Toronto Income Property Newsletter April 2017

Are we in a bubble? The Toronto real estate market continues to be red hot and is attracting attention from all around the world. The current market, in particular over the last couple of weeks, has seen some properties trade for $400K, $500K to a million dollars over the asking price! And this my friends is not good.

I believe that these sales (several hundred dollars over asking price) represent the froth in the current market. In other words, these lucky sellers who have cashed out in the last couple of weeks have seen numbers that may not happen again for a long time. Multiple offers are normal. Tens of thousands over the asking price is normal. But many hundreds of thousands over the asking price is not normal. The agents are not putting the prices too low. The current demand is just pushing them way up.

When the market corrects (or slows up) the prices likely won’t drop but these crazy sales will subside. When will this happen? This is perhaps the most asked question in our business. I think soon, but we could be in for many more months of this. I’m just sure that eventually, the market will slow down. To those who think that this is just going to keep going on ad infinitum with no slowdown ever, I believe you are mistaken. Hot markets end – they always do.

Since I am always hunting for investment properties, I have watched bottom lines all but evaporate despite recent increases in rental rates. I’d like to thank all our buyer clients for their continued patience throughout this challenging period. I will highlight a few sales below that show where I feel that market has gone too far.

I’d like to wish you and your family a Happy Easter and hope you all get out and enjoy the warmer weather.

- P.A.

These are not April Fools Jokes

In order to fully understand what has been going on with Toronto real estate, it is important to identify some of these sales that have been going through the roof.

Take a look at the following link:
Income property (3+ kitchens) sales from the first quarter of 2017

There have been some very high and unprecedented sales of both single family and income properties in the Toronto real estate market over the past few weeks. Some of these prices seem to defy logic as the investment value has all but disappeared. It seems like this huge demand is fueled by buyers looking to get into the market no matter what the cost.

When we see a small triplex at Coxwell at Danforth trade for $1.3M (almost half million dollars over the asking price), we are in new territory. As an agent representing investors, it is very hard to make sense of this. Unless you put down a very sizable deposit, you will need to put money in every month to break even. This is the flipside of investing. These properties that are trading for several hundred thousand dollars over the asking price are indicative of a market that is out of control and needs to cool off.

Will a Vacant Property Tax Help?

Whilst there is a huge push for buyers to try and get into the Toronto real estate market, apparently there are over 65000 unoccupied homes in the GTA. The city is currently eyeing a tax that would supposedly curb speculative buyers from purchasing real estate in Toronto and then not occupying it. The notion is that these vacant properties should be sold if not then be made available to renters. There is quite a bit of speculation as to whether this measure would actually be effective. Many believe that it doesn’t make sense for investors to leave their properties empty, despite the fact that we have been experiencing a rental shortage.

An empty homes tax introduced in Vancouver this year charges 1 per cent or $10,000 on a $1 million property that isn’t occupied by the owner or family or, rented to a tenant, at least six months of the year. Vancouver also launched a 15 per cent foreign buyers tax last year, which has been talked about here in Toronto for several months. It seems like all levels of government are looking at Toronto and trying to figure out how to stem the tide of this hot market.

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