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Baby, we got a bubble!?

A condo at 45 Carlton Street (The Lexington). 1300 square feet, two bedrooms, two bathrooms, two solariums. 16th floor. North and West exposure. View of the Police Headquarters. New bathrooms and kitchen. Valued at $500,000. What do you think is the true value right now, as many of you say that condos are over-valued. I guess the older condominiums aren't as overvalued though. Still, estimate the value to you.

I'm assuming you're asking us this from investment standpoint, and not a primary residence. I'm not familiar with this building so I need some additional info: Is this mostly "rental" building? What's the rent you can get for this place? Does $500K include closing costs? What are the maintenance fees? Property tax? Any additional cost one would have to fork out to make it comparable to other rental units in this building? What kind of downpayment? Once you have all this you just do the simple math - net has to beat (at least) our current inflation, and more likely, missed opportunity somewhere else. Include some buffer in your calc (vacant time, increase in interest rates...). Hope this makes sense as I typed it really quick ....
 
It's going to cost around 100k or more to fix it up to luxury standards that builders offer. If one bought at 470k + 100k to fix up; it might be better just to get a new one with everything completed?
For a place of that size and cosmetic changes, an updated kitchen, and new flooring, $100000 may be far too expensive.

My GF's upgrade to an old 800 sq. ft. unit consisted of new good quality paint, new flooring (high quality laminate), new laundry pair, and new stainless steel kitchen appliances. The paint and paint supplies were a couple hundred bux, plus some elbow grease from her and her father. The new flooring with installation was under $3500. The new appliances were a few thousand, and the laundry pair was around $1000. She also spent a couple of hundred dollars to fix the shower. All told, the cost was under $10000. That was several years ago, but still that's 1/10th of the $100000 number being thrown around.

Her existing kitchen counter was not granite but it looked great with the new wall paint and new appliances. There was no need to go granite, but even if she did, that would have been a few thousand dollars depending on the colour and grade. Her bathroom was just OK, but even if she had wanted to do a gut and reno of the bathroom, it would have been in the $10000 range with decent finishes.

In other words, a more complete reno might have cost her only $25000, and most definitely under $40000. But like I said, she only had to spend $10000.

Unless you want to select the finishes yourself and prefer old buildings.
One of the problems of so-called luxury buildings is that often times the finishes aren't actually very good. They look fine, but the materials used aren't necessarily great. Furthermore, if you're paying for pre-construction upgrades, usually the pricing on those is absolutely horrendous. Unless you're in a really high end luxury building, the quality is usually at best mid-end, and often times you can't even go higher quality even if you wanted to, because it's not offered.

To give you an idea of costing, I put in 700 sq. ft. of high quality 9-layer 14 mm 5" wide-plank engineered hardwood (maple, clear finish) in my basement. (Fuzion hardwood flooring.) Cost of the flooring plus underlay was $4.50 per square foot, plus installation. Most condos don't offer this kind of quality for hardwood flooring.

If you choose to reno to the level of such a luxury building, the cost would actually be less than what I paid because the quality of the materials would be lower.

And don't forget, with a pre-build, you may have to pay phantom rent on the unit for several months before you actually own the place.

EDIT:

For my condo townhouse I bought pre-build and got the upgrades up front so I wouldn't have to deal with the headache of renovating. The biggest part of my upgrade for the pre-build was putting in hardwood floors. If I could do that over again, I would have put in the cheapest broadloom they offered, and put in hardwood after the fact. The cost would have been slightly more, but the quality would have been significantly better.

There are certain parts of a pre-build upgrade that are absolute musts IMO. eg. Roughing in natural gas lines (if possible), addition of extra electrical, cable, and phone outlets, etc. Other things like hardwood floors and even granite? Not so much.
 
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For three years now, Efrem Rone has been keeping a close eye on an Adelaide St. E. parking lot, watching for a condo sales centre to rise from the asphalt.

“I know how things work,†says Rone, 45. “If you don’t get on the list (to get into the sales centre early), the best units are gone, prices start going up and you’re stuck with the leftovers.â€

His agent was getting nowhere, despite registering early to view floor plans for the 22-storey Ivory on Adelaide project. So Rone was surprised last weekend to walk past an Ivory on Adelaide sales centre bustling with activity.

“On the door was taped an ad from a Chinese newspaper with a picture of what the project would look like. Deals were being done,†says Rone. “It looked like the sales centre was open for business, but only to people of a certain ethnicity.â€

Toronto’s condo market is on fire. And much of the frenzy is being fuelled by investors, many of them Asians, who are being given preferential treatment — early access to the best and cheapest units.

“It may look like discrimination, but these people have actually earned the right to be first in line. Any business will go to their best customers first,†says realtor turned condo developer Brad Lamb.

Almost 68,000 new units are now in the planning stages or under construction across the GTA as investors, a lot of them immigrants with ties to Hong Kong and mainland China, the Middle East, India, Pakistan, Russia and Brazil, look to cash in on the biggest condo boom in the world.

A record 20,729 units have been sold in the GTA as of the end of September — smashing the pre-recession record for the same period in 2007 of 17,285. An estimated 45 to 60 per cent have been snapped up by investors, with estimates closer to 90 per cent in some newer downtown condo projects.

They are looking for solid investments in a shaky world — the keys to hard assets like real estate.

“We are a tranquil island in a sea of despair,†says one of Toronto’s leading condo development consultants Barry Lyon. “If it wasn’t for the multicultural community, we would have no condo market to speak of right now in Toronto.â€

Even realtors who find themselves, and their clients, with no hope of being among the first buyers in all these new glass and steel towers springing up on Toronto’s skyline understand why this is happening.

Targeting agents with strong ties to big buyers in the multicultural community — one developer calls them his “rainmaker list†— means developers can sell 70 per cent of the units in a project faster, which keeps costs down. That’s what most banks demand before they will free up loans to start construction.

The practice has paid off: In 2005, it took an average of 13 months for condo builders to sell 70 per cent of their units, says George Carras, president of RealNet Canada, which monitors building activity across the GTA.

This year, they’re hitting the threshold in just four months, largely because of their “growing sophistication†in wooing brokers who can deliver multiple investors.

Carras likens the process to Initial Public Offerings of stocks. Those willing to spend the most and not afraid of risk potentially get the biggest payback.

But some agents complain that a handful of condo builders, such as Plaza Corp., are being so aggressive at racking up early sales, it’s becoming impossible for the average buyer, looking for a home or little investment property, to get in before prices are less affordable.

It also gets tougher to find the most desirable units, such as the cheapest one-bedroom corner units high enough to have a view.

Several realtors spoke to The Star about the focus on investment buyers, but none would be named for fear of being blacklisted from getting access to any units at all, which are now essential to their livelihood.

One Asian agent who has sold numerous Plaza Corp. units, said he had to pull strings to get clients a peek at their York Harbour Club project on the Railway Lands: “I’m not part of their stable of VIP agents.â€

“York Harbour Club was a little bit unfair to the public,†concedes Plaza Corp. vice-president Scott McClellan. “The (pre-sales) took off on us a little bit and we probably didn’t have as much as we wanted to have for the general public.â€

By the time the public could buy, just 30 per cent of units were available.

“This isn’t new. Everybody does it,†says McLellan of what he calls his “rainmaker list†— realtors who can deliver 15 or more buyers willing to buy from floor plans, rather than wait for built units.

McLellan says all of the early buyers of Ivory on Adelaide are Canadian citizens, buying units as long-term investments or as homes for their kids or relatives who might be migrating from overseas.

No one knows how much is offshore investment.

Lyon points out that investors have become essential landlords in a city where almost no one is building apartments. He also sees the units as “warehousing†for first-time buyers who can rent while saving up a down payment. Often investors are willing to sell without requiring the 20 per cent down payment a bank demands.

“These investors bear no relationship to the speculators of the 1980s,†Lyon says. “They’re very sophisticated†and recognize Toronto as a bargain compared with other major cities in the world.

A lot of developers point out they hold back units so less high-achieving realtors, and the public, don’t miss out altogether. Often they are at higher prices — parking spots alone can be almost $10,000 more expensive — but McLellan says there are no plans to raise unit prices on Ivory on Adelaide when the public gets their first crack this weekend.

Rone is fairly savvy — he has been involved in the condo market since 2006 — but is still shaking his head: “This just seems unfair.â€

He finally got his email invitation to the “grand opening†of the Ivory on Adelaide sales centre Friday. Like everyone else who may walk through the doors, he has no clue that almost half — 43.5 per cent — of the 358 units have already been sold.

McLellan insists that no buyer is being left out. Even those who’ve dropped by the last few days have been asked to leave their names.

But Rone’s agent now knows she gained nothing by registering early and that the smallest and most affordable places will likely be gone.

“I’mot going to lie and tell you that I haven’t heard this (complaints about the early sales process) before,†McLellan says. “I have people who have called me upset. We figure it out for them.

“Have him give me a call.â€
 
For a place of that size and cosmetic changes, an updated kitchen, and new flooring, $100000 may be far too expensive.

My GF's upgrade to an old 800 sq. ft. unit consisted of new good quality paint, new flooring (high quality laminate), new laundry pair, and new stainless steel kitchen appliances. The paint and paint supplies were a couple hundred bux, plus some elbow grease from her and her father. The new flooring with installation was under $3500. The new appliances were a few thousand, and the laundry pair was around $1000. She also spent a couple of hundred dollars to fix the shower. All told, the cost was under $10000. That was several years ago, but still that's 1/10th of the $100000 number being thrown around.

Her existing kitchen counter was not granite but it looked great with the new wall paint and new appliances. There was no need to go granite, but even if she did, that would have been a few thousand dollars depending on the colour and grade. Her bathroom was just OK, but even if she had wanted to do a gut and reno of the bathroom, it would have been in the $10000 range with decent finishes.

In other words, a more complete reno might have cost her only $25000, and most definitely under $40000. But like I said, she only had to spend $10000.


One of the problems of so-called luxury buildings is that often times the finishes aren't actually very good. They look fine, but the materials used aren't necessarily great. Furthermore, if you're paying for pre-construction upgrades, usually the pricing on those is absolutely horrendous. Unless you're in a really high end luxury building, the quality is usually at best mid-end, and often times you can't even go higher quality even if you wanted to, because it's not offered.

To give you an idea of costing, I put in 700 sq. ft. of high quality 9-layer 14 mm 5" wide-plank engineered hardwood (maple, clear finish) in my basement. (Fuzion hardwood flooring.) Cost of the flooring plus underlay was $4.50 per square foot, plus installation. Most condos don't offer this kind of quality for hardwood flooring.

If you choose to reno to the level of such a luxury building, the cost would actually be less than what I paid because the quality of the materials would be lower.

You'd be surprised how much prices have gone up. I got a quote for my parents kitchen renovation during the home renovation tax credit which they didn't make use of. The cost for the kitchen cabinet and flooring was around 11k. If I were to get a quote this year, it would be around 15-20k. Granted the quality I selected was thermofoil (cheap standard) at Home Depot which they don't seem to offer now. It was around $56 per linear ft or something. When I went and asked about medium standard cabinets, I got quoted around $156 per linear ft. It doesn't even include installation yet for the cabinets. I'm sure the installation costs have also gone up.

Also, if you were to add cost of hiring someone to paint, that's cost as well. Modern washrooms would have ceramic, stone, or marble on floor and walls. Modern lighting, sink with stone/marble/granite counter, cabinets and medicine cabinets, etc. Costs will go up. Regarding kitchen. Most have granite which is a few thousand. Some offer miele appliances which are expensive. The appliances (ovens, fridge, ceramic stove, laundry machine, etc) themselves on average could cost around 10-15k depending on the models. European cabinets aren't cheap. Like I mentioned, HD was selling standard European cabinets, not the higher end ones, for $150+ per linear ft. Just for cabinets. It doesn't even include door knobs, hinges, installation, etc.
 
You'd be surprised how much prices have gone up.
No I wouldn't. Actually, I know the pricing quite well, as I just finished my own reno this year. I did the entire basement including HVAC, removing support walls and installing new support beams, a complete reframing, new insulation, new plumbing, new wiring, pot lights, new Dri-core subfloor and new engineered hardwood, and a complete new custom bathroom (incl. Schluter waterproofing and floor heating), and new kitchen complete with custom cabinets and granite.

And of of course, it pays to shop around and bargain. My basement kitchen granite quote was around $3100, and I got them down to $2700 (incl. tax). Plus there was another place that could have gotten me even cheaper prices for even thicker granite, but the colour and edging selection was more limited.

The tiles I bought were about 1/3rd the cost of usual tile, because I went to the Olympia Tile Clearance Centre, which only sells off their limited remaining stock. And by limited I mean they might only have 3000 square feet of tile left over, so you just have to estimate well how much tile you need. If you think you need 100 square feet maximum including wastage, then buy 120 square feet, and it still ends up being way, way cheaper than Home Depot.

For similar quality flooring that I got, the pricing ranged from $4.50 per square foot (Etobicoke, after some bargaining) to around $7 (small shops in central Toronto). To get that $4.50 price, the stuff was non-returnable (unless defective). Like the tile, I intentionally bought too much, but I just sold my extra leftover flooring on Kijiji.

For my cabinets, I got one quote for custom bamboo that was $14000, including cabinets and drawers for the kitchen and under-stairs storage closet. I got another quote for < $11000 including that kitchen and under-stairs storage, as well as hallway cabinets and hallway closet, and laundry room. The guy told me if I had gone for wood (eg. maple), the pricing in my setup would have been well under $10000. The door handles I bought myself at Rona. Hinges and cabinet installation were all included in the quote. If I had gone with Ikea cabinets, it might have even been cheaper, plus they had that promotion recently that gave you back 20% in Ikea gift cards if you went with them for kitchen cabinets. However, my GF didn't like their styles, which is why we went for custom modern bamboo.

This is the kitchen with new cabinets and red dragon granite. The gas stove was the old one from my main kitchen, but I had replaced it with a higher end stainless steel one, so I just put this one in the basement. I was going to do the same with my over-the-counter microwave, but ended up just buying a new one on sale from Lowe's. It vents to the outside. BTW, the microwave is NOT stainless steel, but looks like it even up close. Another little bit of money saved there and an added bonus is that it doesn't collect fingerprints as easily as stainless steel.

IMG_5607.jpg


Here are the flooring and pot lights, and some of the custom hallway cabinetry. The door at the end of the hall is actually an old entrance door that I repurposed into a bedroom door conversation piece.

IMG_5613.jpg


For the bathroom, these are all clearance tiles except for those few edge tiles on that part that juts out. (That jutting out part contains a heating duct for the bedroom next door.) The selection was limited but we liked these. If we didn't like them, we would have ended up spending 2-3X more for tile at other stores. The fixtures are mid-end, but the ceiling shower head is a store-branded smaller model to save money and to speed up water pressure at the head. (Since water flow in shower heads is limited to conserve water these days, the super wide shower heads have very much lower speeds of water coming out. The smaller the head or fewer the output nozzles, the faster the water speed.) The store model looks exactly the same as high end models, but ones like from Kohler cost 2-3X as much. Furthermore, shower heads can be changed at will by almost anyone, so there is no need to spend a huge hunk of change up front on some high end model you don't even know you'll love. We have both a wall-mounted removable hand-holdable shower head and an overhead rain shower head because we built a seat into the back of the shower (which is 5 feet long). My GF's elderly parents can sit on the seat, and use the hand-holdable shower head while sitting. The shower control allows the user to switch back and forth between the ceiling rain head and the wall-mounted/hand-held one, and unlike low end fixtures it has a constant temp setting even if you change shower water flow output volume. The glass doors weren't in yet in this picture, but the old bathroom already had glass so I just kept them, and made sure the entrance to the shower was the exact same size. The shower door frame is beige stone. Basically, that's all you can get cheap at places like Rona, so that's what I got. To get a custom colour of granite or marble cut from a stone shop just for a shower door frame would have cost several times as much, so I didn't bother.

IMG_1213.jpg


I will admit one issue that you might encounter with contractors and renos though. For a decent contractor, you might not even get the time of day if the project is less than $15000-20000. They need you to spend that much in order to make things worth their while, or else they'll just tell you to hire a handyman or something.
 
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Point

Counter-point

http://www.theglobeandmail.com/report-on-business/chinese-housing-bubble-fears-grow/article2216566/

"In Shanghai this week, a firestorm of protest erupted when developers offered discounts of as much as 40 per cent on new unsold apartments. Several hundred buyers, who had plunked down cash for the full price, were furious that their investments had lost so much value before they even received the keys."


SHILL
Look at the buyer's intent, who are the buyers and why here in Toronto. Continued success to all:cool:
 
http://www.thestar.com/moneyville/r...ng-to-buy-a-condo-get-to-the-back-of-the-line

Look at the buyer's intent, who are the buyers and why here in Toronto. Continued success to all:cool:

George, in your experience, what kind of units are these Asian investors buying the most? Every new building I look at it seems that more than 70% are some miniature 300sqf studios and 410sqf one bedrooms. But the builders keep spinning the stories about amazing lifestyle and luxury. Have a feeling that all these prison cells will be the hardest to dump when the bubble bursts ..
 
During downturns, it's not the small units that hard to unload. It's the big luxury units that are difficult to sell.

nicely done, Eug.
Thanks. And today, my reno was officially completed. :) It's basically been done for weeks, but I had been waiting for one small piece to finish my bathroom.
 
July Teranet numbers are out.

2005-06: 100.00
2006-06: 105.22
2007-06: 108.41
2008-06: 114.84
2009-06: 108.46
2010-06: 125.98

2011-05: 128.72
2011-06: 131.26
2011-07: 133.53

So, we are now over a third higher than prices in summer 2005, and exactly 20% higher than when I bought in 2007-08 (111.27). We are also 13% up from when this thread started, in 2009-11.
2010-08: 129.07
2011-08: 137.01

For some reason the previous numbers are showing up as slightly different though. Still within 1% of the previous files but different nonetheless. Or else I'm just doing something wrong on this iPad.
 
During downturns, it's not the small units that hard to unload. It's the big luxury units that are difficult to sell.


depends on what one's definition of 'small' is.

IMO, any 1 bedroom unit under 550-600 sq ft is too small.
i think all those 350-550 sq ft studio / 1 bedroom units will be hard to sell. too many and all cookie cutter boxes.
 
depends on what one's definition of 'small' is.

IMO, any 1 bedroom unit under 550-600 sq ft is too small.
i think all those 350-550 sq ft studio / 1 bedroom units will be hard to sell. too many and all cookie cutter boxes.

is a 700 sq ft 1 bedroom + den big enough?
 
700 sqft 1+1 @ $550/sf is $385,000. That is pretty steep. The den better be big enough to work as a second bedroom to recoup some extra rental money. There are lots of young professionals/students that share 1+1 units. I'm guessing $1000 for the bedroom and $800 for the den. That's $1800 a month compared to renting to an individual for max $1500. I think that is why 1+1 with good height and views are the most popular and the first ones that get sold in pre-construction.
 

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