# Stability of Downtown Toronto Condo Market?



## drh (May 20, 2009)

Am seriously considering selling my downtown condo, which has been renting steadily for the past 5 years, as my tenants have just given their notice. 

Curious what others are doing in this regard? I purchased this condo back in '98 in one of Toronto's first downtown loft buildings, which has appreciated quite nicely over time. Now with boom in condo construction in downtown Toronto, I find the area to be undergoing tremendous saturation which does not appear sustainable.

Any others selling off their downtown condos?

Thanks!


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## Jungle (Feb 17, 2010)

We just sold our condo in North York. On our street, there are hundreds of resale units for sale, with more new buildings popping up. 
We sold about a month ago, average time on the market was 28 days. Well the units in our building were still on the market after 60 days, we underpriced them all and sold in less than 2 weeks. 

Now the last unit sold almost 10k under our price and it had a better kitchen!

I don't see an increasing supply of condos as a positive anymore for increasing value.


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## bayview (Nov 6, 2011)

If real estate forms more than 40-50% of your net worth then I would lock in the profits now especially if it is an investment property. 

I Think TO condos including, Downtown is the next big Bubble to break. While prices in Vancouver have been sliding (unthinkable a year ago), I think TO will be next given the global slowdown dragged down by China. 

On top is the tightening mortgage requirements. Besides genuine sellers, speculators will be rushing to sell too when it is clear that the cycle in TO has peaked. I will rather be a year early than a day late, IMHO.

I know it is tough decision - a tussle between head and the heart.

You will find plenty of discussion about Canadian real estate bubble such as this in the net. Dont just listen to the realtors: 

http://seekingalpha.com/article/442421-canadian-housing-bubble-sentiment

http://viableopposition.blogspot.ca/2012/05/canadas-perfect-retirement-storm.html

All the best!


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## NotMe (Jan 10, 2011)

Loft buildings - which one? - shouldn't necessarily be lumped in with the cookie cutter condo developments littering north york and cityplace when looking at stats. In any case, you have to do what makes sense for you.... if 50% of loft owners were jumping off a bridge...


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## ddkay (Nov 20, 2010)

Every building has slightly different demand and therefore different price trends/reactions to expanding or tightening credit. There was a website that specifically tracks condo transaction data from MLS and charted this behaviour based on average $/sf. I posted about it in Dmoney's thread about a month ago.

Is your rental unit fully paid for? Are you highly cash flow positive? Can you increase rent? Is your quality of tenants degrading? Secondary factors - Is the condo majority owner occupied and able to maintain strong financial condition? Are nearby planned/existing construction blocking views... Traveling back to prices from 14 years ago would be pretty dramatic. Are you in a generally grimy part of town? are homeless shelters, affordable housing being built across the street?... Ultimately you have to figure all that stuff out and make your decision.


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## Mall Guy (Sep 14, 2011)

Article on the supply pipeline in Toronto, and given CMHC is bumping up against its lending ceiling, the fundamentals are ripe for change: 

http://www2.macleans.ca/wp-content/uploads/2012/04/Screen-shot-2012-04-19-at-5.33.12-PM.png

http://www.theglobeandmail.com/glob...erty-markets-are-most-at-risk/article2427557/


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## Cal (Jun 17, 2009)

Sometimes you have to take some profits regardless.


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## Berubeland (Sep 6, 2009)

There are more condo buildings being built in Toronto than New York 

http://www.vipcondosource.com/Condo_Market_Statistics.html


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## MoneyGal (Apr 24, 2009)

I can see 16 cranes from my office window in downtown Toronto, and I have not counted the ones I see on my ride home - probably another 16.


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## faline (Feb 10, 2011)

Are the new condos being built indicative of lower re-sale prices in the future? Or that it will probably continue to be a healthy market? 

I'm in the same situation in Ottawa. I had decided to sell, but now I've found what I think will be a great tenant for at least a year at a price that will cover mortgage, interest, condo fees, property taxes. decisions, decisions...


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## faline (Feb 10, 2011)

Thing is, I looked at posts in this forum from one year ago and it seems we've been expecting the bubble to deflate for a long time now... and the homes in my developments that have sold this year made quite a bit more than last year's...


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## kcowan (Jul 1, 2010)

This is pure speculation. OTOH when you can avoid screening for a new tenant, maybe it makes sense to do it. Guessing when the TO bubble will burst is a muggs game. The last TO bubble sprung a leak in 1990 even though logic said that HK would drive the market until 1997. In fact, 1997 was the trough...


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## HaroldCrump (Jun 10, 2009)

Timing an illiquid and manipulated market like RE is even harder than timing stock markets.
By the time most people figure out that a RE crash is happening, it is usually well underway.
For instance, back in 2007, mainstream media in the US was still talking about how strong RE market was, while in fact, the crash had already began months earlier.


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## ddkay (Nov 20, 2010)

If OP was entering the market for the first time, I would say yea there is a large chance you will overpay. but OP got in 14 years ago at bargain basement prices. If their unit was rented this whole time it is probably close to fully paid for itself. Unless area/building/tenant quality is over a cliff or they just don't want to be a landlord anymore I couldn't rationalize selling. Have they found a place to redeploy that capital with better risk-adjusted return?


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## faline (Feb 10, 2011)

That is part of my dilemma: How would I invest the 50k I would likely walk away with if I sold my primary home turned investment? (also it is the only property I own, as I rent now) Where could I invest THAT much money which would guarantee returns higher than inflation?

At the moment my investment strategy is biweekly $100 PPP into TD Mutual funds and living below my means. I like living a simply and minimizing stress so I'm not convinced the stock market or diy investing is for me.


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## Four Pillars (Apr 5, 2009)

faline said:


> Where could I invest THAT much money which would guarantee returns higher than inflation?


A guaranteed rate higher than inflation is likely impossible. If you think the real estate investment meets that criteria, then you should keep it.


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## faline (Feb 10, 2011)

I'm very worried about the next few years, but in 20 years? The other thing is that for every year I keep it, the priciple goes down a few thousand dollars...


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## drh (May 20, 2009)

ddkay said:


> OP got in 14 years ago at bargain basement prices. If their unit was rented this whole time it is probably close to fully paid for itself. Unless area/building/tenant quality is over a cliff or they just don't want to be a landlord anymore I couldn't rationalize selling. Have they found a place to redeploy that capital with better risk-adjusted return?


Thanks for all the responses. The building is in great shape, it's located in a prime downtown area (Queen/Spadina), no obstructions, and no chance of obstructions given the height restriction on Queen St, and my motivations for selling are many:

1) I refi'd the unit some time ago to pull the money into other investments (also to take advantage of interest cost deductions) - so I still have approximately 50% equity in this unit.
2) My mortgage is coming up for renewal in November, giving me an easy, clean exit should I sell. 
3) When I calculate my costs based on renewing the mortgage at current rates, the unit will essentially pay for itself, with perhaps $2,000 profit after taxes.
4) I'm not sure I have the energy/time to go hunting for new tenants.
5) The downtown market seems ripe for softening, exiting now locks in solid profits.
6) The money could be used to essentially pay off my principal residence (mortgage also coming up for renewal November), allowing me to re-invest those funds at a later date when/if market softens. 


So decisions, decisions...


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## Jungle (Feb 17, 2010)

Sell high (condo)
Buy low ( dividend stocks)


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## Daenerys Targaryen (May 11, 2012)

Those are 6 perfectly valid reasons to sell...being mortgage free on your principal residence is tempting for sure
In the end go with your gut,


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## bayview (Nov 6, 2011)

Graphic presentation

http://www.theworld.org/wp-content/uploads/housing_full.jpg


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## ddkay (Nov 20, 2010)

It still amazes me how they fit 3 bedrooms in 800 sq ft


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## sharbit (Apr 26, 2012)

Has inventory been rising in Toronto? I've never wanted to live there so I don't watch the numbers but that's usually a good barometer on the health of things. However as HaroldCrup said by the time this flashes a warning sign you won't be able to sell anyways because you'll be part of that elevated inventory.

You'll also want to look at revenue vs cost as if you were just buying the property and if the numbers still make sense (ie if it cashflows). Finally, consider the tax liability when you sell as a percentage of the price.


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## Berubeland (Sep 6, 2009)

All anyone can say is that the according to statistics such as multiples of income, average salary, units under construction, the Toronto condo market doesn't look good for longterm capital gains. 

One thing I like to do is to break down any gains into units of work. For example my condo gained 100K in value, should I sell and lock in those values? 

How long do you have to work at your job to make that kind of money. If the person would be making $50,000 per year that would mean saving 2 full years worth of work or funding 2 years of retirement and that's not even accounting for the fact that it would take a lot longer to save that kind of money. 

Other factors are how much do you enjoy being a landlord? Is it even something you want to do? 

The housing market in Canada reminds me of a casino at the moment. The numbers for continuing prices are against you but in spite of that you just won a jackpot. Do you walk away from the table? or give your windfall back to the house? Maybe you're on a winning streak, maybe not.


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## Sampson (Apr 3, 2009)

Berubeland said:


> The housing market in Canada reminds me of a casino at the moment. The numbers for continuing prices are against you but in spite of that you just won a jackpot.


Again, I wouldn't say this holds true in all of Canada. I know the forum and Canada is a little Ontario-Quebec centric simply due to the population distribution, but there are plenty of markets here in Alberta that are not nearly as crazy as you would expect, especially considering the much higher median incomes and more reasonable housing affordability metrics.


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## phrenk (Mar 14, 2011)

Article from the Financial Post. Year-over-year drop of 20% in condo sales, with prices slowly creeping downwards.

http://business.financialpost.com/2...how-market-balancing-out-industry-group-says/


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## marina628 (Dec 14, 2010)

Real estate is a good portfolio booster if you have time and money .We have investments but put 35% down and bought with long term goals 10-15 years to pay the properties off and then to use that to supplement our incomes when we retire.Having said all that ,IMO the Toronto condos will always be too pricy and too risky for me to consider for investment.We did have a property there 15 years ago but that was for our personal use and of course prices were 50% or less of what it is today.


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## Sherlock (Apr 18, 2010)

What do you guys think about condos in Markham? There are very few condos there, and Markham is growing. There is a new one going up called the Fontana (see http://www.fontanamarkham.com ) prices from the mid 200s, and there are a large number of tech companies nearby (the IBM lab alone has something like 3000 people working there), so a good pool of well-paid renters.


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## Cal (Jun 17, 2009)

RE im Markham is and has been on the high end in regards to other comparables the same distance from the city core. Agreed, it has a good pool of renters as well. The market there seems relatively stable.


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## Cruiser (May 27, 2012)

I look at it this way...

1) Current rental vacancy rates are 1.4%. The condos being built are in such demand because there is no rental stock being built downtown. There will always be students needing to rent, and there are many affluent people sending their sons/daughters to University. They want the comfort of knowing that they are not living in a bad neighbourhood, so they will pay to rent a condo. Honestly, in the last 4 years, I have only had one week where my bachelor rental unit is vacant. Last time, it took me 10hrs from posting to rental...and it makes over $400/mth. Until this really changes...I will be keeping my rental unit.

2) My primary residence is also a condo. This one I am a little bit more worried about...but again, things are relative. If I have to sell low, then likely whatever I am buying will also have decreased. In the end...I am not sure it will matter. Personally, I am more concerned about the maintenance fees in this building which seem to increase 7% yearly and are now more than my bi-weekly mortgage payment.


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## realist (Apr 8, 2011)

drh said:


> 5) The downtown market seems ripe for softening, exiting now locks in solid profits.
> 6) The money could be used to essentially pay off my principal residence (mortgage also coming up for renewal November), allowing me to re-invest those funds at a later date when/if market softens.


I am not sure I agree with #5 personally, There is only so much "downtown" real estate and they aren't building new transit fast enough to compensate for the growth in the outskirts. IMHO, the longer the commutes, and the more packed the transit gets, the better the downtown market will get. I also tend to think you will be able to rent it out fairly easily. 

#6 would be a better reason to sell to my mind. 

I think Berubeland's post is a good one. Do you *want* to be a landlord. In your position I would keep it and hope to find a good tenant but I like the idea of being a landlord (said from a naive position of lack of experience  ), it sort of sounds rom your post like you'd rather take the money and run.


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