher income than necessary to attain it. This diminished housing sales in 2018 as not only did it make it more difficult for people to buy, but many were hesitant as they didn’t know how this policy would affect them. The same year, the Toronto Fair Housing Plan was also implemented to create more affordable housing and to add an additional tax to non-resident purchasers. This resulted in it being more difficult for outside investors, thus creating an additional challenge for developers to create more projects. The process was made all of the more difficult with extended project approvals which were intended to create more affordable residences. The added increase of development charges put more restraint on builders giving them less opportunities to build.

Chris Slightham, President of Royal LePage Signature Realty, with his assembly of 1,100 realtors has a strong pulse on the current and future trends. When asked about what he predicts for the next 10 years in the GTA, he sees the trend of density and population only increasing. “The growth trends that we see happening now will only continue to increase as the data suggests this in the decades to come.” The main struggle that purchasers will have to deal with is more affordable housing. To combat this, we need government policies in place that directly aid home owners and increase the speed of approvals so that we can catch up with demand.

Regardless of a recession and policy intervention, over time housing values will not stop rising in the Greater Toronto Area. There is no indication that our population will stop increasing due to the continuously increasing potential of what Toronto has to offer. In real estate, all the data suggests success comes with patience.

Written by: Spencer Maxwell

Attention First-Time Home Buyers!

Being a first time home buyer can be a very stressful process, but there is a right way which we see accomplished thousands of times a year. If you do your due diligence it can be rather comfortable. Before you begin to look at specific homes you need a game plan. You need to hone in on your area to determine the general price point. Figure out the specific factors that reach your goals for location and the property itself. How much space do you need? Do you need a large backyard? Do you have kids? Are you thinking about kids? Is having a school nearby important? How is transportation or transit in your area? What are the area amenities? Are you close to work? How is traffic in the area? Is there good shopping nearby? Once you’ve determined every factor about sizing and location, you can proceed to choosing your preferred area.

The next step we highly recommend is getting an independent mortgage advisor. They essentially do all of the research for you, and you don’t need to pay them as their fee is paid by the lender they get the mortgage from. This is more advisable than going to the bank in most cases, as they might not offer the best plan for you because the blue bank won’t tell you if there is a better rate and terms at the red bank across the street. Independent mortgage advisors have access to hundreds of lenders across the country. They will let you know how much financing you can be approved for and inform you of what you’re monthly obligation will be which includes the property tax and condo fees (if applicable). They will also tell you about all of the upfront costs, including the Toronto and Ontario land transfer tax; both of which you can get a rebate on if you spend $400,000 or more as a first-time home buyer.

Utilizing a certified home inspector is something we strongly advise. They test the entirety of property with specialized tools to ensure that everything is structurally sound. A home inspector will tell you if anything from the windows to the furnace needs to be updated and when. If something doesn’t meet your criteria you have the option to negotiate for a better deal or back out of the sale if the offer is conditional. The cost of their services is about $500.

The next person we advise for your team is a buyer agent specific to the area you’re looking in. The Greater Toronto Area is approximately 75 km, so you want someone who knows the subtleties of the micro markets you’re after, which there is approximately 250 of. Any large city has their own different pockets which you must be aware of, a specified realtor for that area will have the necessary information to understand the actual property value. Ask them for a list of the types of homes you are interested in that have sold in the last 90 – 120 days. Comparing prices is the best way to determine true market value. You can then get a list of everything that is available for sale in your area. We would advise looking at homes 9 – 5 on Monday through Friday as that’s when your team is most available, the sellers aren’t home so you get more privacy while going through all of the fine details of the property and you get to avoid the real estate “rush hour” of buyers at peak busy times.

The fourth person we highly recommend is a lawyer specific to real estate rather than a general practitioner. Ensure they operate within the province, preferably within the area you are looking to purchase as they will be better informed to assist you. Getting your real estate lawyer early on is important as they may want to make changes to the Agreement of Purchase and Sale which can be done ahead of time rather than last minute. They charge a one-time fee rather than by the hour. Their fees and disbursements are typically $1800.

After the team is in place you are ready to go shopping. You need to look at your location, as that effects pricing and that’s where you will be residing. The layout is also important as it can’t be moved around, look at the size of the principal rooms, this also determines the price of the property. Don’t get caught up in the cosmetic things like the wallpaper or the smell, those are things that can easily be changed and are rather inexpensive. Those are actually things you can utilize to negotiate a better deal as it’s not up to par with the neighbouring homes. Some sellers use the strategy of pricing it low to attract more offers. Asking price is truly irrelevant, it always comes down to what comparable homes have sold for. After you’ve found a home you’re interested in your buying agent will draft an Agreement of Purchase and Sale, which we advise be conditional upon mortgage financing, home inspection and lawyer’s review of the condo status report (if applicable).

Once the financing, legal and inspection process are all complete then you send a waiver of fulfillment of conditions to the seller. This states that you are pleased with everything and you can proceed with the final sale. Being conditional gives you the opportunity to back out obligation free if you aren’t pleased with something. After you’ve gone firm on the deal, you can move in on the specified date and you now own your very own home.

Congratulations!

Written by: Spencer Maxwell

The Different Types of Investment Opportunities

A question we get asked frequently is: where do I invest my money? There are so many different types of real estate to choose from. You can pick a number of methods based off your comfort level and how much your willing to invest.

A pre-construction condo investment is a condominium which has yet to be fully built. It’s commonly done because the down payment is extended for a 2 to 2 and a half year period. The down payment structure is extended, which is why it’s such a popular option. There is the 10 day due diligence period, after which your money is nonrefundable.There is generally a big appreciation in value for future return. It may be undesirable for some as you are locked into a contract for years. You are buying from a floor plan so you can’t get the strongest feel of the space, you’re essentially buying it from paper. The typical cost of entry is approximately $100,000 for Toronto.

An income property investment is the second most popular type of investment. It can be a home that’s already on the market for resale, also can be a rented room inside of a home (ie basement apartment). This is one of the few options that provides income right away, but generally doesn’t have the highest payout. The mortgage is being paid right when you close. There’s typically a 20% down payment. The market is increasing 6–6.5% in passive appreciation, which means the value is appreciating while you own it. Your tenants are paying you and essentially your mortgage. Neutral cash flow is not uncommon, and not necessarily negative. Forced appreciation is your smartest option for this type of investment. This means you’re adding value to the home by adding little to big things, such as a basement apartment, renovating or adding new features. Managing a tenant does take time and effort, you have to ensure that they are satisfied with their living situation. So the more tenants you have, the more work you must put in, but also the more income you will receive. If you get approximately 15 or more tenants, you will need a property manager. It is an active investment, you have to work on it constantly and budget for maintenance. The typical cost of entry in Toronto is $130,000.

Student housing is very popular and essentially recession proof as people will always be going to school. It’s a passive or active investment depending on property management arrangements. Its typically located in AAA locations as major cities have large colleges and universities. There is an ongoing demand for this type of property. Always a big pool of prospective tenants, so the search is never a challenge. Always look up supply and demand of your particular area, you want to see if and where buildings are coming up. This investment generally gives you the highest positive cash flow of any of the asset classes. You as the owner definitely want to see the credit history from the student or parent. Luckily, there is a very low eviction rate. In major cities, students are generally staying for the whole year rather than just the school year now. But it is possible that you will have an empty property for 3–4 months. High tenant turn over is an issue. The maintenance schedule and budget is higher due to their more likely rowdy nature. The typical cost of entry in Toronto is typically $80,000.

Joint venture is when you partner up with investors together to obtain property while leveraging everyone’s ability for financing, management and repairs as a team. This is the best way to mitigate risk as you have a number of partners to fall back on if an issue does arise. Venturing into this method allows you to invest in more properties and also future larger projects. The biggest issue are that everyone’s goals need to match up, so there is obviously less control for all parties. The typical cost of entry in Toronto is $50,000.

Lease to own is one of the most common investments even though interest has dipped in the past few years. The investor essentially acts as lender with predetermined terms, tenant pays rent and eventually purchases the remaining amount in approximately 3- 4 years. It’s a very passive investment. The selling of the property is pre-determined, you know it will eventually sell once you have a tenant. It’s good strategy for young families or first time buyers. A negative aspect is that the money is typically tied up for the entire term until the sale. Getting qualified tenants is also a challenge and can be a long process as they would need to have approximately $15,000 and as well as pay approximately 20% off the monthly rent.

The final way to invest your money in real estate is equity deals. It’s essentially helping land developers raise capital. Most equity deals are eligible from an Retirement Savings Plan and Registered Retirement Income Fund perspective. Depending on who you are investing with you can sometimes choose your terms of the lending. This is another passive investment. Your capital is tied up for about a 4–6 year term. You may or may not have monthly or annual dividends with is type of investment. The typical cost of entry in Toronto is $30,000.

Written by: Spencer Maxwell

Yes, You Can Sell Your Own Home

Selling your own home can be such an intimidating process. It seems so daunting with all of the costs and the seemingly overly complicated steps. This is something that you can do yourself. Be aware that this process can’t solely be done on your own as you do need the assistance of a real estate lawyer, and we suggest a mortgage advisor. You just need the due diligence and the proper research to proceed with the transaction. Approximately, less than 2% of homes are sold privately in Canada, so this definitely is a possibility. 

The first hurdle you need to get over are your emotions. It’s understandable to have such deep attachment after years of love and effort. It’s difficult not to want to cling to something you’ve filled with memories, but this is new to the potential purchasers. Your feelings have nothing to do with the price, terms or conditions. When it’s on the market, you are not selling your home, you’re selling a house. It’s important that you understand that distinction to generate a successful sale. A potential buyer has no interest in buying your home, they want a property they can make their own. You need to look at it through a buyer’s eyes so you can position it and repackage it in a way that appeals to the average consumer.

Pricing

It’s an absolute necessity to not just know the market, but the market for your specific neighbourhood. Great market research produces great results. This is the best way to overwhelm the competition and compel people to buy what you’re selling. It’s best to utilize the assets of your home, make it stand out among the rest. If your house is the only one in the area, then you can sell for more than if there is a dozen with similar features. Your house may be different than the others, but if everyone is looking to sell, prices will generally drop. No matter what the market is, the laws of supply and demand apply to any product. It’s up to you to discover what is selling in your area and for how much. Be aware that different areas sell for different prices, as location is obviously a huge factor in real estate. 

You must understand the time frame in which to sell your home. How many days, weeks or months do you have? This will help you choose the right listing price. Sellers can lose thousands or have their house sit unsold for months if they fail to understand the market conditions and timing required to govern a suitable sale. A big factor in determining the price is how many days you are able to put it on the market. If you can have it up for 90 days you will have the opportunity to negotiate better.

You can utilize the Land Registry Office to get an overview of the property of the area, but this does come with fees. This will tell you the necessary information of what has sold in your area, how long it was on the market for and the price it went for. You’ll need a complete list of homes that have sold recently that are comparable in location, size and layout to best understand how to price the home.

Marketing

Your property can be priced correctly, but if it doesn’t look right it’s not going to sell. What do you always notice about model homes? All colours and furniture is kept at a more muted tone, with a lot of open space so others can envision themselves living in that space. Home buyers purchase what they see, like and can afford in that order. Even if it’s priced right and you’re advertising was appealing, your property won’t sell if they don’t like what they see or feel. 

As a home seller, the biggest merchandising mistake you can make is assuming that potential buyers will take your home as is or will like the things you’ve done to alter it to your particular tastes. Over-personalizing your home is a common and costly mistake. The harder it is for the potential buyer to envision themselves in the property, the harder it will be to sell. It’s all about giving people the potential to imprint on your home. 

Another common error is the failure to recognize the weaknesses of your home. It’s difficult to be objective when it comes to something that you put so much energy and affection towards. In order to maximize profits, you need to look at the property from an impartial eye. Train yourself or hire someone to go through your home to look for the things you cannot or refuse to see. You must take an active role in decreasing the negatives and accentuating the positives. This may require a professional cleaner, a painter to touch up the walls or even a stager. These expenses may seem large upfront, but create the potential to have a higher selling price. 

Staging is vital in your marketing strategy, this is how you present your home. Utilizing soft colours, smells, lights and sounds are the best methods to make your home as attractive as possible. When you decide to put your home on sale, it’s time to decorate it as you would a model home. Eliminate all visual impact of your life there, bring out the basic features, emphasizing the appeal that made you want to buy it in the first place. Think back on the features that made you want to purchase in the first place.

Most people find and buy their homes through real estate agents. They benefit from the Multiple Listing Service (MLS) where they can see any house that is on the market or has been sold since its creation. This is partly why 98% of all homes are purchased through real estate brokerages. You can utilize the Land Registry Office instead, which provides the data you need on pricing. They have the expertise, but you are able to get all the necessary tools.

A for-sale sign is the second most common way that buyers find a home. The combination of an attractive sign with an immaculate front yard, nicely trimmed shrubbery and finely decorated landscaping lets people know that this is a home worth buying. Hanging flyers or having an ad in the newspaper are great ways to build awareness. Place a weather-proof box filled with brochures and a number of directional signs letting people know there is something worth getting. Find the most high-traffic areas and guide interested parties to your home. 

The third most common way buyers find homes is through online advertising. You want to ensure that your ad is located on a high traffic site, it might be beneficial to put some money into it to receive more traction. Without utilizing a real estate agent, it’s fair to say that it will cost money and definitely a fair amount of time. You have to weigh how much this will cost you and what your time is worth. Don’t write another generic ad that won’t register with people. Unless you’re a talented photographer with a good camera, get professional pictures to demonstrate that this is a serious sale. Make the unique features of your home apparent. Entice people with an extra-large master bathroom or an exquisite family room in the advertisement. Make it exciting. “Barbecue and relax while others work. Beautiful, four-bedroom ranch style home with brand new deck and free Jacuzzi.” “Beautiful three-bedroom townhouse with finished basement all ready to rent out. Great opportunity for first-time home buyer.” It all comes down to being creative and thinking what would make you want to buy the property. There are so many features in your home and so many ways you can spin it to appeal to the general consumer. Utilize all websites that traffic this type of information, including: Kijiji, Facebook Marketplace, Craigslist and forsalebyowner.ca. It’s all about using all the avenues you can to get the word out. The better your exposure, the better the results. 

Negotiating

When qualifying buyers you must be confident while discovering their requirements, but also avoid being intrusive or overbearing. REC advises you have a separate phone line as you may not be comfortable having your personal number for all interested parties to see. Have a landing page so you can keep track of prospective buyers. When you start receiving requests for showings, schedule them at certain times and certain days, this way it gives the appearance of it being more desirable to purchaser. The more traffic you get at these times, the greater sense of urgency you provide, which can result in a quicker sale and/or more offers. 

For security purposes, we suggest you ask for a copy of the buyer’s license as well as mortgage pre-approval. This is to let you know that they are qualified to be searching in the price range of your home, but also that they are serious buyers. 

When showing, step out for about 15 – 20 minutes to let people relax within the home without any undue pressure. The next day it would be wise to follow up with a phone call, asking: Are you interested in purchasing the home? Do not ask them to give you an offer as this indicates you priced it incorrectly. If they say yes, move onto the next step of authorizing an agreement of purchase and sale. If they said no, ask for feedback. How did the home show? How well do you think it’s priced? Are there any comments you can give that might be helpful?

As soon as you receive an offer from an interested buyer, thoroughly review the documents. It’s best to work with a real estate lawyer before putting your home on the market, as they charge a one-time fee. This way you have the lawyer on call to review the documents before you sign anything. It’s not their job to comment on whether the price and terms are fair, that research is all on you. 

The majority of buyers will have made the agreement conditional on doing a home inspection. If it’s a condo, they would make it conditional on reviewing a condo status report. As a seller, if you did not do a pre-listing inspection, expect the buyer to have a home inspection. The sole purpose of this is to find the deficiencies within the home, this takes roughly 3 hours. If there are any substantial problems, expect the buyer to renegotiate the terms of the agreement. 

If you and the buyer don’t come to an agreement for whatever reason during the 10 day due-diligence period, you both have the option to cancel the arrangement and return their deposit. The buyer can also use the financing condition to walk away from the deal. The lender of the mortgage will request to do an appraisal of the home to confirm the address and the state of the home. Should this impact the amount or the terms of the mortgage offered to the buyer, they can choose to rescind their offer and you would again be obligated to return the deposit. For a condo, if after reviewing a status report, the buyer, the agent or their lawyer feel it is not satisfactory they can walk away from the deal as well; within the conditional period stated in the agreement. Our advice, if you are presented with an offer which has one or all of the above conditions, counter offer with tightening the time allotted to complete the tasks. The majority of buyers would have tried to negotiate in 5 business days, but we advise minimizing this, therefore lessening the time your home is potentially off the market. Keep in mind that the market for which you are selling in will determine how much power you have in the negotiations. 

Once the conditions are satisfactory to you and the buyer, they will send you a waiver or a notice of fulfillment and your home is now sold. The buyer generally requests in the offer to see the home 2 times in order to take measurements, also to see that the property is clean and vacant.

Team 

A day before closing, you will meet with your lawyer to sign off on the sale. After receiving the funds from the buyer on or just before the closing date, the lawyer will pay off any outstanding mortgage payments, liens and any realtor fees associated with the transaction. Lastly, you will be given a cheque for the remainder. 

We strongly advise enlisting the aid of a mortgage advisor. When selling, you can offer the purchaser discounted financing, special terms or conditions. This is a strong way to entice purchasers and gives you the advantage of potentially having more interested parties. This is something that works very well for us, and something that realtors don’t do. 

 

If you take all of these factors into account, along with researching the necessary information and actively pursuing your goals, you’ll be well on your way to selling your home. If you price it properly, market it well, negotiate smoothly and build a solid team, you have nothing to worry about. Assess how you would do this, then proceed with the transaction. You shouldn’t do this process entirely by yourself, but you can sell the property itself on your own merits.

Written by: Spencer Maxwell