Toronto Real Estate and Neighbourhoods Blog | Move Smartly

Canada’s National House Price Index

John Pasalis in Toronto Real Estate News

Using a simple average to measure the change in real estate values can present a number of problems.  I have covered these issues in several recent blog posts.  The National Bank of Canada along with Teranet recently developed a House Price Index which aims to give us a more accurate look at how prices are changing in six Canadian cities.

The House Price Index uses something called the repeat sales methodology to calculate changes in house values.  This approach requires a property to have been sold at least twice in order for it to be used in their calculations.  They take the current sale price of a particular house and compare it to the previous sale price to measure the increase or decrease in value over that period.  This approach offers a more realistic look into changes in real estate values.   You can read more about their methodology here.

Consumer protection common 2008 theme

Bob Aaron in Legal

When it comes to consumer issues, my goal in this column is to educate, protect, and occasionally, entertain.

Over the past year, I emphasized how important it is to have a lawyer's input in a purchase or sale transaction as early as possible in the process, and how lawyers may wind up recommending against a deal if it is not in the client's best interest.

In May, I wrote about a homebuyer who got stuck with the seller's unpaid final water bill when her title insurer refused to reimburse her. Shortly after the column appeared, the title insurer announced that it had changed its policy and would now be covering unpaid final utility bills.

In a city like Toronto, where many people live in close proximity to their neighbours in condominiums or attached houses, noise continues to be an issue for many residents. Two columns dealt with this issue, and a third was devoted to the problem of second-hand cigarette smoke in multi-unit rental and condominium units.

Court is an expensive way to deal with a noise complaint issue

Bob Aaron in Legal

A decision of the Superior Court of Justice in Toronto earlier this year clarifies the huge financial risks a condominium owner assumes if he or she is found to be in breach of the rules of the corporation.

Anthony Italiano bought a Toronto condominium unit on Marine Parade Dr. in October 2006. Before taking possession, he obtained permission from the condominium corporation to install laminate hardwood flooring in his home. Shortly after he moved in, the corporation received noise complaints from the owners of two units beside and underneath his own.

In early 2007, building security visited Italiano's unit and reported that the sound coming from inside was "loud." Building management contacted the condominium lawyers who sent a letter demanding that the noise cease. An arbitration between the parties took place in August 2007. At the hearing, Italiano requested that the common element walls of his unit be tested for deficiencies which might account for the transmission of noise.

Several months later, an independent acoustics report was delivered to the arbitrator. It concluded that the sound transmission material in the building complied with the Ontario Building Code standard, "although, barely."

Media Roundup December 19th, 2008

Media Roundup

Real Estate News

Existing home sales drop 12% (Globe and Mail)

McGuinty calls property assessments 'unrealistic'  (Globe and Mail)

Warnings about risky mortgages ignored (Globe and Mail)

Special investigation: How high-risk mortgages crept north (Globe and Mail)

Genworth Responds to Globe Article (Canadian Mortgage Trends)

Toronto's condo boom is heading for a bust (Toronto Star)

Canadian Real Estate Declines Reflect Recession, CREA Economist Says  (CEP News)

Greater Toronto Home Resales at 1,500 in Mid December (MarketWire)

US Real Estate News

U.S. homes lose $2 trillion in value in '08 (CNN)

Fed chops rate to record low (Globe and Mail)

Economic News

Buy Canada, Goldman Sachs says (Globe and Mail)

The paradoxical peril of thrift (Globe and Mail)

Bank of Canada Has Scope to Cut Rates, Flaherty Says (Bloomberg)

Scotiabank Forecasts Fast Recovery for Canadian Economy  (CEP News)

Urban Planning and Neighbourhoods

The new Regent Park: wide hallways, hardwood floors (National Post)

Families set to move into new Regent Park in April (Globe and Mail)

Regent Park begins to stand tall (Toronto Star)

Queens Quay future looks brighter than ever (Toronto Star)

Rebuilding Cities (Creative Class)

 

Low Vacancy Rate Good News for Toronto Condo Investors

John Pasalis in Toronto Real Estate News

Most of the uncertainty surrounding the short term outlook for Toronto’s condo market has to do with the roughly 147 condos currently under construction and the unknown percentage that were purchased by investors versus future home owners.  The theory is that if the percentage owned by investors is high we might see some downward pressure on the condo market should these investors decide to sell in large numbers once their condos are registered.

Here it’s worth drawing a distinction between condo investors and condo speculators.  Condo speculators have no plans of ever holding on to their units, they buy condos in the pre construction phase when they are cheaper for the sole purpose of flipping them at a higher price once the condo is completed.  Condo investors like speculators also benefit from the increase in value from the time they buy to the time their condo is completed, but unlike speculators they hold on to the condo as a source of rental income. 

A recent CMHC report highlights the difference in vacancy rates between condominium apartments and regular apartments.  Since 1995, vacancy rates in condominiums have been significantly lower than vacancy rates in apartment buildings.  In 2007, the vacancy rate in condominiums was below 1% compared to over 3% for regular apartments.

Last week the CMHC reported that the vacancy rate reached its lowest level in seven years.  The vacancy rate for all apartments dropped to 2.1% from 3.2% the previous year while the condominium sector saw a very low .4% vacancy rate, down from .7% the previous year.

A low vacancy rate is good news for Toronto condo investors and may provide some relief to speculators who might choose to rent their units instead of sell them in 2009/2010.

John Pasalis is a sales associate at Prudential Properties Plus in Toronto and a founder of Realosophy. Email John

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In litigation cases, often only the lawyers win

Bob Aaron in Legal

In 1997, James and Barbara Dinsmore bought a new townhouse in Windsor for $177,000 from Masterpiece Homes. On taking possession, they noticed dampness on the basement floor, which raised concerns about potential drainage problems.

After investigation, the builder acknowledged that the cement slab in the basement did not meet the three-inch-depth (7.6 centimetres) requirement specified in the Ontario Building Code, but did not agree with the Dinsmores about the alleged drainage problem. The issue became how to resolve it, and the Dinsmores and the builder could not agree on the solution.

Following a series of failed negotiations, the Dinsmores in early 2002 sued the builder, the Ontario New Home Warranty Plan (Tarion), and representatives of the City of Windsor, claiming general and aggravated damages of $350,000 for breach of contract and negligence and $150,000 in punitive damages.

Media Roundup December 12th, 2008

Media Roundup

Real Estate News

Now it's a landlord's market (Toronto Star)

A rental crunch on the horizon (Globe and Mail)

No U.S.-style housing collapse in Canada: RBC  (Globe and Mail)

Condo building boom screeches to a halt (Globe and Mail)

Tremor signals correction in condo city (Globe and Mail)

5 Things to Know About Occupancy Fees (Andrew La Fleur)

Mayor's land-transfer tax helped sink Toronto real estate market, study says (Globe and Mail)

Toronto's land transfer tax hurting real estate market: C.D. Howe report (CBC)

Canadian home sales slow, prices drop (Toronto Star)

US Real Estate News

Research the finer points (National Post)

Foreclosure activity drops to June levels (Washington Post)

Economic News

Consumer debt defaults could rise, bank warns (Globe and Mail)

Deep recession could force more foreclosures: BoC (CTV)

Bank slashes key rate to 1958 level (Globe and Mail)

Banks fail to match rate cut - again (Globe and Mail)

Are consumers benefiting from the interest rate cut? (CTV)

Urban Planning and Neighbourhoods

New Art of Suburbia — thoughts from Scarborough

Kingwell vs. Florida? (Spacing)

Preservation project makes timely debut (Toronto Star)

Regional Canadian Real Estate News

Vancouver Real Estate Analysis for Downtown November 2008 (Vancouver Reflections)

8 Sources of the U.S Financial Crisis - How it all began. (Montreal Real Estate Blog)

Economic Funamentals supported record breaking St. John’s real estate (St. John's Real Estate Blog)

Atlantic Canada Leads The Way (Halifax Real Estate Blog)

Saskatchewan housing suffers hangover following last year’s party: RBC (Saskatoon Online)

Toronto Land Transfer Tax Hurts Real Estate Market

John Pasalis in Toronto Real Estate News

The CD Howe Institute released a report this week titled "Sand in the Gears" that evaluated the effects of the City of Toronto’s Land Transfer Tax on Toronto’s real estate market.  The report concluded that the Land Transfer Tax has had a negative impact on Toronto’s real estate market by reducing sales and lowering average prices. 

From the report:

Our data show that the LTT caused a 16 percent decline in the number of single-family homes sold after January 2008 and a 1.5 percent reduction in house values. We calculate that in its first year, the LTT will cause a reduction in household mobility – at least 3,500 families in the municipality of Toronto will stay in houses from which they would have otherwise moved – and an average reduction in selling price of about $6,400 per house.
 
The report compares house sales along Toronto’s border with Durham, Peel and York Regions where there is no municipal land transfer tax.  Since the authors used data up to August 2008 their analysis was not impacted by the significant declines in the GTA real estate market over the past few months.

The report concludes:

By our estimate, the LTT will cause about 3,500 families per year to stay in houses that are too small, too big, or too far from their places of work or school. Unlike the LTT, an ordinary property tax does not provide a disincentive for moving. This means that a property tax that collected the same amount of revenue as the current LTT would leave Toronto residents better off. While Torontonians would pay the same amount of tax on average, they would do it in houses that suit them better. 

John Pasalis is a sales associate at Prudential Properties Plus in Toronto and a founder of Realosophy. Email John

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Toronto’s Real Estate Market – No Reason To Panic, RBC Says

John Pasalis in Toronto Real Estate News

RBC Economics says that Canada is experiencing a “Canadian-style” housing downturn but will avoid a US style housing market crash. The author of their recent Housing Trends and Affordability report, Senior Economist Robert Hogue, is advising Toronto residents not to panic about their real estate market.

I called Robert Hogue to get some of his thoughts on our real estate market.

John Pasalis: Some economists are saying that we’re lagging the US by 2 years and are heading for a US style collapse.  What do you think are the key difference between the US and Canadian markets?

Robert Hogue, RBC Economics: Well, first of all you have the subprime catalyst in the US that is not really present in Canada. We have some subprime market here but it’s really a marginal phenomenon so any kind of collapse in that segment of the market won’t have a dire impact on the overall market … when you look at the financial condition of households in Canada the household debt has increased over the past two years but it still is not in the same zone as it is in the US so Canadian households are less say financially overstretched in terms of debt as is the case in the US. And also when you look at the banking industry, the financial sector in Canada is comparatively much stronger than in the US.  Banks in Canada are still lending, a bit more picky these days but still lending, as oppose to an outright retrenchment in many parts of the US. So I think these conditions put some kind of a floor on how far the housing market can correct in Canada and certainly I’m not expecting a US style meltdown.

Buyer gets frosty welcome

Bob Aaron in Legal

A recent decision of the Small Claims Court in Winnipeg illustrates whether the buyer or seller is responsible for damage to a home, which is discovered on closing.

Hazem Alzawawy was interested in buying a small house in Winnipeg. He found a tiny 612-square-foot, one-bedroom bungalow that was described in the listing with the Winnipeg Real Estate Board as having forced air, natural gas heating.

When he inspected the house there was a furnace in the basement. He assumed it was in working condition because of the information on the listing.

There were also five or six space heaters in the house, but Alzawawy didn't think anything of it since it was not uncommon in Winnipeg to use space heaters as an additional heat source.