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Baby, we got a bubble!?

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ponyboy said:
For this interested, lots of recent discussion of mortgage rates here --
http://urbantoronto.ca/forum/showthread.php/15577-Mortgage-rates/page4

I recently refinanced with 2.59 for 3 yr fixed, but I'm told that 2.49 was avail (no one would offer me that, and I didn't get any 4-yr offers). Rate hub has also recently had 2.79 for 5 yrs, but I think rates have ticked up .1 or .2 from then.
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Rate hub advertises no frills rates and I believe also broker buy down rates. The latter rates are not true rates, but the effective rates after the broker forfeits some of their commission.

Expect regular full frills rates to be 0.1% to 0.2% higher than those advertised rates.
 
Since the preview opening of its sales office last month, Dundas Square Gardens has been quite a hot seller. Now Easton's Group is giving potential purchasers even more incentive to invest in this new condominium development with a limited time offer on suites in the shorter 17-storey boutique styled Garden Tower. On select 2 bedroom Garden Tower suites (all including large terraces of over 150 sq. ft.), there currently is a $10,000 cash back offer as well as a free storage locker valued at $5,000. On select Garden Tower studio suites, the promotion also includes a $5,000 cash back offer, a 10% deposit, and a free storage locker.
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http://urbantoronto.ca/news/2014/07/new-promotions-being-offered-dundas-square-gardens

If it's a "hot seller", why does the developer need to provide "even more incentive to invest"? Per economics, wouldn't a "hot seller" indicate lack of supply and hence higher prices? Or is this simply a real estate fluff piece like we see so often?
 
DearSummer said:
http://urbantoronto.ca/news/2014/07/new-promotions-being-offered-dundas-square-gardens

If it's a "hot seller", why does the developer need to provide "even more incentive to invest"? Per economics, wouldn't a "hot seller" indicate lack of supply and hence higher prices? Or is this simply a real estate fluff piece like we see so often?
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Of course your logic makes sense. To not offend other purchasers, keep the price up but then offer rebates or freebies. The new buyer is paying less.

There are other reasons however for this action possibly. For e.g. sold say 60% in 2 months for e.g. (which would be excellent for most projects)and want to get to 70% so as to start construction....offer some incentives. Or have 70% and want to add additonal sales in an environment where people are looking to buy...to make your project stand out perhaps.
 
interested said:
Of course your logic makes sense. To not offend other purchasers, keep the price up but then offer rebates or freebies. The new buyer is paying less.

There are other reasons however for this action possibly. For e.g. sold say 60% in 2 months for e.g. (which would be excellent for most projects)and want to get to 70% so as to start construction....offer some incentives. Or have 70% and want to add additonal sales in an environment where people are looking to buy...to make your project stand out perhaps.
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I've noticed that a good chunk of developments are offering cash back on units and are also encouraging offers now. Didn't happen too often before. I still think prices for pre con are too high!
 
I believe it's all the above.

Dundas Square Gardens have really high maintenance fees especially when a lot of the utilities like water, heat and hydro are extra.

pre-con prices are $650+ psf dt and the GTA market has reached beyond 70% ownership, which is the tipping point.
prices are beyond reach and acceptance of local buyers incomes.

if more renters were to buy to live, then more rental stock becomes available pushing down rents.
what would be the incentive for "investors" to buy to rent when the supply of rental units is getting larger and larger with more supply coming online?
 
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cdr108 said:
I believe it's all the above.

Dundas Square Gardens have really high maintenance fees especially when a lot of the utilities like water, heat and hydro are extra.

pre-con prices are $650+ psf dt and the GTA market has reached beyond 70% ownership, which is the tipping point.
prices are beyond reach and acceptance of local buyers incomes.

if more locals were to buy to live, then more rental stock becomes available pushing down rents.
what would be the incentive for "investors" to buy to rent when the supply of rental units is getting larger and larger with more supply coming online?
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I don't know the particulars of this project except that I believe it has a lot of units....like 968+ which means they need to sell probably 600+ average units or more just to get construction financing. That is a big launch/project.

Alot of precon is not to end users but to investors and I think a) numbers don't make sense and b) a lot of projects released and c) there is only so much investor money to go around. Just my feelings. I agree with cdr/TheKing East and Dear Summer in this regard.
 
cdr108 said:
I believe it's all the above.

Dundas Square Gardens have really high maintenance fees especially when a lot of the utilities like water, heat and hydro are extra.

pre-con prices are $650+ psf dt and the GTA market has reached beyond 70% ownership, which is the tipping point.
prices are beyond reach and acceptance of local buyers incomes.

if more renters were to buy to live, then more rental stock becomes available pushing down rents.
what would be the incentive for "investors" to buy to rent when the supply of rental units is getting larger and larger with more supply coming online?
Click to expand...

From my archives.

Price of a unit in 1 Bloor St.

March 24, 2010 Agents preview pricing
Model: Eternity 2 bedroom, 817 sq. ft, South West View, floors 8 - 38

$ 622,990 + 47,500 parking + 4,950 locker. Total: 675,440 or $ 830 psf

April 4, 2010 Exclusive VIP Agents Preview pricingModel: Eternity floors 9 - 38

$ 653,990 + 47,500 parking + 4,950 locker. Total: 706,440 or $ 864 psf

In both cases, premiums apply to floors

If investors can't make money on current prices, how they are going to make money on these prices?

just to keep discussions going
 
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KA1 said:
From my archives.

Price of a unit in 1 Bloor St.

March 24, 2010 Agents preview pricing
Model: Eternity 2 bedroom, 817 sq. ft, South West View, floors 8 - 38

$ 622,990 + 47,500 parking + 4,950 locker. Total: 675,440 or $ 830 psf

April 4, 2010 Exclusive VIP Agents Preview pricingModel: Eternity floors 9 - 38

$ 653,990 + 47,500 parking + 4,950 locker. Total: 706,440 or $ 864 psf

In both cases, premiums apply to floors

If investors can't make money on current prices, how they are going to make money on these prices?

just to keep discussions going
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Personally, I think 1 Bloor East has a certain amount of prestige over YC. Both subway lines there, Yorkville nearby.
That said, it remains to be seen if anyone is going to make any money. Certainly to sell when you fact in realty commissions etc. and other soft costs, I suspect close to $900 and even $950 / sq.ft. will need to be made just to break even.
Also, adding the floor premium just adds to this amount.
 
the numbers aren't the best either but I don't know if the location and 'cachet' of the building would get more in rental.
still, I would be wary of increased future costs especially with the mortgage as interest rates go up even though principal gets paid down:

ie. 817 sq ft 2 bedroom unit

purchase price = $675,440

mortgage with 25% down payment = $506,580 = $675,440 - 168,860

monthly mortgage payment @ 3% / 5-year term / 25-year amortization = $2,397/m ~ half to principal, half to interest
http://calculators.mackenzieinvestments.com/mackenzie/jsp/MortgLoanAmortScheduler/mortgloanscheduler.jsp?$dir=self

maintenance fees = $625 = $135 / m for parking & locker + $490 / m @ $.60 psf * 817 sq ft
property taxes = $300 / m
property insurance = $100 /m
rental income = $3,268 / m = 817 sq ft * $4 psf (inclusive of parking and locker, and location premium)
===================================
NET INCOME = - $154 / m = - $1,848 / year
^ ^ ^
that's with sizable 25% down payment and doesn't include:
* the costs for property manager that may be used (5-10% gross rents = $2,000 - $3,921.60 + HST)
* lost income from vacancy/turnover (15 days to 1 month isn't abnormal = $1,600 to $3,268)
* 1 month rent paid to realtor to find tenant ($3,268 + HST)
* costs to clean and fix minor repairs/paint unit for next tenant = $2,000
__________________________________________________ ____________
~ - $7,900 to $13,500 / year
 
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@ 25% down you can stretch the ammort. to 30 years. It will increase your cash flow by a bit.

I think the value is in the smaller units. I accompanied a friend who bought a unit right when this project launched for just under $400K. I believe the unit was 530sqft or something. No parking or locker required IMO.

The numbers end up looking a bit better.
 
cdr:
I really appreciate your calculations.
If I could point out however you suggest insurance at $100/month. In my experience it is closer for a landlords package to about $15-20/month.
I agree with the King East that the value is in the smaller units for renting. Renters in my experience do not worry so much about floor/view etc. Mostly concerned with the amount of rent. The central location definitely in my view would be worth a premium over other locations (except downtown for those who wish to eliminate TTC costs). That said, we have been in a tight rental market for a while. What remains to be seen is when there is excess product if a) rents decrease and b) if the gap between premium rentals and regular locations goes down. Also, when given the choice of a better location/better view etc. and not in a tight market, questionable units may languish. 530 sq.ft. by todays standards is a descent size for a 1 bedroom.

That said, further point to 1 BE. The question everyone might be asking is these were 2010 prices as quoted by Ka1 and I am not so sure there has been a lot of appreciation...especially given the soft costs. My question is since prices increased from 2010 onwards though perhaps not so much so in the upper end of the market, do people still think who purchased in 2013 that they are going to make more profits as prices seem to be slowing down their average rate of growth?
 
For those that want to look at larger trends in the city, the July 2014 How Does the City Grow report is out. Link with the previous reports too: http://www1.toronto.ca/wps/portal/c...nnel=1e68f40f9aae0410VgnVCM10000071d60f89RCRD

Toronto is growing with strong development prospects helping to bring more people and jobs into the City. Between January 1, 2009 and December 31, 2013:

Over 163,800 residential units and 4.41 million m2 of non-residential GFA were proposed in the City of Toronto.
70,400 new residential units were constructed.

86% of this new residential development is proposed in areas targeted for growth by the City’s Official Plan.

The Downtown & Central Waterfront area is the main location for residential and office development, with 40% of the residential units and 38% of the non-residential GFA proposed in the City.

132,100 units and 3.05 million m2 of non-residential floor space proposed are under review or have been approved, but have not yet been built. Toronto will continue to grow as proposed developments receive approval and building permits.
 
Irishmonk said:
Makes me think that the worst people in this city right now and the greatest threat to its long term well being are actually our con artist developers and their milquetoast, enabling architects. Generations from now the Fords will be a dim memory while POS glass boxes like this one will be haunting every street corner. (And this is actually one of the better POSGB)
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The greatest threat these places represent to the long term well being of the city is not the ways they fail to meet the aesthetic expectations or standards of skyscraper junkies. Once it's done you'll all pay less attention to the colour of the glass on a mechanical box and go on to fretting about some new construction falling short. Our real concern should be that despite all this activity we're meeting the housing needs of only a sliver of the population, that all these towers are being built for people, as said above often overseas investors, to move money around.
 
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