Just 24 hours after TheStar.com wrote their article, Sympatico.ca and Yourmoney.ca picked up the story too. You can read it here.

While the articles were a fun read, what I found most interesting were the comments section of each article.

The article on TheStar.com framed me as a landlord and Realtor. The comments were mostly personal attacks on me, essentially calling me an evil, greedy slumlord and that I should be locked up for even thinking about renting out such a horrible, God-forsaken shoeb0x of a condo at such an exorbitant and oppressive monthly rate. “How dare you!”

The article on Sympatico.ca framed it as my own apartment that I would be living in (even though the author knew that it is an investment unit). The comments section on this article are full of praise for me as a smart and even ecologically sound home owner who is living within my means and not being wasteful. “Good for you for making it work!”

This contrast between the two comments’ sections provides a fascinating glimpse into the human physche, but the point I want to make is that it really underscores my belief that investing in real estate is not for everyone. Many people do not and will never understand real estate, and specifically how it can be a vehicle for wealth creation. Some of us ‘get it’. Some of us don’t. I wrote a couple blog posts last year about the difference between those who get it and those who don’t.

Questions or comments? Please contact me.

I never envisioned my face would be plastered on the front page of TheStar.com right next to a picture of Rob Ford laughing diabolically, but here we are. Check out this cute little article-with video- that Susan Pigg (The Star’s new real estate reporter) wrote about my investment unit at One Park West. What is interesting or ‘newsworthy’ of this condo is that it is possibly the smallest condo in the entire city at 301 square feet.

I guess you could say I put my money where my mouth is when it comes to the Regent Park revitalization project. I first started blogging several years ago about One Cole, then last year it was One Park West, now this week it’s Paintbox. It’s no secret I am a believer in the redevelopment that is happening in Regent Park, and I’m happy to say my own piece of the puzzle has turned out fantastic.

I know that many people within the real estate industry in Toronto are still highly skeptical that Regent Park will overcome it’s stigma and reputation as a ‘bad’ area, built progressively over the last 50+ years, but I’m not one of them. I believe when the redevelopment is complete in around 5-7 years this area will be a great middle-class, family-type neighbourhood in the heart of downtown. Something unique and an affordable area that people will not only want to live in, but also spend their free time in.

Questions or comments? Please contact me.

I guess this makes it official: everyone is talking about the Toronto condo market. I was interviewed a couple weeks ago for an article on our condo market by a writer for the Wall Street Journal, and today that article hit wsj.com. Read the entire article here. See what people on Twitter are saying about the article here.

The article certainly has a bearish slant to it, with the basic thesis being: the market has been booming for so long it therefore must crash. Certainly not something we haven’t heard before many times over the last decade, but should this article give individual investors pause as to whether or not they should be buying a condo in Toronto right now?

I was asked my opinion on the market and the prospects for a ‘correction’. What I told the writer was the same thing I’ve been saying on this blog for a while now: the likelihood for a correction in the short term is very low, the fundamentals right now are strong. However, even the most bullish investor must admit that a key driver to this market has been the lower-than-low interest rates we have had over the last few years. If rates continue to stay low, demand will continue to be strong, prices will continue to rise, and thus, the potential for a correction will grow. In other words, no market can rise at 6-8% per year ad infinitum, but as long as money is cheap, the market will likely keep its momentum.

I would love to hear your comments. Leave one below or email me.

Graphic above taken from the wsj.com article.

The Globe and Mail and the Toronto Star are competing for your eyeballs right now running the same story: some of the good folks at TD bank are claiming that sometime in the next 2 years the market will slow down and prices will fall. Wow, what a bold prediction (sarcasm)!

Here are my problems with this prediction (and others like it):

1. They are extremely vague. Interest rates will go up and incomes will go down, therefore prices in Toronto and Vancouver will fall 10%. Really? How will this happen? Why will this happen? Show me some statistics in the market right now that leads you to believe this is going to happen. These articles are always very short on specifics.
2. They are too broad in scope. Economists and bankers are trained to think of the big picture. We live in a global village, however, real estate is still local. If you want to know what will happen to the downtown Toronto condo market – talk to the experts who live and breathe the market, not some economist who has never set foot inside a Toronto condo.
3. They are too long term. Trying to predict the real estate market beyond about 6 months is a fool’s game. Look at any of the predictions made 2 years ago for where the market would be today and you’ll see what I mean.
4. They are media driven. Bad news sells. Good news doesn’t. This is a simple concept we all understand. If a pundit comes out and says that everything seems fine and will continue along as it has been, that pundit will soon be out of work!

I only see two things causing a change in the Toronto condo market in the short term:

1. RAPID rise in interest rates. If interest rates rise, this won’t likely impact the market – because they will rise slowly and the market will adjust accordingly. If they rise quickly and significantly, then we will see a big impact. (Consult further: Toronto condo market in 1989.)
2. MAJOR economic catastrophe. If Greece defaults, or the U.S. doesn’t get their act together and they are downgraded, the world will feel the pain and the trickle down effect will most likely and eventually hurt the Toronto condo market.

Thoughts or questions? I always like to hear from my readers. Leave a comment or contact me directly.

ANOTHER NOTE: If you find this article confusing, good. That’s the number one point I’m trying to make: the HST on new condos is very confusing and it needs to be fixed.

This is a subject that very few people in the pre-construction condo industry are talking about, but one that could actually have major repercussions on our industry over the next few years. HST and how it affects new condo purchasers, specifically those purchasers who are investors (i.e. up to 80% of the market right now), is a terribly unclear issue. When the Mcguinty government introduced the HST in July 2010, it was said that it would not really affect the real estate market. While this may be true in an overall sense, for investors of new condos, there can be serious implications to your bottom line.

The issue is essentially this: there is an HST rebate built into the price of every new condo sold in Toronto. The assumption is that the buyer of any given new condo is an end-user (they are buying it for themselves to use, not to flip for profit, or to rent out to a tenant), therefore they qualify for this rebate which the builder collects on their behalf. In reality we know that the pre-construction condo market is dominated right now by investor-buyers NOT end-user buyers. Investors do not qualify for this rebate, so the builders must charge them to account for this rebate, effectively increasing the price of their units significantly at final closing. Now, there is a process in place whereby investors can apply to get this extra money back from the government after the fact, but as you can imagine any application process involving extracting money from the government is long, painful, and tedious.

The key questions that are so difficult to get concrete answers on are:

• Who qualifies for the HST rebate in the first place?
• How much is the HST rebate? How is it calculated? How much do I have to pay extra if I am an investor?
• How do I apply to get my money back if I am an investor? When can I apply? What conditions must I meet? When will I get my money back? Do I get all my money back or only a portion of it?

If you talk to 3 different real estate lawyers, I gaurantee you will get 3 different answers as to how the HST rebate works and how it affects investors. This is a serious issue as thousands of investors are buying condos in Toronto every month, and I think many will get a shock in 2-4 years when they meet their lawyers for final closing and they are asked to write a cheque for thousands of dollars to cover the HST.

Why are there seemingly no clear answers on how the HST works for investors? Part of it can be explained by the fact that the HST has only been in effect for a year, and very few (if any) NEWLY purchased condos have actually completed and closed in the last year. In other words, very few lawyers have actually completed a final closing for a client who purchased a new condo during the HST era which began July 1, 2010.

Toronto real estate lawyer Stephen Shubb has done his best to explain how the HST works (and I think he did a pretty good job) on his website: HomeLegalCost.com. Essentially his explanation boils down to this: if the purchase price is less than $450K, you will get the full rebate back after the fact as long as you rent it out for at least 1 year after final closing. So you will be in the same position as the end-user is, but you have to pay up front and wait to get your money back. If your purchase price is over $450K (which many units are of course in Toronto), buyer beware! You may have significant additional costs at final closing that you might not be getting back.

Call me crazy, but I actually believe that someone up there at Queen’s Park might be reading this blog (especially with an election coming). With that in mind, I am calling on the Ontario government to do the following:

• Come up with a clear statement and communication to the public about how the HST will affect buyers of new condominiums in Ontario.
• Come up with a clear statement and explanation for the real estate law industry (lawyers) so they can explain it to their clients
• Increase the limits on who qualifies for the full HST rebate. $450K is a ridiculous upper limit in a city where the average single family home costs about double that
• Get rid of the application process for getting back the HST rebate for investors. If the rebate is in fact the same as for end users, why complicate the entire process, create unnecessary bureaucracy at a great cost to the public, just to get the same result in the end?

Questions or comments? Totally confused? Please contact me.

Is Toronto on its way to becoming just like Manhattan? This question has been asked for years now, and the comparisons can be made that Toronto is a sort of ‘mini New York’ – a major financial and cultural centre, the heart of a mega-region, and home to some really expensive real estate. But are we moving away from being an affordable city for the middle class to a city built primarily for the rich? Will $1000 per square foot to purchase a mid-grade condo and $2500/month to rent a studio soon become the norm here?

I’ve had some interesting conversations with some of my clients with international experience lately, and here are some of the sentiments and theories that they are espousing:

• Like Manhattan, prices and demand are rising to the point where Toronto could perhaps become a city where much of the real estate is owned not by individuals, but by corporations
• Could we reach an average price level where home ownership becomes a possibility only for the wealthy? – i.e. the first time buyers market will cease to exist (can’t make these condos much smaller than they already are!)
• Will first time buyers will be forced to look outside the downtown, (as is the case for many in Manhattan), live in the inner suburbs for years before saving enough and building enough equity to move back into the city?
• What about investors? It is taking higher and higher down payments to get condos to cash flow – will this continue, or as prices rise, will we finally see rents rise as more and more would-be buyers are priced out of the market and forced to rent?

Sorry for the random collection of thoughts, but these are some of the talking points I’ve been having lately with some of my clients. I’d love to hear what my readers think about this subject and where people see prices, rents, and the first time buyers market going in the next 5-10 years. Leave a comment or contact me!

Image from photos4travel.com