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Toronto Condo Market: Do we have a flippin’ problem here?

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How condo flippers are making a killing in Toronto's hot housing market

Inside the Toronto condo building where quick sales are earning investors up to $2,900 a day.

Toronto condo market heated up in the first quarter, amid new evidence of investor flipping

The Greater Toronto Area’s condo market saw record quarterly sales as inventory plummeted in the first quarter, some of it clearly linked to investors looking to profit from units quickly.

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Andrew la Fleur: Today is Monday, May the 9th, and this is what’s happening in the condo market this week. Before we get into today’s episode, just want to give a special shout out and thank you to Madison Homes. Madison Homes just sent me and a few other top agents in the city to the Nobu Hotel and Nobu Restaurant in Las Vegas and we’re looking forward to launching Nobu Residences in Toronto very, very soon. So, thank you very much Madison Group and watch for Nobu Residences information from me coming soon.

The first article that I want to talk about is from the Financial Post and the headline is “Toronto condo market heated up in the first quarter, amid new evidence of investor flipping.” This article’s talking about the latest stats from Urbanation, sales on the first quarter are up 73% for new condo sales compared to the first quarter of last year. Prices are up, sales are up, and there’s some evidence, they have some evidence that the units that are being flipped or being sold in the first year or two after a building’s completed, that those numbers have increased this year compared to last year.

This kind of a thing, flipping, speculating, these kind of buzz words make for great headlines and you’ll often see these words used by the media in a lot of articles like this as a way to generate attention, as a way to stimulate the senses in the public, but again, the point of this video and what all these videos and podcasts I do is to help you cut through the … separate the fact from fiction, what’s really going on here and to answer the question: Is there something to be concerned about? Is there something to be worried about in the market? Is flipping and speculating just running wild and the market is out of control? No. It’s nothing at all like that.

Obviously, a natural consequence when the market is rising quickly, when prices are rising quickly, a natural consequence is that more people will look to sell. That’s exactly what we’re seeing in the resale market with listings up in the past month or so compared to the previous few months. We’re seeing an increase of new condos coming onto the market as well, compared to previous year new condo launches. The number of units coming on are increasing as well because developers want to take advantage of the higher prices, as well as individual resellers.

Obviously, if you own property, last year if the market was relatively flat when you took possession of your new condo that you bought a few years before, you’re going to rent it out. Now the market is up 30-35% from a year ago. Obviously, it’s going to entice some people to sell. It’s just the natural ebbs and flows of the market. There’s nothing to be concerned about here in terms of flipping or speculation being some major problem and the market is in danger because of this. That’s just completely untrue.

Speaking of flipping, the second article I want to get to is from The Globe and Mail. It’s a very beautifully displayed article, very visual, a cool piece to sort of click through and I will include the link of course for this. It’s called “Flipped …” Again, talking about flipping, speculating. “Inside the Toronto condo building where quick sales are earning investors up to $2,900 a day.”

The biggest beef I have with this article, what they do basically is they took a look at one building which is X2 Condos, which originally launched in 2009 on pre-sales, was completed in 2015, so now it’s a couple of years old. They looked at, after a couple of years of the building, how many units have been sold there and they’re defining those units as being “flipped.” People who bought pre-construction and they sold within the first two years, they’re calling them “flippers.”

So, let me get this straight, Globe and Mail. If you bought a condo in 2009 and you sold it in 2017, that’s eight years, you’re a speculator, you’re a flipper? I will take that. Then I am also a speculator and a flipper, because holding a property for eight years to me is definitely not the definition of speculation or of “flipping.”

Anyways, the biggest beef I have with this article is this sub-headline where it says again, “Investors earning up to $2,900 a day.” The way they’re calculating that is they’re looking at what the property was closed at in 2015 and then what they sold it at in 2016 or 2017, and then they’re doing a calculation, how much they made per day.

It’s just such a simplified calculation. The biggest thing that it’ll miss is the fact that you’re not making that per day. Most of these people, again, purchased these properties in 2009, okay? So you bought it in 2009; you sold it in 2016 or 2017. You may have only held that condo for one year of two years, and then they’re dividing the profit that they made from the price they paid in 2009 to the price they sold in 2016 or 2017, but they’re completely omitting the holding period from 2009 to 2015 while it was being constructed.

Of course you’re not making $2,900 a day. You forgot about six years of days there in your calculation, Globe and Mail, so frustrating and again, it’s a headline, it grabs people’s attention. “Wow, look at these guys making all kinds of money …” Excuse me one second here. Fix that exposure there so I’m not jumping in and out on you. That’s again the biggest beef I have with this article.

Interesting anecdotal story I’ll share with you from X2. Had a client … I was there in 2009, by the way. I was in the line up, the famous line up for X2, it’s a whole story but people were lining up for X2. Sold some units there to some of my clients.

One of my clients at the time signed for a two bedroom, two bath unit with parking on a high floor. I believe the purchase price at the time was around $450,000. It was around 850, 900 square feet, something like that. It was a prime unit in the building, corner unit, balcony, floor to ceiling glass, split two bedroom floor plan, high floor, amazing view. Beautiful unit.

They signed for the unit and they had their 10 day conditional period and during that 10 days, they decided to cancel the agreement. I said, “Why are you canceling the agreement, sir?” And he said, “Well, Andrew, I took a look at it. I just think the price is way too high, I think no one is ever going to pay more for this unit than this price here. I’m just going to back out. I just don’t think it’s a good investment.”

I’ll never forget that one. For some reason that one stands out in my mind because I just knew at the time that this building was going to be an amazing investment, that these prices were absolutely incredible, and that a building like that in a location like that, built by Great Gulf, was going to be a fantastic investment. Well, it turns out today that same condo that he bought for about 450,000 that he said would never go up in price is now worth probably around 800,000. So, yeah, we’ll just leave it there.

Anyways, that’s the X2 “flipping” article. You can take a look at that and see some interesting stats and things that they share there but again, the calculation of how they’re looking at how much money is made is just really deceiving and it upsets me that the media keeps doing stuff like this but again, that’s why I create these videos.

The next few articles, I want to share three good news pieces with you. Three good news pieces about Toronto and why you want to keep investing in Toronto. Huge announcements all in the past few days. First one: “Trudeau Bestows $26 Billion Infrastructure Bank on Toronto.” $35 billion Canadian, actually, infrastructure bank is now going to be open in Toronto, according to Trudeau. It was just announced. They were looking at maybe Calgary or other cities, Montreal. Nope. Toronto is getting it. Makes sense. Toronto’s the financial capital of Canada. It’s the rich continue to get richer and Toronto is, in the country of Canada, Toronto is the rich.

The next one: “Alphabet’s Sidewalk Labs Eyes Toronto for Its Digital City.” This is Google. Google is looking at making a major investment in Toronto. It’s sort of top secret, but the rumors are spreading. They’re looking at doing some major investment infrastructure digital thing in a new Toronto neighborhood. It’s assumed that this means the Port Lands. Looking at putting some kind of a digital network into the Port Lands. Again, this would be a huge win for Toronto if this happens and Google is looking at us from across the world as the city to do it.

Finally, the third good news is from Uber: “Uber Builds an AI Team in Toronto as It Fights Self-Driving Car Lawsuit at Home.” So Uber is investing huge into building a lab here in Toronto to work on self-driving cars and artificial intelligence research here in Toronto.

Again, Uber, Google, Trudeau and the federal government, huge announcements this week again. Just keeps reinforcing why we invest in Toronto and why it’s a great place to continue to invest.

So, there you go. That’s the news for this week. I hope you enjoyed this episode, please go ahead and share this video with a friend. Make sure you subscribe to the True Condos podcast and make sure you do subscribe, getting my weekly email updates as well.

Weekly email updates are so important to keep up to speed on what is happening in the condo market and the investment opportunities that exist each and every week, and you can do that by signing up anywhere on Until next time, have a great week.