Downtown Toronto Condos Vs. Downtown Mississauga Condos

Downtown Toronto Condo market is currently super-hot! Media is projecting some mixed views; someone is calling it a bubble and others a simple demand and supply issue.

As per a study, Toronto has some 148 condo towers (either in planning stage, starting to be built, under construction etc.) on the go.

The most important question being asked is whether there is so much demand, for that kind of supply?

Don Cambell (REIN) an expert in Canadian real estate, is of the view that there may be too much supply.
 

Disconnect between New builder Prices and Resale Prices

Working on a worse case scenario, I feel that the return on investment may not be great when one looks at prices of some new builder condos in the Downtown Toronto core. Just to give you an example, today's resale condos in Downtown Toronto, sell at an average price of $550 per sq. ft. At the same time, many Downtown Toronto condos are being sold at $750-$800 per sq. ft. Many experts, and some of my RE/MAX broker colleagues who specialize in condos, agree that it may not be possible for these high priced new builder condos to meet or beat the future resale condo prices of 2014-15.

Looking at the TREB's historic data, one may assume that Downtown Toronto market can be projected to grow at a yearly rate of 5.5%. This relates into $645 p.s.f. price in 2015 (based on $550 p.s.f price of resale condo in today's market). This disconnect between the resale condo market and the pre-construction market can be risky for short term investors/flippers.

Many investors are betting that prices will keep on rising

The resale market is populated by end users. Income of these buyers is not rising at the same pace. Chances are that many so called short term investors/flippers (buyers of $750 p.s.f. + range) might become forced landlords. Some may even live on negative cash flow if they do not put down a substantial down payment. What if the interest rates reach 5% by 2015?

Rental market can change

Rental price growth might also become slow in 2015: With competition from unsold inventory, investors will compete for tenants. Today, an average rent of a one bedroom unit without parking to a one plus one with parking is $1550 -$1750. For two bedroom units one can expect to pay from $2100 without parking to $2500 with parking. Current rental market is very tight and the market is on landlord's side.

What about price to rent ratio? Based on above numbers, an average price of resale Downtown Toronto resale condo (600 sq. ft.) is approx. $330,000. Rents for $1,750 with parking. The price: rent ratio of 6.3%, in today's market.

Downtown Mississauga is the place to invest!

To my surprise one of the condos experts called the 905 region (Mississauga falls in 905 dialing code) as not a great place to invest. This is absolutely a myth and a statement without much research and analysis of actual facts. Well, Mr. Expert, Downtown Mississauga has better appreciation (7.21% year/year in Downtown Mississauga vs. 5.47% year/year in Downtown Toronto), lower vacancy rate than Downtown Toronto (0.3% in Mississauga vs. 1.3% in Toronto), affordability is better, buy to rent ratio is similar and supply is controlled.

Being a local Realtor, I can vouch that things look pretty good in Downtown Mississauga. Downtown Mississauga condos have outperformed Downtown Toronto condos (C1 district) condos by whopping 31%. 

More reasons to invest in Downtown Mississauga

Price: An average one bedroom condo in Downtown Mississauga sells for at least $80,000-$100,000 less than Downtown Toronto's condo in the resale market (similar size and type). An investors is looking at approx. $25,000 to $30,000 more in cash (based on 20% down payment) for what he will end up paying after additional closing cost towards land transfer tax, to buy in Toronto.

Affordability: More the affordability, better the demand and price growth, it is that simple.

Price to Rent Ratio: Based on $245,000 average price of a one bedroom condo and yearly rental income of $15,600, the price: rent ratio comes to 6.3%. This is in line with Downtown Toronto market.

Supply: As of today, there are only 7 projects that are being offered as pre-construction, are under construction and are almost ready for interim occupancy. Supply of new condos is very tight; there is not much land available. City of Mississauga spends a lot of time in understanding the growth trends and keeps a close watch on development applications.

Rental market: The rental market has never been better. Not only, units rent fast but the quality of tenants is also good.

Many top Fortune 500 companies have based their Canadian headquarters in Mississauga. Mississauga is filled with thousands of young people and families that tend to be highly educated, upwardly mobile and very tech savvy. Rental properties in and around the Square One area in Mississauga get snapped up fast because of its network of GO and Mississauga Transit routes. Furthermore Islington subway is a mere 20 minute bus ride while the highways connecting to the 401, 427 and QEW are minutes away.

The new Sheridan college campus that opened this year is also attracting thousands of students from all over and many of them are looking to rent in the vicinity so as to cut their travel time.

Caveat emptor: Not every project provides same return (this is true for both Downtown Toronto as well as Downtown Mississauga). Novice investors make thousands of dollars less in return, by investing in wrong projects and prices, even for projects in the same vicinity and or being sold at President/Platinum prices. Contact me, if you are looking to buy a resale or a new builder condo in Downtown Mississauga or a perfectly priced project in Downtown Toronto.
 

Search Square One Condos for Sale

Related Post on Downtown Mississauga Condo Investment
 

Canadians Develop a Better Way to Track House Price Trends

The Canadian real estate industry says it has developed "the best and purest way of determining house price trends in the housing market."

The new MLS Home Price Index (HPI) will be used to replace the current method of providing average or median prices. The more accurate numbers will allow consumers and real estate professionals to identify price trends sooner, and allow for an "apples to apples" comparison of prices across the country. The measure will be a valuable tool for homeowners, real estate investors and those in the real estate industry.

The Canadian Real Estate Association (CREA), which took the lead in developing the HPI, says average house prices are often misinterpreted. They are affected by changes in the mix of homes sold and can swing dramatically from month-to-month, based on the types and prices of properties that sold in a given month, CREA says.

The new measure is calculated "using a sophisticated statistical model that is a hybrid of both the repeat sales and hedonic price approaches," says a news release from the Toronto Real Estate Board.

For those of us who have no idea what that means, here’s how it works. The HPI each month will provide two measurements. First is a price index. The HPI uses price values as of January 2005 as its base (reference) point. This level is set at 100 and works in a similar way to the Consumer Price Index. For example, in January 2012, Toronto’s composite HPI was 143.6. That means the composite price index rose by 43.6 per cent between January 2005 and January 2012. It was up by 0.28 per cent compared to December 2011 and up by 7.6 per cent compared to January 2011. Consumers can use the number to track price trends without worry of it being skewed, for example, by increased sales of higher-priced homes in a particular month.

The HPI also sets a series of benchmark home prices for different housing types: single-family, one-storey, two-storey, townhouse and condominium apartments. The benchmarks take a set of attributes typical of that type of home in the area where it is located, and remain constant over time.

Among the attributes that go into calculating the HPI are:
 

• number of rooms above basement level
• number of bathrooms and half-bathrooms
• square footage for main and living areas
• whether it has a fireplace or finished basement
• lot size
• age of the property
• parking
• how the home is heated
• foundation, flooring, siding and roofing types
• waterfront or panoramic view if any
• whether it’s new or resale
• proximity to shopping, neighbourhood amenities, public transit

In 2008, the Teranet-National Bank House Price Index was introduced to address the problems presented by average and median prices. The new HPI is better than the Teranet Index, says CREA’s chief economist Gregory Klump, for two reasons. The Teranet index uses the repeat sale methodology, which compares the values of properties that have been sold at least twice. The two prices are used to measure the increase or decrease in property value between the two periods of measurement.

The problem with that, says Klump, is that it does not take into account renovations or improvements that may have been made to the property between the two sales. "And we know how much Canadians love to renovate," says Klump. The other issue is that the Teranet index data is "considered to be five months out of date" by the time it is issued, says Klump. The new HPI data will available almost immediately at the end of every month.

The HPI was developed by CREA with five major real estate boards in Montreal, Toronto, Calgary, Fraser Valley, B.C. and Vancouver. It was created by the Altus Group. They consulted with Statistics Canada, Canada Mortgage and Housing Corp., the Bank of Canada, Finance Canada and Central 1 Credit Unit, which all have endorsed the MLS HPI methodology.

Initially only the five boards are taking part in the new index, which Klump says represents more than 60 per cent of the Canadian real estate market. There are plans for eight more real estate boards to be added this year, and another eight boards next year. Klump says there is no accurate measurement of how many private and new home sales are not conducted through the MLS, but he estimates that 70 to 90 per cent of all Canadian home sales are tracked on the service.

"This new approach will provide clarity for the consumer and prove to be a major improvement over any other method to measure home prices and home price change available in the marketplace today," says Toronto Real Estate Board president Richard Silver.

Written by Jim Adair
for my Realty Times Newsletter, Mar 2012
Realty Times

Mississauga Toronto Pre-construction condos-New builder condos

Newly constructed condos can be a good option when buying your condo. Normally, you may have to wait a couple of years before moving into your Mississauga or Toronto new condo. Newly constructed building offers new home warranties (transferable), fresh appearance, greener/energy efficiency, modern fittings, latest amenities, high speed elevators, latest appliances etc. while providing buyers to choose their finishes and upgrades.

As a first time buyer or an investor you can purchase a Mississauga Toronto new condo from the developer either before (pre-construction) or during its construction and well before the condo corporation is formed. Sometimes developers may have some unsold units available after the condo has been completed and registered. There can also be opportunities to buy assignment of purchase and sale agreement in projects. Real estate professional; someone working in condos market, can play an important role in helping you buy new builder condos at pre-construction prices. They can also help you comparison shop inventories of different builders, at no cost to you.

But there is more you need to know

On a negative side, you cannot "see" what you are buying and you must rely on artist sketches and floor plans (which may change); your initial deposit will be tied up for the duration of construction (you will earn some interest on this deposit); your financial position may change at the time of occupancy, that can affect closing the sale; construction of your unit may not be completed by the expected date; you may move into your unit while construction continues in other units-this can be noisy and disruptive; you may not be allowed to flip or lease your condo during the interim occupancy period and your condo may loose its value if the real estate markets plummet.

When someone buys a new condo, the developer typically provides the purchaser with a disclosure statement. However, if a purchaser reads the document, he or she may not understand the implications. These documents must be reviewed by lawyers. Failure to spend a few hundred dollars on lawyers could results in having to shell out thousands to the developer at a later date.

My point is that you should know exactly what you are walking into and make an informed decision, when purchasing a pre-construction condo.

What should your first step be

Feel free to consult with me before you invest your hard earned money into any Greater Toronto Area or Mississauga condo projects. With hands on experience in dealing with many new builders, I will be able to help you.

Working with me means more benefits for you

As your real estate broker, I Work for You and Not the Builder. I refer you to real estate lawyers to review builder's documentation before your deal firms up (within 10 days cooling off period).

Your lawyer goes through the builder documentation, disclosure statement, and agreement of purchase and sale to ensure that your interest is protected. It is very important for you to do your due diligence through your lawyer and tax advisor. Their advice will help you in making an informed decision.

There can be many hidden costs that you may not be aware of.  Lawyer points out these out of ordinary expenses and may ask the builder to cap some of those costs if not already capped.

Builder's closings costs can add thousands of dollars to your closing costs, if not looked into at the time of buying.

These costs can include-utilities meter charges, government levies, TARION warranty fees, parks and municipal charges, PST on appliances, builder's construction financing discharge fees, legal fees, education or transit development charges, proportion of development charges paid by the builder to the city.

Buyer do not pay any fees to me

The price to buy your new builder condo using my services is exactly the same as going direct to the property and buying it from the builder's sales people. You will not pay any fees to me or my brokerage (same are paid for by the seller/ builder).

What you lose by not working with a condo focused broker

• By not working with a professional condo focused broker/salesperson, you will miss out on the opportunity to be at the exclusive pre-launch event which is by invitation only and reserved for REALTORS® and their preferred clients.
• You may stand to lose out on the low rates, better terms, choice of floor plans etc. offered only at some of these events. Rates normally move up after the broker's preview. You would then be buying as any other regular member of the general public.
• By not working with an experienced condo focused broker/salesperson as your buyer agent, you will likely miss out on many aspects that help you to make an informed decision.
• You could lose out on guidance and advice around builders' reputation; comparable data on different projects, best models, floor plans, room sizes and views to choose from etc.
• You might also miss out on your chance negotiate some special terms in the contract that a novice buyer may not be aware of.
• Sometimes developers may create media hype about their condo projects. This is followed by a flurry of activity from the public, real estate agents and their clients, all anxious to buy a piece of real estate that seems like "the best deal in town". Developer sales people create an atmosphere to induce buyers to commit right there and then; it sounds as if there is no better deal, and everything is selling out etc.
• By not working with your own condo focused real estate professional, someone who is working for you and not the builder, you may simply get swayed by all the marketing and end up paying much more than what you should.
• Remember, you do not pay any commission to work with me to buy a new condo. The price to buy a condo is same in both the cases. But you stand to lose a lot by not working with a condo focused real estate professional.

There are more benefits for you!

When you work with me you get turnkey solutions, right from the project selection, to the suite selection, to help in choosing interiors, doing pre-delivery inspection; if required, followed with leasing your suite, tenant selection, and later selling if you would need.

Some key questions that I will help find answers to:

• What is included in the price?
• Is there any extra cost to purchase parking or locker?
• Any extra monthly fees for locker or parking?
• Do you own your parking/locker or you will you just have exclusive use of them?
• Are there any special provisions to limit noise between units?
• How are the units heated, cooled and ventilated?
• Who will pay for the utilities?
• What are the amenities (like indoor pool, sauna, indoor golf etc.)?
• What is included in the condo fees?
• How is condo fee calculated, is there a price per square feet?
• How are odours controlled?
• Is the building energy-efficient?
• What options are available for suite wall and floor finishes, cabinets and fixtures etc.?
• What are condominium rules regarding pets, BBQ on patio/terrace etc.?
• What are the condominium rules in regard to leasing suites?

You should also be aware of the view from your unit, especially in a new development or when the building is as a part of a larger complex. Be sure to ask about the future construction plans for adjacent open areas. Your view may change significantly with the construction of a neighbouring high-rise.

New home warranties are offer by TARION. This warranty is transferable to the owner buying newly built condo from the resale market.

Buying resale condos in Mississauga

I am often asked about the difference in buying new and resale condos.

The biggest advantage of purchasing an existing condo is that you get what you see. You can see the building and grounds, your unit and demography of people living in the condo before you buy.

Your lawyer will go through the status certificate and financial documents of the condo corporation. After looking at these documents, he can tell you if the condo complex is well maintained and managed, whether or not the condo in question is right for you.

I sell both new builder and resale condos in Mississauga and will be happy to assist you in your condo buying, selling and investing needs. Consult with me to receive objective information, unbiased advice, tips on choosing best suites, new builder information, compare new vs. resale, find out vacancy rates, rental incomes, property taxes, condo fee and incentives for first time buyers.

If you are considering buying a Mississauga or Toronto condo nearing its completion; directly from the builder's unsold inventory, check with me first. Once 70%-75% of the project is sold out builders often increase prices by approximate 5%-10% for all balance inventory. Builder offers more incentives however; there is a considerable difference in pricing from their initial release.

Chances are that I may find you a better priced comparable unit from the resale or assignment sales market.