Here’s what happened in Toronto’s condo market in 2017, plain and simple.
Here’s a list of tips on what makes a good condo for resale.
I share what I think will happen with the real estate market across Toronto in September 2017.
A Brian Torry interview, General Manager, Bosley Real Estate Ltd., Brokerage who discusses the Toronto Real Estate Market. It’s strength and the unprecedented increases we have seen in 2016. Brian also highlights why real estate is important to him.
Davelle: On today’s episode we have Brian Torry, he’s the general manager of my brokerage, Bosley Real Estate Ltd. I wanted to have him on today’s show to discuss the state of the market. Brian, what do you think is going on in the Toronto real estate market right now?
Brian: That’s a pretty big question.
Davelle: It is.
Brian: That’s a very big question. What’s going on is just a more intense level of what’s been going on for years. It’s a lack of supply. It’s a huge lack of supply. Supply’s even tighter than it’s been over the past few … and absolute huge demand for real estate in Toronto. When those two things happen, we get what we have and the market is active, very active, I would say is a great way to describe it.
Davelle: Absolutely. Why do you think our supply of real estate is so low, that’s causing these prices to increase so much?
Brian: It probably started with legislation that came out of the government, including the green belt legislation which stopped the city from growing [inaudible 00:01:39]. We have a lake in our south, and the provincial government has passed legislation telling Toronto it has to grow every year, by 50,000 people. So there’s this process going on where Toronto’s growing but it’s limited in where it can grow. There’s great in-migration to Toronto, and there’s a demand for housing, a huge demand for housing. That’s a big part of it, but also the lack of supply coming to market is that people are starting to stay where they are. They’re renovating, they’re not making a big move.
The transactional costs of moving are fairly substantial, with two land transfer taxes, you’re going to pay professionals to help you make your move. We’re starting to see some families, instead of doing that move up out of your first home into your second home, are starting to renovate it, re-do the basement, [inaudible 00:02:25] a basement, do an addition, extra washrooms; staying with their space and improving it instead of going out and looking for the other one, because those other ones are going to be pretty expensive.
Davelle: Yeah, that makes sense. One thing I find interesting with the double land transfer tax that we have in Toronto is that even in places like Richmond Hill or in the 905 area, there still seems to be a shortage of supply in those areas where they don’t even have the double land transfer tax, but it still seems to be having that same supply problem.
Brian: Yeah. That’s a direct relation to people not being able to afford in Toronto, that they’re moving out [inaudible 00:03:00] the suburbs. It’s a funny thing, we talked about this the other day. When I started in real estate 16 or 17 years ago, there was this belief that the young people didn’t want to live in the suburbs; that was their parents’ dream. They wanted to move into the city. There was a great influx of people moving into the city and buying condos. Now we’re at this point where the young people can’t afford to live in the city anymore. They’re starting to go out, and you’re starting to see a lot of really young people going to Oshawa or could be Ajax, out into the 905. They’re used to bidding wars, it’s not unusual for them in real estate, and the real estate is much more affordable out there, so they’re going out and getting it there.
Davelle: Yeah, that makes sense, but there’s also this move for some people to decide to have a family in a condo as well too, just to stay in the city and keep their costs down. What do you think the longevity is of people raising families in condos?
Brian: It’s all over the world, people raise families in condo. We have this strange belief in North America that we should all somehow live in a giant penthouse, have a giant lot out somewhere, I don’t know where; but the world all around us, people raise families in condos. We’ll start to see a lot more of that in Toronto, and the way we’ll see it more likely … since they’re not building big family-sized condos … is we’ll start to see people buying the condo next door and combining them together so that we’ll end up with bigger spaces for people to raise kids. That’s coming, and there’s nothing that’s going to stop it. People like living downtown, they like being there, and condos are going to be a way of life for raising children for years to come.
Davelle: Yeah, that makes a lot of sense. Do you think the city could do more to increase the supply of housing, maybe not have so many regulations when it comes to laneway housing, things like that?
Brian: Yeah, it’s hard for the city to think outside the box. Building condos is something they’re used to, they know that they can increase their housing stock doing it that way. When they’re forced to think outside the box, it’s a little more difficult. I see it with laneway housing, I see it in making it easier for two families to buy one house and divide it, share that ownership in some way, and that’s not an easy process to the city. I see that there’s a lot of opportunity out there. The city doesn’t seem to be taking that opportunity. It seems much easier to go the condo route at this point for them.
Davelle: Right. One of the things I notice in Montreal is that they do have houses that essentially have been broken up and turned into condos, but in the city of Toronto you can’t really do that.
Brian: You can, the legislation allows it. It’s not something that people are doing very much. There are several very small two and three-unit condos around in Toronto, but they’re definitely the exception, not the norm. That could be a way for young people to get into home ownership, in sharing a property if they don’t want to be in a condo. With some imaginative ways, you can do it with laneways, as you said, with laneway housing. Just with some of the bigger housing stock in Toronto that can be divided for families.
Davelle: Yeah, that makes a lot of sense. One of the things in the media a lot right now is about how the government have to put in controls in the market because they feel that the prices are becoming unaffordable in Toronto, Vancouver. A lot of my friends will ask me about this, and I don’t think the government can really do anything because they don’t seem to really understand the problem. What are your thoughts about that?
Brian: I’d probably agree with you. They’ve tried a few times to change downpayment rules and amortizing [inaudible 00:06:23] rules, and nothing really seemed to change the market. With interest rates as low as they are and remaining as low as they are, that’s part of what’s driving it. It’s demand, it’s cheap money, and I’m not sure what kind of intervention the government could do that would make a difference. Hopefully there’s much smarter people out there than me that will figure out what they want to do if anything. The housing market’s partly driving our economy at this point. I’m not sure why. Affordability is a huge issue in Toronto, the housing industry and the spin-offs, the renovations and all of that, are a huge part of the economy here.
Davelle: Yeah, absolutely, for sure. One of the things they said in the paper that they were looking to do to quell the market was they wanted to increase the land transfer tax. I laugh as I say it because it makes me think you don’t really understand the problem if your solution is to increase the land transfer tax to slow things down. That’s part of the reason why the supply is so tight right now. Would you agree or do you have any other thoughts on that?
Brian: I absolutely would agree, because it’s a transactional cost. It really affects you moving up, so you move up to that bigger house and you get a big hit from land transfer tax, and it takes away the equity that you’ve built on your way to moving up. If you’re suddenly trying to move up with the equity from your first home and you have to pay a huge amount in taxes to do it, you either don’t move up or you can’t move up as much as you’d like. That’s the way to put it.
Davelle: That definitely makes sense. What have you seen over the last six months at least for 2016 in terms of the rise of prices, on a month to month basis, or at least just over the last six months?
Brian: It’s probably been one of the biggest jumps in the spring that I’ve ever seen. The prices have really spiked over this spring compared to last time, even in Toronto. It’s not downtown Toronto where the numbers are probably higher but in the entire GTA, it’s up 15% and I don’t remember a spring like that. I would say this year it’s as big a jump as we’ve seen. All this with less inventory. You can do the math. The number of sales are up, the inventory’s down. Of course prices are up.
Davelle: Absolutely. Over the last 16 or 17 years you said you’ve been in the business, has there been a period where you’ve seen the market stop or a slight downturn at all?
Brian: In 2008.
Brian: In 2008, we all thought we should probably go get jobs, because for six months it went sideways, and there was something in the world that happened then, it was banks going sideways in the US if I remember correctly.
Brian: In 2008 there was a few things that happened in real estate over the years, big economic factors, but I’m pretty sure that’s what it was. For about six months, it sort of stalled out.
Davelle: Yeah, absolutely, the stock market crashed.
Brian: It was an interesting time. Yeah, there you go. There was some big event that stalled us out for six months, and then we all went back to selling and prices went back up again. That’s the only time I remember in 16 years. It’s like the bottom of the market was 1996, so we’re into 20 years … except for that little blip … of upward growth in prices in Toronto, where is unheard of as real estate’s always been a cyclical business and prices go up and down and interest rates go up and down, but it’s been fairly steady for a long time.
Davelle: Yeah, absolutely. I always believed that the markets are cyclical, but I always wonder what would it take for the market to go down, because when we did have that big stock market crash back in 2008, the market didn’t really dip, it just stopped. The faucet stopped for six months, and then it went back to business.
Brian: Just turned right back on. Absolutely. I don’t know, maybe we’ll never see that dip again. More and more of the world’s population is moving to cities. We’re becoming an urban culture and society. Our cities may just continue to grow and grow until they reach a level of absorbing all those people that want to be there.
Davelle: Right, interesting. Wow. If you were a real estate investor in this market, would you still invest in this market? I always hear from people, “[inaudible 00:10:19] wait till things cool down because I get into the market.” What would your advice be to people who say that?
Brian: I am real estate investor in this market, and I’m always looking for something, and my advice is buy the right property even if costs a bit more money. Be careful, don’t bury yourself and pay too much money for something that’s not going to return if you need to sell it down the road, and look for markets that have potential growth. If Toronto’s not your market for potential growth, go somewhere else. I’ve been looking a little bit down in [inaudible 00:10:47] and maybe I’ve missed the boat on that one already, but there are communities around Toronto that are going to have strong growth in the future, and there’re still neighborhoods in Toronto that [inaudible 00:10:56]. Don’t ask me what they are, because if I knew I’d go buy. Every year some neighborhoods outperform others. If you really want to look, look where they’re building transit. Where they’re building transit, real estate prices should go up.
Davelle: Absolutely. What do you think about diversifying into let’s say commercial real estate versus residential?
Brian: For me, residential real estate is what I’ve always invested in. That’s what my family’s always held. Commercial’s just a bit of a different animal. It’s different renting, different leasing, and you run a bit more of a risk, depending on where you are, of having empty space. In residential leasing in Toronto, you never have empty space.
Davelle: Right, that’s a good point for sure. What would your advice be to somebody who let’s say they don’t have enough money to get into the residential investment market in Toronto? Would you suggest they partner up with somebody else, or how should they go about getting into the Toronto market?
Brian: Yeah, partnering up is a good idea. I would just make sure you put everything in writing and you’re careful about it. I’ve seen a couple of partnerships work and some not work. The difficult part of a partnership is dissolving it if one party wants to. If you’re going to do a partnership, it’s a great way to do it. I looked at some property with a few people the other day that we all are considering together. You just have to be really clear with the process of dissolving that partnership should that occur, and the type of ownership that you’re going to use. I would say don’t be afraid to buy something smaller, to invest in a smaller property or to invest a little bit outside your comfort zone, to get out of the city of Toronto.
Davelle: Right, that makes sense. I’m a real estate investor as well and I certainly believe in holding real estate and investing in it, but it’s funny, I get a lot of friends who question me and say, “Oh my god, you’re over-weighted in real estate, the bulk of what you have.” What do you say to critics that question the fact that you have a big portion of your portfolio in the real estate market?
Brian: This is what I say. I say they’re not making any more land, and so what we see is what we get. There’s a lot more people coming to the planet than there are right now. Land will be valuable, it will always be valuable. From time immemorial, land has been what people sought. I don’t know a lot about the stock market, I think I have some money in it, in mutual funds or something somewhere, [inaudible 00:13:17], but for me the safe place is in real estate, it’s real.
Davelle: Yeah, absolutely. You can touch it, you can see it.
Brian: Yeah, you can stand on it, and you can even live there if you need to.
Davelle: Yeah, absolutely.
Brian: I will never ever live on my stock portfolio. It will not protect me from the rain or give me a place to sleep. I suppose if I sold it, then perhaps it would.
Davelle: Yeah, absolutely, it’s very true. What I like about holding real estate is that can control it. I might not be able to control the real estate market but one thing I look at the stock market is, I’m not sitting on the board of directors of a particular company whose stock I own, so I can’t really control anything at all about what’s going on in that particular company that’s on the market.
Brian: That’s right. You’re at other people’s control all the way.
Davelle: Yeah, absolutely. What I love about the real estate is it’s my house and I can control it. Obviously there’s a couple of things I can’t control but for the most part, it’s under my control and I don’t feel that any part of me investing in a particular mutual fund or a particular stock is under my control at all.
Brian: I’m totally with you. I’ve always done real estate, my family’s always done real estate. It’s natural for me. I’ll tell you, some people are not [inaudible 00:14:29] to be a landlord, and some people hate real estate investing. I’ve seen people get into it and get out of it very quickly.
Davelle: Right. What would your advice be to that young person that’s renting now, that at some point they do want to get into the market; and obviously because it’s becoming expensive it makes it difficult for them to get into the market? What would your advice be or what you say to your kid in terms of how should they best try to get into that real estate market?
Brian: That’s a really good question. Work hard and save some money but don’t be afraid to take a bit of risk. The interesting thing about real estate, it’s like all things, with a little bit of risk you can do a bit better. Don’t be afraid. My first family home was a bit of a chunker, my wife and I fixed it up. Don’t be afraid to take on projects. If you can find a good place and a good [inaudible 00:15:18], sometimes you live in a way you don’t necessarily want to for a few years until you’ve done the renovation you need. [inaudible 00:15:23] renovations, it’s not the end of the world. If you’ve got an open mind to what you can buy and what you can afford, and you put a little money away, work hard, you’ll find a way into the market.
Davelle: Got it. What do you think about the bank of mom and dad, about a lot of people getting help from their parents these days?
Brian: I don’t know. Obviously that goes around, that happens, and I’m sure they do. Certainly the kids today are coming from … we’re the richest generation ever and there’s definitely money out there. I’m a family person, if parents want to help, that’s wonderful and great. If you have that opportunity, great; if you don’t, find another way.
Davelle: Absolutely. Do you plan on helping your kids when they get older?
Brian: I’m trying to buy houses now, knowing that it will be more difficult for them to buy them in the future. So yes, I would help my children get into the real estate market.
Davelle: Awesome. That’s a good strategy. Try to buy now to help your kids out later.
Brian: Yeah, and myself of course.
Davelle: Of course, that makes sense, absolutely. Anything else you’d like to tell our audience about the market right now?
Brian: I don’t know. It’s probably been the busiest spring I’ve ever seen, and we’ll probably take a little pause over the summer, which we haven’t done for many summers. The spring markets have really pushed into the summer, but this summer we’ll get a little bit of a break. If nothing changes we’ll come back in the fall as fast and furious as it’s been all spring long. We’ll see, everyone have a nice summer. Even in the summer, real estate happens. In fact if you don’t want to compete for real estate, you’re trying to get into the market, into condos, it’s not a bad time to be buying. There’s less people out there looking for property and there’s still lots for sale.
Davelle: Absolutely, it makes a lot of sense. Whereabouts do you live in the city?
Brian: I live in Roncesvalles Village. I used to live in Parkdale, but some time ago some savvy realtors re-named it Roncesvalles Village. I’m out in the west side by High Park and I love it very much. It’s a wonderful wonderful community, and it’s just one of those communities in Toronto that are like all … there’s so many of them all around Toronto where there’s a really wonderful main street and some good green space and just a vibrant community, those vibrant neighborhoods. I’m happy to live in one of those.
Davelle: What first drew you to that neighborhood? I’m assuming you got into that neighborhood before it was hip and happening?
Brian: Yeah, we definitely got in right before it was hip and happening. I consider that a little bit lucky. We were living in a condo downtown but wanted to have children, my wife and I. So we were looking for a place to live. I grew up in downtown Toronto and my wife didn’t want to be as downtown as I wanted to be. We found Roncesvalles and my wife is from Collingwood and she really liked the main strip, because it seemed like a small town to her, the main strip of Roncesvalles. We bought out there and have never looked back.
Davelle: Were the schools good when you moved out there?
Brian: We looked into the schools because of the kids. There was a very good school, Howard Public School, that had French immersion which was interesting to us. We liked the stream of schools it went through and we were happy with it. There are great schools out here, [inaudible 00:18:19] the city. Realistically we do live in Parkdale and there are some inner city schools all around, but it’s wonderful living, it’s urban living. It’s how I grew up and I’m happy to raise my kids that way.
Davelle: That sounds great. You mentioned something about Parkdale, because Parkdale right now … there’s some parts of Parkdale that seem sketchy but there’s other parts of Parkdale that seem like they’re up and coming. How long do you think it’s going to take Parkdale to have a full re-birth?
Brian: I hope a long time. I consider Parkdale to be one of the most … maybe the last interesting neighborhood in Toronto. There’s so much gentrification that goes around, all around Toronto, and Parkdale really is a neighborhood almost out of time. It’s a wonderful wonderful vibrant place and the people that live there are wonderful people. I hope it doesn’t change too quickly to be perfectly honest.
Davelle: It seems to be the place right now with all the hip, happening restaurants, that’s for sure.
Brian: Sure does, eh? Sure does. There was an interesting [inaudible 00:19:11]. They tried to ban restaurants there for a couple of years and I believe they did.
Davelle: Why did they do that?
Brian: They were just trying to stop it from turning over too quickly. There’s a large population in Parkdale … I don’t know if it’s a large population, but they have affordable housing in Parkdale and people that use it. There’s a real belief in the communities around it and in Parkdale and in the city that when we lose that affordable housing in a central location in Toronto, that the city’s a lesser place. It’s not as good a mix of people, it’s not as interesting a place. Parkdale’s one of those places still with a lot of affordable housing and it’s starting to disappear, and that’s a real problem for the city, especially in a city where affordability is becoming an issue for real estate. We’re talking about people not being able to get into the market. Here is a neighborhood where there is still some affordable real estate and affordable rentals, and it’s changing.
Davelle: Interesting. Brian, thank you so much for joining us today. I really appreciate it. It’s been great listening to your insights and information about the real estate market. Thanks so much and enjoy the rest of your vacation.
Brian: I will. Thank you very much and it’s been a pleasure. Great to chat with you, and have a wonderful weekend.
Davelle: Great, thanks a lot, Brian. Bye.
Brian: Bye now.
I’m always blown away by the fact that the newspapers for the last 5 years keep writing about a housing crash, yet every year when it doesn’t happen, they never go back and do an analysis of where their research went wrong. The challenge with looking at national housing stats is that housing isn’t national. The housing market in St. Johns has nothing to do with the market in Regina which has nothing to do with the market in Toronto.
Furthermore, the market in Toronto is not homogenous either, since the market in Leslieville has nothing to do with the market at Yonge & Eglinton. Additionally, the condo & housing markets are completely different yet most publications lump them both together. Newspapers recently reported that the national stats have shown a 3 ½% dip in the market. They use this as evidence of a crash. It’s funny in most other industries there is always a statistical margin of error of + or – 2%. So calling a 3.5% dip a crash seems like an exaggeration. I would think a crash would be a 30% or 40% dip, not 3.5%.