Real Estate is the new RRSP
This year we're spending our RRSPs. With stocks and bonds yielding so little returns, more and more Canadians are taking their savings and splurging on second homes, boats and renovations.
Sam Cohen knows all the arguments in favour of sinking his savings into an RRSP. He has been a financial adviser in Toronto for the past 10 years, helping clients pick the mutual funds that are supposed to finance their golden years.
But somewhere along the way, Mr. Cohen lost the faith. Six years ago, he stopped making his annual contribution to a mutual-fund-filled registered retirement savings plan. Instead, he started investing directly in real estate. He has never looked back.
Mr. Cohen has bought and sold raw land, and doubled his money. He has been in and out of condos, and is up 40 per cent for his troubles. He picked up a dump of a house and renovated it himself, and expects to double up on that holding too. All told, he has built a $1-million real-estate portfolio.
"I'm not playing a real-estate boom," Mr. Cohen says. "I'm sticking to properties because I believe that I can do better this way than by trying to pick the right stocks and funds in an RRSP."
An increasing number of Canadians share Mr. Cohen's view. As Canadians rush to file their tax returns before May 2, more than 60 per cent of the population will leave line 208 blank -- that's the box on the tax form set aside for RRSP deductions.
Real estate is in vogue, everything from buying a first home, to moving to something bigger, to renovating. So is splurging -- purchasing a cottage, or a boat, or a dream vacation. Saving for retirement, in a conventional stocks-and-bonds plan, is definitely on the outs.
The number of citizens who contribute to RRSPs has been in steady decline since the stock market melted down in 2000. Fewer than six million taxpayers set aside money in their RRSPs last year, or roughly one in three of those eligible, according to numbers compiled by Statistics Canada. Just five years ago, when Nortel Networks could do no wrong and markets were booming, close to 6.29 million people contributed to retirement plans.
RRSPs soaked up $29.3-billion of our savings in 2000. That was down to $27.6-billion last year. So not only are fewer people using RRSPs, but those who do are saving less. These plans are the only significant break left for a tax-weary population. The rules allow us to set aside up to 18 per cent of what we earned last year, to a limit of $15,500.
Well, the average contribution last year was $2,600. Those living in Alberta and B.C. set aside closer to $3,000, while savings in the four Atlantic provinces came in closer to $2,000. When tax returns are filed on May 2, there will be 18 million Canadians walking around with extra room left in their RRSPs -- fewer than one person in 10 maxes out their contributions.
The folks in the financial trenches understand what has happened.
"Many investors have soured on markets, and it's hard to blame them," said Charlie Spiring, founder and CEO of brokerage house Wellington West Capital, in Winnipeg. "There's been a debacle in the funds, first with the poor performance, then all the issues around malfeasance, with [New York Attorney-General Eliot] Spitzer on the warpath."
Like many industry experts, Mr. Spiring sees larger social forces at play in the move away from RRSPs. He has firsthand experience with clients who would rather enjoy their money today than sock it away for tomorrow. People work hard, and as a reward, many opt for something tangible, some sort of instant gratification, rather than the delayed pleasure of retirement income.
"The Manitoba government opened up a few new lakes for cottages this year, and there was a stampede of buyers. You just know some of those people were spending cash that they otherwise would have socked into their savings," Mr. Spiring said. "With older, more affluent individuals who are still working, there's a tendency to spend money in order to build the kind of retirement that they've always dreamed of."
Cottages aren't the only indulgence going.
At the Beaconsfield Yacht Club, in the Montreal suburbs, you will find a former Air Canada executive in his late 50s -- he asked not to be named -- who dropped $10,000 of his recent severance package on a used C&C 24-foot sailboat, rather than putting it all into a retirement fund.
April 29, 2005 in Watching the Market | Permalink | Comments (0)
Record year for Toronto sales
November brings Toronto Real Estate Market to a Record Year
The Toronto real estate market regained its momentum in November, finishing as the resale market's best November on record with 6,301 transactions.
November also resulted in the best year ever for the Toronto resale market with one month to go. So far this year there have been 79,382 sales as compared to 78,898 in 2003, the previous best year on record. It is anticipated that the month of December will add another 4,000 sales to this year's total.
"Throughout part of the fall we were beginning to see signs that the market was moderating but November's final result is evidence that moving into the New Year, the market will likely be full steam ahead," said Toronto Real Estate Board President Ron Abraham.
As compared to the previous best November, which occurred last year, November 2004 was up eight per cent. Sales increased evenly throughout all Greater Toronto Area neighbourhoods.
Prices in November declined by two per cent as compared to the previous month, which is encouraging news for buyers.
"One of the most effective tools our members have to serve their buyer clients is the Prospect Match function in our MLS. It matches their clients' needs to properties listed and automatically generates emails to those buyers nightly. Everyday, approximately 80,000 Prospect Matches are processed."
Consumers also have plenty of choices with regard to the REALTOR they select. The Toronto Real Estate Board's membership exceeded 21,000 REALTORS last month.
"More professionals are becoming attracted to our business because it is widely recognized that real estate continues to be the engine driving our economy."
December 4, 2004 in Watching the Market | Permalink | Comments (0)
Stable prices, healthy market
According to the latest Urbanation report, the condominium market continued to exhibit remarkable strength in the third quarter as more than 2,600 people became new condominium homeowners during this time.
Our statistics show sales of new condominium units in the first nine months of 2004 were 23 per cent ahead of the same time last year. As well, unsold inventory has fallen by 20 per cent compared to the same time last year — despite the addition of 68 new condominium projects and more than 12,000 units over the past 12 months.
New condominium prices have also remained remarkably stable over the past several years, rising only as much as construction cost increases. The net result: a healthy condominium market where there are currently 113 projects under construction that have already pre-sold more than 81 per cent of their suites. And there are 59 projects in their pre-construction phase that have already pre-sold more than 51 per cent of their suites.
So what is going on out there?
The key to understanding what is happening in the condominium market is to understand how demand has changed, particularly as our population has grown and matured over the past 25 years.
In the 1980s, demand for condominiums was driven largely by demand from speculators and investors looking to make a quick buck, resulting in a sharp increase in both sales activity and prices over a very short period of time and creating an unsustainable bubble.
In contrast, condominium buyers today are savvy, well-educated consumers who are taking the time to shop around and compare projects to find the best value for their money.
This means prices have remained both competitive and affordable as the condominium market is being driven largely by "real buyers" looking for "real homes" to move into.
Strong competition has been beneficial to consumers as many projects are offering attractive incentives, such as free maintenance fees or free upgrades.
Demand for condominiums has never been more broadly based than it is today.
Buyers include young first-time homebuyers (without children) looking for small, affordably priced condominiums in urban locations; 30 to 40-something second-time home buyers (still without children) moving from small one-bedroom units into something slightly larger in urban locations; and older, move-down empty nesters looking to trade in their family homes for large suites in their current neighbourhoods.
Demand has also never been more diversified in terms of location. Condominium projects are now found throughout the city in the 416 and 905 regions, including: downtown Toronto, King West Village, Entertainment District, St. Lawrence Market, Harbourfront, North York City Centre, Bayview Village, Scarborough City Centre, Agincourt, Don Mills, High Park, South Etobicoke, The Kingsway, Weston, Mississauga City Centre, Markham Town Centre, Richmond Hill, Woodbridge, Pickering and Milton.
The growth in demand for condominiums makes sense as the population continues to mature and grow — as young people leave the family home; as people get married later in life and delay having children; as empty nesters look at condominiums as a way to gain freedom to do the things they really want to do now that the children have left home.
Overall, demand from these buyers has accounted for over 80 per cent of all new condominium sales in the Toronto Census Metropolitan Area (CMA) over the past decade, with investors accounting for the balance of condominium demand.
However, today's investors are very different from investors in the 1980s.
Whereas in the 1980s, investors were typically buying with the intention of "flipping" their units, today's investors tend to be involved in more long-term thinking and buying with the intention of renting. They see real estate as a relatively safe and secure place for their money, particularly in such a dynamic and growing city as Toronto.
Investor interest also tends to be concentrated in certain locations in Toronto, typically in highly urban locations near conveniences, such as the subway, shopping or entertainment. This makes sense, as renters tend to be younger in age and are typically attracted to vibrant, urban locations.
I often hear concerns from prospective condominium buyers about purchasing in a building where they believe there are a lot of investors. There seems to be this misconception that condominium renters somehow decrease the value of a building. However, there is no empirical data to support this claim.
The decision to purchase a condominium should be based ultimately on location, price and value for money, rather than concerns about the number of potential investors in the building
November 20, 2004 in Watching the Market | Permalink | Comments (0)
Condos fuel building boom
Buoyed by a strong condominium market, Toronto housing starts bucked the national trend in October, posting a healthy increase over September figures.
Starts hit 46,400 seasonally adjusted and annualized units in October, up 10.7 per cent from a month earlier, according to figures released by Canada Mortgage and Housing Corp. yesterday.
"Toronto residential construction remains resilient, evident in the strong activity posted in October," said Ted Tsiakopoulos, senior market analyst at the federal housing agency.
"Active resale markets, low interest rates and low standing inventories continue to support the residential construction market."
Nationally, housing starts eased to 225,000 units in October, a 5.4 per cent decline, which is in line with market expectations. That is still on target to hit the highest annual tally of housing starts since 1987.
"Borrowing costs are still quite low, which should cushion the blow to the housing industry, as will solid gains in full-time employment," said Sherry Cooper, chief economist at BMO Nesbitt Burns, in an economic letter.
While the Toronto market did better than expected, it is not set to hit a record this year for starts. "The Toronto market is a little more mature than the rest of the country and we have done well for longer," said Tsiakopoulos.
In the Toronto area, single-detached-home starts, which have been extremely strong for the last several years, dropped for the second consecutive month in October to 17,800 from 19,000 in September, a 6.3 per cent fall. That number is one of the lowest levels in almost two years — since single starts hit 17,200 in January of 2003.
Single starts are seen as a leading indicator of housing market strength, and the drop indicates that the market is likely cooling, analysts said.
"It's certainly a bellwether segment, and we consider it the more important segment of the market," said Tsiakopoulos. "Singles have been resilient, but they have lately been caving in to the double whammy of higher interest rates and sharply higher prices for single-detached housing. The drop shows what's happening on the affordability front."
Despite the rise in rates, the market is likely in for a soft landing, Beata Caranci, economist at TD Bank Financial Group, said in an economic letter.
"Even with the Bank of Canada in tightening mode, residential borrowing costs have yet to fully reflect recent upward adjustments in short-term rates," said Caranci. "For instance, the bank raised short-term rates a total of 50 basis points between September and October, and yet fixed-term mortgage rates actually declined over this period relative to summer levels."
Caranci is forecasting that a decline in starts will happen in the second half of 2005 and be "more heavily weighted toward multi-unit activity (such as condominiums)."
Meanwhile, a report by the Bank of Nova Scotia says the market for existing homes should hit sales records in all regions of the country this year before settling back to more sustainable levels next year.
"The strength in housing activity has not been isolated to one or two major centres, or even to large urban centres," said Adrienne Warren, senior economist at Scotiabank.
November 9, 2004 in Watching the Market | Permalink | Comments (1)
Toronto housing sales strong
The Toronto real estate market maintained a strong and stable pace in October, with a total of 6,666 properties changing hands.
The performance makes it the second-best October on record. Last year's tally was 8 per cent higher.
As well, the market saw 78 more sales than those recorded in September, an increase of 1 per cent.
"Despite other perspectives, the statistical facts indicate that we are still experiencing a healthy market," said Toronto Real Estate Board President Ron Abraham.
With a total of 23,353 properties included in the multiple-listing service in October, the selection of homes declined by 4 per cent from the previous month.
The average price, in fact, is up 6 per cent to $324,215, from $304,844 a year ago.
"The market may moderate during the holiday season but that represents good news for buyers. In addition, the holidays generally offer sellers exposure to individuals who are more serious about undertaking a transaction."
November 9, 2004 in Watching the Market | Permalink | Comments (1)
Toronto home market cools
Housing cycle on track to reach peak this year.
The Toronto resale home market continues to cool as the temperature drops and the year winds down.
October sales were 8 per cent down from October of 2003, with 6,666 existing homes sold. However, that is still the second best October in history, considering that last October was an all-time record with 7,227 homes sold, according to figures released by the Toronto Real Estate Board yesterday.
While analysts expect 2005 to have more balanced conditions and be less of a sellers' market, a sizzling start to 2004 means that this year is still on track to be the peak of the housing cycle.
"The market is losing some momentum, but is still quite healthy," said Doug Porter, senior economist at BMO Nesbitt Burns. "At this point in the cycle, it's far from a negative, though. If you want to see a healthy market, you would hope to see some cooling off."
The Canada Mortgage and Housing Corp. is forecasting 84,000 sales this year, an all-time record. But sales are not expected to be as robust in 2005 as more listings, higher-priced homes and rising interest rates will slow the market.
"The economy is still growing, but it's not super hot," said Porter. "As interest rates move higher, sales will still be healthy but not as strong. Meanwhile, price appreciation appears to be slowing moving into next year."
The real estate board reported that resale home average prices are up 6 per cent to $324,215 compared to $308,844 a year earlier. Sales in October were also up 1 per cent, compared to September. The CMHC is forecasting that the average cost of a resale home at the end of 2005 will be $330,000.
The federal housing agency is forecasting a five-year posted mortgage rate at 7 per cent by the end of 2005, compared to 6.3 per cent at the end of this year. But analysts have said that it will take another couple of percentage points to slow the market.
With so much home buying going on, the renovation market has also been strong in Canada. Canadians are expected to spend $38.5 billion on renovations by the end of the year.
A survey by RBC Financial Group released yesterday says that six out of 10 Canadians are planning to renovate within the next two years. Half of them expect to do the work themselves and finance the project with cash. About a third of the would-be renovators say they expect to spend more than $10,000 on their project.
Spring is the most favoured time for renovations and the most popular types of home improvement are new floors and painting.
The Ipsos-Reid Poll was conducted from Sept. 17-30, 2004 with a sampling of 3,074 adults. Results are considered accurate within plus or minus 1.8 percentage points, 19 times out of 20.
- An article by Tony Wong published in The Toronto Star
November 4, 2004 in Watching the Market | Permalink | Comments (0)
Toronto Market Strong and Stable
The Toronto real estate market maintained a strong and stable pace in October, with a total of 6,666 properties changing hands.
This performance makes it the second best October, second only to last year's record, which was eight per cent higher.
As well, the market saw 78 more sales than those recorded in September, an increase of one per cent.
"Despite other perspectives, the statistical facts indicate that we are still experiencing a healthy market," said Toronto Real Estate Board President Ron Abraham.
With 23,353 listings on the MLS in October, the selection of homes declined by four per cent as compared to the previous month.
Prices in fact, are up six per cent as compared to the average of $304,844 a year ago. Today's average price is $324,215.
"The market may moderate during the holiday season but that represents good news for buyers. In addition, the holidays generally offer sellers exposure to individuals who are more serious about undertaking a transaction."
All statistics are derived from TorontoMLS, which is used only by Toronto Real Estate Board Members. Serving more than 20,500 REALTORS throughout the Greater Toronto Area, the Toronto Real Estate Board is Canada‚s largest real estate board.
November 3, 2004 in Watching the Market | Permalink | Comments (0)
Toronto October Sales - 6,666
October sales rose one per cent over September to 6,666, making this month the 2nd best October ever, Toronto Real Estate Board President Ron Abraham announced today. "In addition to having a strong month sales-wise, prices continued their advance in October, with the average rising one per cent to $324,215 over September's $320,911, and six per cent over the $304,844 recorded in October of 2003."
In other highlights, Mr. Abraham noted that average Days on Market came in at 36 days, a brisk pace by historical standards, and that the average list-to-sale price ratio remained at 98 per cent, indicative of a seller's market.
Breaking down the total, 2,564 sales were reported in the Toronto Real Estate Board's 28 West districts and averaged $298,351; 1,136 sales were reported in the 14 Central districts and averaged $441,051; 1,291 sales were reported in the 23 North districts and averaged $350,790; and 1,675 sales were reported in TREB's 21 East districts and averaged $264,084.
Neighbourhood Corner
Agincourt
Sales in Agincourt have mostly been of detached homes and condominium apartments this year, with smaller numbers of semi-detached and condo-townhouses also transacting. There have been 78 sales of detached for an average of $349,042. These sales are up marginally from the 76 that passed through TREB's MLS system in 2003, though the average price is down six per cent from the $380,783 recorded during that time frame. Condo apartments averaged $161,450 in 2004, this price up three per cent over the 2003 figure of $156,340.
November 3, 2004 in Watching the Market | Permalink | Comments (0)
London home sales set record
October home sales in London have set another record with 668 homes trading hands last month, the London and St. Thomas Real Estate Board reported yesterday. In October, 532 detached homes sold, up six per cent over the previous year, and 136 condominiums, up 16 per cent, also moved.
"There is still demand out there," said Glen Gordon, past president of the board. "All sectors are going strong, all price ranges."
Year to date, home sales sit at 7,915, up 9.8 per cent for detached homes and 10.8 per cent for condos over the previous year. The next best October was in 2002, when 621 homes sold.
"Go into any area at any given time and it is flying," said Gordon. "A good house, in a good area, and they're gone. The low interest rates just kick up consumer confidence."
However, many agents are noting uneven traffic, with some remaining busy while others are slowing down and listings are staying on the market longer before they move, said Christine Panyi, real estate agent with Re/Max Advantage.
"It is still busy, but there are more listings that are sitting there longer. It is just taking longer to move some listings."
It is not uncommon for a home to sit for several weeks now, as buyers are more informed and willing to be more patient before they act, she said.
"Buyers have become very particular about what they buy. They are more educated and quality is important," she said.
According to a study conducted by Clayton Research in 2003 that calculates the amount of economic spinoff generated by a real estate transaction at $19,800 per transaction, it means sales last month injected about $13.2 million into the local economy.
The amount of economic spinoff into the local economy to date in 2004 is about $156.7 million.
Panyi has noticed more people moving to London from the Toronto area.
"London is in demand, people want to live here. London has great facilities we have not had before, but it's really about crime. People are worried about it and we don't have that reputation here."
The best-selling house type for October was the two-storey home, 124 of which sold for an average $218,962.
Next was the bungalow, 107 of which sold for an average $135,161, followed by the ranch-style home, 84 of which changed hands for an average $213,915.
Townhouse condos came in fourth, with 72 sales for an average $114,034.
The average price of a detached home year-to-date stands at $179,251, up 10.1 per cent, while the average cost of a condo year-to-date is $119,921, up 7.7 per cent.
November 3, 2004 in Watching the Market | Permalink | Comments (0)
Toronto condo market correction
Toronto's hot condominium market is heading for a soft landing, not the crushing fall it went through at the end of the last boom, a new report by Toronto-Dominion Bank predicts. Rising interest rates, weakening demand and an oversupply of units will bring a correction to the market in the coming two years, the report predicts. But it says that rising immigration, a strong job market and the low level of speculation in the market will mean that the downturn will be short lived. Builders, it notes, also have become more cautious and are not starting projects until the bulk of the units are sold. That compares with 1989, the peak of the last boom, when condominium sales fell by 50 per cent, and condominium starts hit a new record.
October 27, 2004 in Watching the Market | Permalink | Comments (1)
