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Observations from Paris

I just got back from a couple weeks in Europe and got to spend some time in one of my favourite cities: Paris. When travelling I always like to try to learn something of the state of the local real estate market. As you can imagine, Paris is a very expensive city, and has ‘world-class’ written all over it (that illusive descriptor we are always striving for here in Toronto).

The photo for this post is the view from the terrace of an apartment I had the pleasure to visit while in Paris. The apartment had completely unobstructed south, west and north views from an expansive terrace. The buildings in the photo comprise the “La Défense” neighbourhood (the modern business district of Paris). The apartment was approximately 1300 sq ft with a terrace of about 300 sq ft. It was in an older building from around 1920 in a prestigious but not downtown neighbourhood. It was completely rebuilt by an architect-designer and was recently sold for about €1.8M (CAD$2.2M, works out to about $1600 per square foot).

A few things I learned about the market in general in Paris:

• Commissions are typically 5% selling property in Paris using a real estate agent
• Other transactional costs when buying a property in Paris can be up to 10% of the property’s value! (And I thought the Toronto land transfer tax was a burden)
• Property taxes are quite similar to Toronto. example: One apartment I visited was worth about €1M
  and the yearly property taxes were about €6000
• A sort of ‘community tax’ (Taxe d’habitation) must be paid for by whoever lives in the apartment – either the owner or the tenant (if leased out). Hard to figure out how much this will be, but something like 10-15% of market rental rate.

On another note, cheese, wine, and bread are all incredibly delicious and incredibly cheap in Paris. On balance, Toronto is still an amazing city to live in and invest in real estate. Glad to be home and excited for what promises to be another busy fall market! If you have any more insights on the real estate market in Paris that you’d like to share, leave a comment below or feel free to contact me.

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Lessons From Australia

In case you haven’t heard, the hottest real estate market in the world right now is in Australia. It’s like Calgary in 2006 down there! This recent Globe and Mail article outlines the situation with our Commonwealth cousins down under and is worth a read. Some interesting tidbits from the article if you don’t have time to read it:

• The Australian method of selling houses by live auction makes our Toronto practice of ‘bidding wars’ seem pretty tame and civilized.
• Australia has a population of 22 Million with the largest city being Sydney with 4.5 million in the metro area. Sounds very similar to Toronto’s relationship to Canada. The average home price in Sydney is $580K. The average home price in Toronto is about $450K.
• 5-year mortgage rates are at around 8% in Australia while this boom has been happening. Gives pause to those who say that the only thing driving our market here are the ultra low interest rates.
• Property values have increased by 18% in Melbourne over the past year. Prices in Toronto are up around 5% over the past year.

What is driving this real estate boom in Australia? Sounds like the same things as here: cheap pricing by global standards, immigration booming to the urban centres, shortage of new housing supply, strong overall economy with good jobs, and relatively low interest rates. The key difference is that a crash is a stronger possibility in Australia because values have increased so much, so fast, whereas in Toronto we are slowly and steadily rising as we have been for the better part of the last 15 years.

Questions or comments about the Downtown Toronto real estate market? Please contact me.

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Toronto Resale Market Slows; New Developments to Follow?

Interesting article in today’s Globe and Mail about more anecdotal and factual evidence that the Toronto resale market is slowing down.

Agents are starting to see conditional offers more and more, negotiations are actually taking place, and sellers who price their property too high are getting a rude wake-up call to the new realities of the marketplace.

Gone are the heady days of 2007 when a seller could simply list their property at seemingly any price and they would usually be rewarded with an offer.

So what about the market for new condos? What is the market like today and what will it look like heading into the final quarter of 2008 and into 2009? I spend most of my time helping buyers enter into the pre-construction condo market in Toronto.

A new report from Urbanation, a research firm run by the folks behind Market Vision-a brokerage specializing and new developments-seems to suggest that new condos will be following the trend currently happening in the resale market.

“We’re expecting a slowdown in 2009,” said Jane Renwick, editor and vice-president of Urbanation, a condominium market research company.

“So we would say that we were at 22,000 [condo] sales at the end of 2007. We’re predicting 16,000 sales to round out this year. And we’re expecting sales to dip beyond that in 2009.”

Urbanation released a report yesterday about the Toronto condo market’s second quarter of 2008.

Following record condo sales in 2007, she said, the market is now back to 2005 and 2006 levels.

Anecdotal evidence, evidence on the ground from my own experiences and the experiences of my colleagues who also specialize in new condo developments, suggests that the market is currently still hot. People are still lining up for condos (overnight in many cases), and prices are still rising. However, there is a sentiment that slow times are ahead and smart buyers are proceeding with caution, not just jumping into any development that comes along. If you are looking to flip a condo and make a quick profit overnight, it is probably not the best time to buy.

If you ever have any questions about new condos or Toronto Real Estate, please give me a call or send me an email.

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International Investors & Developers Have their Eyes on Canada

I came across an interesting post over at New Condos Online about how American developers should start aggressively pursuing Canadian buyers for their product due to the relatively strong Canadian economy and the (until very recently) high Canadian dollar.

This is very timely advice for American developers to consider. Most US Real Estate Markets are still following a downward slide. Prices are still falling, inventory is still massive with little signs of it changing in the near term. Canadian investors are beginning to wonder it things have peaked here in Canada and are starting to look elsewhere for better value and better long-term prospects for price appreciation.

While foreign developers are starting to consider Canadian buyers, foreign investors are still feeling quite bullish on the long-term prospects of condos in markets like Toronto. More and more international investors are looking at purchasing condos in Toronto as investment vehicles, or as temporary residences. Look at recent developments like Ice Condos or Aura. Anecdotal evidence suggests a substantial proportion of buyers in these landmark projects are from outside of Canada. Canada is considered a safe, secure, low-risk place to invest to many outside of our borders.

My own client list is increasingly becoming something of a United Nations. Just in the last year alone I have had new clients originating from the U.K., Dubai, Taiwan, Korea, India, China, and Bangladesh to name a few.

If you are interested in knowing more about investing in Canada and Toronto in particular, please contact me.

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