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Posts from the ‘AgentThink’ Category

14
Feb

The New Danger to Toronto’s Rental Pool

condo-rentalsThere should be no surprise to anyone that we are seeing significant competition for rental suites in the city. Last week an agent in my office scoured MLS to find 21 condos that met the size, location and price for his client. He started calling to make appointments only to find that all but 4 had been rented out. Clearly a shortage exists in the rental pool across the city which is creating competing bids. In this situation the winner is not just the guy with the biggest amount of money. Today’s winning tenant is the one who has the best covenant, that is.. the best job (meaning long track record of employment) and the biggest salary, the least debt and highest credit score. Perhaps that doesn’t come as much of a surprise.

But the bigger concern should be the shrinking pool of rental units across the city. The double-digit price increases that condos are experiencing together with some of the highest numbers, in terms of millennial buyers, entering the market, should be cause for concern. Consider that in January 2014 the average condo in C01 cost $448k. That would typically be a 1 bedroom and den configuration of about 700 square feet +/-. For simplicity I will assume that a typical buyer would put down 20% (or $90k) and carry the balance on a mortgage at a cost of about $1694/month. ($358k at 3%, 5 yr term). Include a typical property tax of about $265 per month (Around $3200 annually) and maintenance fees around $385/month ( $.55/per sq ft). and you have a total operating cost of about $2345/ month. For that kind of money in C01 you are probably located on King West about a few blocks away from the Financial District and assuming the unit had parking, the monthly rent MIGHT cover your nut. Not a bad deal especially if you hope that the unit is appreciating year over year.
Jump ahead two years. That same unit is now, according to TREB stats, pushing $531k. Interest rates have not changed significantly so the monthly cost of your mortgage, with the same 20%down, is now $2016/mo ($531k-$105k deposit= $426k at 3%, 5 yr term). Assume maintenance and taxes are similar and your monthly carrying cost is now closing in on $2670/month. Rental rates have not kept pace, so if you are an investor, you would be running a loss, in fact you need to have nerves of steel to be ok with losing well over $300/ month. For investors, buying a condo to rent out just doesn’t make sense.
Now consider the investor who bought in 2012. Chances are they are covering their expenses nicely. Even with higher maintenance fees and taxes, they are still in the black by $200-$300/month. But at an average purchase price of $410K in January 2012, if that person sold today he would gross $121k. Hard to pass up on that considering it would take you roughly 40 years to earn that same income when you are collecting it $250 a month. Naturally, I am omitting commissions and capital gains out of the picture but the theme remains. Currently in the C01 there are nearly 400 active listings of which 122 are listed as having tenants. Many of the listings I examined contained vacant possession notes in the broker comments. If half of those tenants are forced to move to accommodate end users, Toronto could face a much more serious housing shortage. On a side note, two other factors will change the landscape of rental units in Toronto namely the tightening of speculative lending through the banks and AirBandB. Two things to keep an eye on.

Mark McLean is the Broker/Manager at the Bosley Real Estate Queen St W office, the Immediate Past President the Toronto Real Estate Board and a director at the Ontario Real estate Association. The opinions expressed here do not reflect the opinions of TREB, OREA or Bosley RE.

8
Feb

Market conditions stressing out local Realtors too

hair-pullAs a manager for a busy downtown Toronto real estate office, I never thought I would be spending my time talking agents off the edge of a cliff. The truth is, that the market is breaking new ground on agent management. In the past, my conversations with fellow agents revolved around helping them write clauses, dealing with complaints, running meetings, being a liaison with front desk workers, reviewing advertising and generally ensure their business was running smoothly. Today I’m still doing those tasks but as an unfortunate byproduct of this market, I find myself spending a lot of time comforting agents, offering condolences and talking through the ‘post offer’ game tapes. Don’t get me wrong, these are great conversations, but I worry about an office full of stressed out and exhausted agents.
Now, you might be thinking…boo hoo, poor agents, they make so much money it’s hard to have any sympathy. The reality is that the buying process is seriously intense these days. Frustration levels amongst agents are extremely high. They are missing out on offers on both condos and houses and our office meetings and masterminds are dominated by countless stories of failed offer attempts despite clients throwing everything they have at a property.
The problems of low supply, as reported in the media, are not limited to the downtown core either. This is a Golden Horseshoe problem, from Hamilton to Ajax and as far north as Barrie. Granted, the supply crisis is highest in the 416. For several years I have been tracking the weekly sales of houses and condos in the downtown market, defined by the area between the 401 and the lake and east to include the Beaches and west to include High Park. Over the years I have watched the general trend of tightened supply in both houses and condos as well as an increase in the percentage of properties selling over the list price. While housing has stayed relatively consistent, only edging up slowly, the condo market has often surprised me. When I first started tracking sales, there was only true competition on about 13-15% of units sold. That percentage was pretty stable for a few years. Then the number started to shift. By mid year 2016 I started to see more units selling at or above the list price. By June we started to see 30%, by October we were testing out 40% and by December we were seeing some numbers in the 50% range. Imagine, half of all condos selling above the list price. In January 2017 new records were set. Last week we hit 65% and when I am reviewing each and every listing on a line by line basis I notice that condos are not selling over the list price by a $5-10,000 like a few years ago, they are selling over the list price by $50-100K now. It is an extraordinary phenomenon.
Freehold homes face the same challenges for buyers. Recently a home in the west end, listed at $799K sold for $999k then, less than a month later a similar home sold for over $1.2M. Everything in an agent’s gut says these houses are worth the same money. So imagine what is happening to those clients who are being told to submit their offer based on a recent sale, only to get completely blown out of the water.
What impact, if any, is filtering down to the agent on the street? Productive agents are feeling the pressure as much as new agents entering the real estate field. I personally find myself spending as much time coaching the newbie agent the art of increasing your odds at the offer table as talking to the experienced agent who is frustrated with market conditions and looking for answers. And it’s not just the shear number of buyers looking for homes that is creating high stress levels. Increased scrutiny by the banks on their borrowers (sometimes insisting on conditional financing clauses), appraisals and quick home inspections are severely complicating the buying process. Are there any quick fixes? Nothing seems evident on the horizon and my impression is that as the spring market approaches it is going to be a whole lot harder before it gets easier.
Mark McLean is the Broker/Manager at the Bosley Real Estate Queen St W office, the Immediate Past President the Toronto Real Estate Board and a director at the Ontario Real estate Association. The opinions expressed here do not reflect the opinions of TREB, OREA or Bosley RE.

2
Feb

Too good not to post.

zero-talent

Think you don’t have what it takes to be an awesome Realtor? Here are ten things that escape many agents I have worked with in the past. Not only do these ten points require no real talent, they are also free. So really there is no sense spending money on SEO if you can’t deliver on most (or all) of the traits on the list. Boom!

Thanks @sethprice for sharing

Mark McLean is the Broker/Manager at the Bosley Real Estate Queen St W office, the Immediate Past President the Toronto Real Estate Board and a director at the Ontario Real Estate Association. The opinions expressed here do not reflect the opinions of TREB, OREA or Bosley RE.

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