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Real estate sales forecast upgraded

Strong home sales in the summer have prompted the Canadian Real Estate Association to dramatically increase its forecast for sales figures for this year.

The agency is now predicting 432,600 units will change hands this year. That's only 0.4 per cent below the 2008 figure, and it's significantly more than the 14.7 per cent sales decline the agency was forecasting as recently as May. "The difference in the resale housing market now, compared to the beginning of the year, is night and day," CREA President Dale Ripplinger said. "And nowhere is this more evident than in the West."

British Columbia and Ontario are now forecast to post annual increases in activity this year, reflecting weak demand last year and a subsequent rebound. Forecast declines in annual activity were trimmed significantly in Alberta, Saskatchewan and Quebec and were also scaled back for New Brunswick and Nova Scotia.

For 2010, the agency is now forecasting a 5.3 per cent increase to 455,400 units. That figure is a smaller increase in activity than was previously forecast.

The main reason for the downgrade is that demand is shifting as buyers move ahead their purchase decisions to take advantage of low interest rates, said CREA chief economist Gregory Klump.

Slight price increase forecast

The agency is now forecasting the average home price to edge up 1.5 per cent in 2009, as the strong rebound in sales activity, not price, in some of Canada's most expensive markets continues to skew the national, and some provincial, average prices upward.

At -4.4. per cent, Alberta is the only province with a forecast decline in average price in 2009. Average prices are forecast to rise in all other provinces except British Columbia, where prices are expected to be flat. CREA's previous forecast predicted a decline in the national average price of 5.2 per cent in 2009.

The national average price is forecast to be up 2.1 per cent on a year-over-year basis in 2010.

August 30, 2009 in Canadian Market Forecast | Permalink | Comments (9) | TrackBack

Toronto real estate defies reality

Toronto finds itself in a surprising situation: The economy stalled, but house prices didn't.

What happens if you had a recession and housing prices didn't really go down? That's the scenario Toronto could be in by the end of 2009, as economists scramble to revise this year's real estate market forecasts.

Toronto housing economist Will Dunning is forecasting that the average price of an existing home in the Greater Toronto Area will be $378,700 by the end of this year. His previous forecast was for prices to decline to $358,100, or about 5.6 per cent from 2008. That's in line with the estimates of about a 5 per cent decline from most major housing analysts.

"The forecast has been raised substantially," Dunning says. "For the past three months, resale activity has been much stronger than I had been anticipating."

A $378,700 price is spitting distance of the $379,347 average price recorded at the end of 2008. Dunning says this year's average price could surpass last year's.

See article by Tony Wong in the Toronto Star »

August 26, 2009 in Toronto Real Estate Forecast | Permalink | Comments (3) | TrackBack

Toronto Real Estate Board reports:

August Mid-Month Residential Resale Market Figures.

In the first two weeks of August, Greater Toronto Realtors reported 3,832 sales – up 27 per cent compared to the first two weeks of August 2008. The average price for these transactions was up three per cent year-over-year to $383,796.

"The results for the first half of August indicate that many households in the GTA remain confident in their ability to purchase and pay for a home over the long term," said TREB President Tom Lebour.

Year-to-date sales, at 54,303 are up slightly compared to 54,138 in 2008. Average price, at $385,603 is down by less than one half of one per cent.

"Strong resale housing demand will contribute to broader economic recovery as each transaction results in substantial spin-off benefits to other sectors of the economy," explained Jason Mercer, TREB's Senior Manager of Market Analysis.

Source: Toronto Real Estate Board »

August 18, 2009 in Toronto Real Estate Update | Permalink | Comments (9) | TrackBack

Canada's ICI market struggles

Toronto's commercial real estate market is facing 'trying times' with no bounceback as experienced by the residential sector.

Canada's housing market may appear to be on the fast track to recovery but commercial real estate, which includes office buildings, industrial and retail space, still faces "very trying times," two reports released Monday show.

Commercial real estate transactions fell by more than 50 per cent in the first half of 2009 compared to last year, according to CB Richard Ellis Ltd.

It said transaction value was about $4.9 billion from January to June compared to $10 billion for the same time last year. The number of transactions also dropped dramatically to 1,569 from 2,542 last year.

"The global recessionary impact on the commercial real estate market has yet to run its course," said John O'Bryan, vice-chairman of CB Richard Ellis, which provides financing and management services for commercial real estate.

O'Bryan said the commercial market follows the general economy, and is not seeing the same kind of bounce as in the residential real estate sector.

"There is a big contrast between the two markets; one is looking as though everything is back on track and the other one looks as though it's recovering slowly."

On Friday, the Canadian Real Estate Association said residential resale activity jumped 18.2 per cent in July compared to last year, setting a record for the month. Buyers are being enticed by record low interest rates and federal tax breaks for new buyers.

BMO Capital Markets called July's sales figures a "Lazarus-like rise" from the "depths of despair" where Canada's residential real estate sector was just six months ago.

But the commercial real estate sector isn't expecting similar miracles.

"It's a very uneven recovery," O'Bryan said.

He doesn't expect the commercial market to hit close to the nearly $32-billion high reached in 2007, which he called an "aberration."

"We are now tracking this year to do around $10 billion," he said.

"The pain in the general economy isn't anywhere near through the system. The (commercial) real estate market is reflecting that."

O'Bryan said 2010 will be a year of recovery for commercial real estate, as the unemployment rate remains high and businesses still look for ways to keep costs low.

The vacancy rate for commercial office space across Canada rose to 8.3 per cent in the second quarter compared to 6.4 per cent for the same time last year, according to CB Richard Ellis data.

Scotiabank economist Adrienne Warren said commercial real estate tends to lag other parts of the economy because the projects are often large and take years and lots of money to develop.

"You need to secure fairly large tenants and secure financing. It's more complicated," she said.

She said a lot of new stock that started being built in better economic times is now coming to market, which is helping push up vacancy rates in cities such as Toronto and Calgary.

Warren also expects vacancies rates to rise further in the coming months, before eventually recovering.

However, Warren said the overbuilding is nowhere near the level it was in the late 1980s and early 90s, when commercial vacancy rates were around 15 per cent.

"We are more cautious today about building and lending," she said.

Warren added Canada's commercial sector is nowhere near as depressed as that of the U.S., where vacancy rate has surpassed 15 per cent.

The crisis in the residential and commercial real estate sectors south of the border has also led to the collapse of lenders.

Last week, U.S. regulators shut down Montgomery, Ala.-based Colonial BancGroup Inc., a big lender in real estate development and smaller Pittsburgh-based Dwelling House Savings and Loan.

Both closures boosted to 76 the number of federally insured banks in the U.S. that have failed so far this year, according to reports.

Warren said similar-style closures are not expected in Canada, where banking criteria is much more conservative.

In its report released Monday, PricewaterhouseCoopers said Canada still has "significant obstacles" to overcome before its commercial real estate sector recovers.

In fact, the consultancy said conditions are becoming more challenging as a result of tight lending conditions, less investor appetite for commercial mortgage backed securities and expectations for higher capitalization rates, which imply decreased valuations.

It also said financial weakness and sluggish growth amongst tenants is also a problem in the sector.

"The credit crisis and ensuing recession have dragged commercial real estate markets into very trying times, marked by value losses, rising foreclosures, and reduced property revenues," said Frank Magliocco of the PricewaterhouseCoopers real estate division.

"There is simply scarce money and therefore limited buyers."

Its report said "vulnerable" property types include buildings used for hotels and leisure as well as suburban office and industrial space.

It recommends property owners reassess their short and long-term needs in case vacancy rates increase further.

"In some cases, a formal restructuring process, equity injection or other non-traditional strategy may be beneficial," Magliocco said.

Soyrce: The Canadian Press.

August 18, 2009 in Canadian Real Estate Market | Permalink | Comments (5) | TrackBack

House sales in Canada jump in July

Canada's resale housing market for July posted the largest year-over-year gain in two years, with Western homebuyers leading the way, according to statistics released Friday by The Canadian Real Estate Association. For the first time on record, sales of existing homes climbed to more than 50,000 units for July.

A total of 50,270 homes were sold last month via the Multiple Listing Service of Canadian real estate boards. This is up 18.2 per cent from the same month last year, and 3.9 per cent above the previous record for July that was set in 2007.

"The difference in the resale housing market now, compared to the beginning of the year, is night and day, and nowhere is this more evident than in the West," association president Dale Ripplinger said in a release.

"Homebuyers recognize that interest rates and prices have bottomed out, and are taking advantage of excellent affordability before prices and interest rates move higher."

Resale numbers for July were up from the same month last year in about 60 per cent of local markets.

The association said year-over-year gains in these cities contributed most to the national increase in activity:

• Toronto (28 per cent).
• Vancouver (90 per cent).
• Montreal (19 per cent).
• Calgary (22 per cent).
• Edmonton (28 per cent).

Demand is rebounding sharply in some of Canada's priciest housing markets, skewing the national average price upward, with the average price rising 7.6 per cent from one year ago to $326,832.

See the Canadian Real Estate Association report »

August 14, 2009 in Canadian Real Estate Market | Permalink | Comments (4) | TrackBack

Toronto Real Estate Board:

GTA Realtors report resale record in July.

Greater Toronto Realrors reported a record 9,967 sales, up 28 per cent from July 2008. The average price for July transactions was $395,414 – up by six per cent compared to the same month last year.

"Households confident in their positioning within the current economic environment have taken advantage of housing affordability in the GTA," said TREB President Tom Lebour. "The real estate sector has been one of the sectors making a positive contribution to economic growth in the GTA, not to mention Ontario and Canada more broadly."

Year-to-date sales, at 50,632 are down 1.2 per cent compared to the first seven months of 2008. Average price, at $385,808 is down by less than one-half of one per cent.

"The steep drop-off in sales experienced at the beginning of the year has all but dissipated," explained Jason Mercer, TREB's Senior Manager of Market Analysis. "With five months left to go in the year, it is probable that total existing home sales in 2009 will be at or above last year’s level."

See the Toronto Real Estate Board's July Market Watch Report »

Source: Toronto Real Estate Board

August 6, 2009 in Toronto Real Estate Update | Permalink | Comments (3) | TrackBack

New Toronto condo sales surge

The Toronto area's new condominium market rebounded in the second quarter of 2009 as consumer confidence improved and developers offered incentives to move their units. But analysts say the market isn't on firm ground yet. Thousands of units are still under completion and there is a backlog of unsold units.

After three consecutive quarters of negative growth, sales of condos hit 2,963 units in the second quarter, up 223 per cent from the dismal 917 first-quarter sales, according to market research firm Urbanation inc. in a report yesterday.

"This is certainly better than most people had expected," said Ben Myers, executive vice-president of Urbanation.

He said figures for July are also expected to be positive, noting "sales seemed to be going well."

Myers said low interest rates and first-time buyers flocking to condos have helped drive the numbers. Developers were also quick to react to the recession by changing floor plans to offer smaller units and giving fewer amenities at a lower price point. "I think developers are a little more optimistic after the second quarter," said Myers.

See article by Tony Wong in the Toronto Star »

August 5, 2009 in Toronto Real Estate Update | Permalink | Comments (2) | TrackBack

Back to Basics In Real Estate

To succeed in this real estate market, investors and managers need a new kind of toolbox. While financial implements are still critical, more traditional tools of the trade, a hammer, paintbrush and the number of a good plumber, for example, have joined them.

As the industry experiences one of the worst downturns in decades, real estate investors and managers are reconsidering strategies for success. Many of them have embraced a back-to-basics approach that provides a path for staying strong in a difficult economy. A key part of that approach: actively maintaining their properties.

Gone are the days when making a profit in real estate involved a financial transaction and little else. Now, in an effort to remain viable, real estate professionals are focusing on 1) protecting and enhancing the value of their assets; 2) adapting to a changed investment climate; and 3) reallocating precious resources.

And despite the rough sledding, there is a good likelihood that these strategies, taken together, will yield success. To be sure, a meaningful recovery is not imminent. But there is a growing list of companies lining up to take advantage of the recovery when it occurs, giving perhaps the first indication that a slow turnaround may be beginning, at least in some sectors.

See full GE Capital Commercial Real Estate report »

August 4, 2009 in Selling Toronto Real Estate | Permalink | Comments (2) | TrackBack

Five must-haves for flipping houses

By Glenn Curtis

Many people assume that they can simply 1) buy a house, 2) apply a fresh coat of paint, 3) trim some bushes, and then 4) resell the home at a profit. Unfortunately, this process, called "flipping" is not that easy. After all, if it were, everyone would be doing it. There are several skills and people that every potential investor/flipper should have in place before even considering entering into a real estate transaction of this nature. Here are the top five "must-haves" you'll need to succeed in this endeavor.

1. A Group of Experts

While a house flipper can certainly go it alone, it will certainly help to retain individuals that are familiar with the legal, accounting and construction ramifications of flipping houses.

Flippers typically work against the clock, so they must renovate a home on budget and then turn it around and sell it before the financing costs eat up their profits. In any case, a bevy of experts including a real estate agent, a lawyer, a contractor or renovator, an accountant, a home inspector and an insurance agent can ensure that the work is completed in a timely and efficient manner.

2. A Handyman or Knack for Home Improvement

The house flippers that make the most money buying and selling homes tend to be handy people. That is, they have the ability to step in and lend a helping hand when time or money constraints kick in. Most flippers can do things like change a sink, install a countertop, do basic electrical or plumbing work, and/or shingle a roof.

Why is being handy so important?

The obvious answer is that if you can do the work yourself, you won't have to pay someone to come in and do it. However, there are other advantages to being handy as well. For example, there are times when it will be impossible to get an electrician to install an attic fan on short notice. There are also times when a job must be completed without warning at the last second in order to obtain a certificate of occupancy. In these instances, having the ability to navigate your way around a tool box is very valuable.

3. A Good Lay of the Land

The buyer should know about the area in which they are buying property. A buyer should know, for example, what characteristics (acreage, number of rooms, type of home, etc) are the most desirable in the area in which they are looking to buy. Equally important is knowing what houses in the general vicinity have sold for and if there is likely to be any future development in the community (such as a new school, condominium or shopping center) as this could affect supply and demand.

4. A Good Estimator

By definition, house flippers attempt to buy a property and then resell it at a profit in relatively short order. In order to do this, however, the flipper must typically make some structural and/or cosmetic changes to make the property more appealing to the next buyer.

If the flipper underestimates the costs associated with the refurbishment he or she may be exposed to large monetary losses. Therefore, a flipper should be familiar with construction materials (their use and their cost), as well as local construction codes, the cost of local labor and the time it should take to do a given job.

This is no small feat. In fact, it takes even the most seasoned construction professional many years before he or she is aware of all the nuances that exist. In any case, before becoming involved in "flipping", be certain of your abilities to estimate a job in terms of both cost and time.

5. A Dose of Patience

One of the biggest obstacles to making money in the real estate market is that buyers tend to overpay for a given property.

Why do buyers overpay?

Typically, buyers become emotionally attached to a property or develop some other bond with it, which in turn forces them to enter into a contract on less than favorable terms.

However, savvy flippers have the ability to avoid emotional purchases, and the desire to find diamonds in the rough and properties on the cheap. They also understand that if they aren't buying a property at a favorable price and with favorable terms, it makes sense to simply move on to greener pastures.

The bad news is that patience is a difficult virtue to teach and hone. In general, either you have it or you'll lose a lot of money trying to learn it.

The Bottom Line

While quitting your job and becoming a full-time house flipper may sound like an attractive proposition, be sure that you have these five "musts" before investing in a real estate project.

August 2, 2009 in Real Estate Investments | Permalink | Comments (3) | TrackBack