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Real estate investment $1 billion club is getting bigger

Real estate is attracting more cash from institutional investors globally with those allocating at least U$1 billion growing in the past year.

In 2017, 422 investors were part of real estate’s ‘Billion Dollar Club’ but in 2018 that has risen to 499, a 13% increase according to industry analysts Preqin.

“The allocations of these investors now exceed $2.5tn, accounting for the vast majority of capital dedicated to the industry. It is striking that this figure has grown so much over the past year, and perhaps reflects a trend towards inflation-hedging and noncorrelated assets on the part of investors,” said Tom Carr, Preqin’s head of real estate.

The Billion Dollar Club comprises just 8% of active investors in real estate but with a total allocation of $2.5 trillion they hold 84% of total assets under management in the industry.

North American members of the club make up 34% of the global total with Europe taking a 47% share.

Public pension funds make up 28% of the club while insurance companies are the second largest group with 21%. Each accounts for 26% of aggregate allocations.

With opportunities for investment in real estate globally and across risk/return profiles, Carr believes there could be further institutional investors allocating $1bn+ to the sector.

“We may see more investors position themselves in anticipation of a market shift in the coming months and embrace real estate investments further, in which case the Billion Dollar Club could continue to swell,” he said.

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Toronto resales gain 18.6% in July, average selling price up

There was strong growth for resales in the Greater Toronto Area in July with sales up 18.6% year-over-year to 6,961 units.

Toronto Real Estate Board says that the average sales price was up 4.8% to $782,189 including a moderate rise for detached home types.

Preliminary seasonal adjustment shows a 6.6% rise in sales compared to June with the average sales price showing a 3.3% rise month-over-month.

That puts seasonally-adjusted sales at a 2018 high point and the average sales price at the highest level since May 2017.

“We have certainly experienced an increase in demand for ownership housing so far this summer. It appears that some people who initially moved to the sidelines due to the psychological impact of the Fair Housing Plan and changes to mortgage lending guidelines have re-entered the market. Home buyers in the GTA recognize that ownership housing is a quality long-term investment,” said Jason Mercer, TREB’s Director of Market Analysis.

Supply issues remain
However, new listings were down 1.8% year-over-year and TREB president Garry Bhaura says more needs to be done by officials to address the low inventory issues.

“The new provincial government and candidates for the upcoming municipal elections need to concentrate on policies focused on enhancing the supply of housing and reducing the upfront tax burden represented by land transfer taxes, province-wide and additionally in the City of Toronto,” said Mr. Bhaura.

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Artworks Tower opening this fall in Regent Park in Toronto!

Regent Park in Toronto is undergoing one of the most ambitious and incredible revitalizations in the history of the city, and Daniels is playing a leading role. The latest high-rise condo in the community was just announced – we’d like to introduce you to Artworks Tower.

Artworks Tower will rise 33 storeys and feature one- to three-bedroom units, starting from the high $300,000s. Located at Dundas and River, Artworks Tower bookends all the amazing development that has been completed and is underway in Regent Park.

Where does the name come from? The Regent Park community is known for its vibrant art scene – something Daniels has been supporting and strengthening through the revitalization.

“Art does, in fact, ‘work’. It works to unite us, to excite us, and to put us on the world stage,” reads the project website. “You may not know this, but art has been ‘working’ in Regent Park long before the revitalization. Now, more than ever, we celebrate the achievement of a community coming into its colourful own…with Artworks.”

The neighbourhood amenities include the Athletic Field the Aquatic Centre, many restaurants and coffee shops, community centres and artist hubs like Daniels Spectrum, and convenient access to transit and other nearby communities like St. Lawrence Market, Distillery District, and Corktown.

Daniels has a reputation for including innovative building amenities in their projects, and Artworks Tower is no exception. Artworks will feature co-working space, an outdoor terrace, a kids’ zone, a party room, an arcade, and a mega gym with indoor and outdoor crossfit spaces!

Join the Artworks Tower Inner Circle   

The best way to ensure you’re among the first to receive updates about Artworks Tower is to join the Inner Circle.

As a member of the Inner Circle, you will receive an invite to the first advanced sale, giving you the first choice of suites, floors, and views. You’ll also receive invites to members’ only events hosted by Daniels, as well as access to other insider info!

There is a fee of $300 to join the Inner Circle. This fee gets applied to the purchase price of the unit you buy. If you decide not to buy at Artworks Tower, then your money is fully refunded, no questions asked! There’s no fine print or anything – it’s completely risk-free!

Artworks Tower is opening this fall with prices starting in the high $300,000s. Receive priority info by joining the Inner Circle or register to receive general info and an invite to the public opening.

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I’m very interested in buying a certain house, but the seller wants me to fork over a really big deposit. If I change my mind, can I get my deposit back?

There’s no set amount for deposits, however. If the owner’s demand for a large deposit is a major sticking point, you could ask your real estate representative to try to negotiate a lower deposit amount with the seller.

A deposit is a money you put down to secure a property that you want to purchase. Providing a deposit is both a gesture of good faith and a serious commitment. Once the seller accepts your written offer, it becomes an Agreement of Purchase and Sale (APS), which is a legally binding contract.

Once the APS is signed and the deposit is provided to the seller’s rep, attempting to renege on the APS by saying, “Sorry, I’m no longer interested” is highly inadvisable. You will almost certainly lose your deposit. The seller also might sue you for damages for any difference between the amount of your offer and the amount they accept from another buyer, along with any additional legal fees and carrying costs. You don’t want to go down that road.

Deposits are sometimes returned to would-be buyers when conditions are placed on an offer and the conditions aren’t satisfied. For instance, if you make an offer on a house on the condition of financing, but your bank won’t approve it. Or your purchase depends upon the successful sale of your current home, but it doesn’t sell in time. Or you make your purchase conditional on a home inspection and the home inspector discovers a problem that stops you from moving forward.

If you can’t go through with the purchase because your conditions haven’t been met and you want your deposit back, you’ll have to sign a release form and get the seller’s signature, too. It’s a pretty straightforward procedure and sellers will usually go along with such requests. But if the seller suspects you didn’t act in good faith, they could refuse to hand over the money.

What happens next? Well, the deposit would stay in a trust account, usually with the seller’s brokerage, and the dispute between you and the seller would become a legal matter. If you and the seller are unable to arrive at a settlement, a judge could eventually release the funds through a court order. But I’ll warn you: that can take a long time.

It’s a myth that a seller can pocket a buyer’s deposit any time a deal falls through. Cases involving deposits of $25,000 or less can be decided in small claims court, which is relatively inexpensive and easy for ordinary Ontarians to use. Cases involving larger deposits, however, are decided in Ontario’s much more formal Superior Court of Justice. Court cases can quickly become expensive, so you should carefully consider all of your options before taking this route.

If you’re serious about buying this house, I strongly recommend working closely with both a lender — to get your financial ducks in a row — and a real estate salesperson before you commit yourself to a deal and hand over a deposit.

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Home sales and prices rise in Toronto region for a second straight month

In a sign that the Toronto area real estate market is in recovery mode, year-over-year resale home prices and sales rose for a second consecutive month in July.

Selling prices climbed 4.8 per cent to $782,129 last month, up from $745,971 in the same period last year, for all types of homes in the region, according to the latest numbers from the Toronto Real Estate Board released Friday.

The number of home sales also rose 18.6 per cent year over year in July, while new listings declined 1.8 per cent.

“It appears that some people who initially moved to the sidelines due to the psychological impact of the (Ontario) Fair Housing Plan and changes to mortgage lending guidelines have re-entered the market,” said Jason Mercer, the board’s director of market analysis.

July was the fifth consecutive month-to-month rise in Toronto region housing prices: up 3.1 per cent from June, according to the real estate industry’s Multiple Listing Service Home Price Index.

Condominiums continued to outperform lowrise housing such as detached, semi-detached and town homes. Condo prices rose 8.9 per cent on average last month to $546,984. About three-quarters of the 2,002 condos sold last month were in the city of Toronto.

Of the 2,390 detached houses that sold in the region, three-quarters were outside the city. Regionwide, detached house prices rose only 0.5 per cent on average to $1 million, but the scarcity helped increase prices 3.6 per cent inside the city, while they remained flat in the surrounding 905 communities. A detached house in Toronto cost $1.35 million on average, compared to $907,347 in the surrounding regions.

The lift in resale home numbers so far this summer — June prices and sales both rose about 2 per cent above 2017 levels — appears to signal the stronger second half of this year that the real estate board and industry executives have been predicting.

The real estate industry’s MLS Home Price Index showed a slight 0.59 per cent decline in July, but the board’s release said, “The annual growth rate looks to be trending toward positive territory in the near future.”

Seasonally adjusted figures, nevertheless, also showed year-over-year growth of 3.1 per cent in prices and 6.6 per cent in the number of home transactions.

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Condo construction in the GTA hits record high

Urbanation, the authority on condo market intelligence in the Greater Toronto Area, released its market results for the second quarter of 2018, reporting a drop in sales as developers respond to the buyer slowdown.

In 2017, pre-sales hit a record high, so it’s not surprising the total number of condo units under construction in Q-2018 hit a high of 63,904 (95% of which were pre-sold). Construction starts also hit a record high last quarter, reaching 7,981.

5,759 new condo units came to market in Q2-2018, and 56% were sold by the end of the quarter. Compare this to the same period last year when 9,521 units hit the market and 80% pre-sold. Clearly the new condo market is moderating. Unsold inventory in development jumped to 9,341 units, the highest in six quarters, but lower than the 10-year average of 15,807.

“The slowdown in new condo activity this year was fully anticipated following the record-breaking pace of activity last year,” reads the report release. “First half 2018 sales of 9,058 units were down 58% from 2017 (21,316) and 13% below the 10-year first half average of 10,471 sales.”

The average opening price in Q2-2018 was $835 per square foot, an 18% year-over-year increase, but down from the high of $954 per square foot in Q4-2017.

With skyrocketing prices in 2017, some buyers have been hesitant to get into the new condo market, plus resale prices have calmed down. As a result, developers are holding back on new launches. Compared to the same quarter last year, there were 51% fewer site openings.

“Fewer new pre-construction condo sales this year will help to keep the supply pipeline in check as construction starts and completions move to new highs over the next couple years,” says Shaun Hildebrand, President of Urbanation. “Ultimately, low unsold inventory and a stabilizing resale market will provide support for the new condo market in the second half of 2018.”

There were 6,019 condo transactions in the resale market in Q2-2018, which is 5% higher than the average for the quarter. Annual resale price growth came in at 5%, which is a significant slowdown from the 30% growth recorded in Q2-2017. Low supply is supporting price growth; for the last 10 consecutive quarters listings have dropped year-over-year.

As Urbanation points out, it makes sense that new condo sales and prices are easing up a bit after a year of record highs. As single-family home prices drop, condo units are still the most affordable option in the GTA, so demand is still there! We can’t wait to see what the second half of the year holds for the new condo market.

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New GTA condo supply “in check” says Urbanation

There was a record high for new condo starts in the GTA in the second quarter of 2018 (7,981) while sales slumped.

There was also a record high for condos under construction (63,905, 95% pre-sold) driven by a high level of pre-sales in 2017.

However, a report from Urbanation says that pre-sales of new condos in Q2 2018 was down 57% year-over-year to 4,977 units with a slower pace of new projects and absorptions moderating to their longer-term average.

Of the 5,759 units brought to market in pre-construction projects in Q2-2018, 56% were pre-sold by quarter end, which compares to an 80% opening absorption of the record 9,521 units launched in Q2-2017.

No surprise after 2017 high
The slowdown in sales is no surprise following the record breaking high of 2017.

First half 2018 sales of 9,058 units were down 58% from 2017 (21,316) and 13% below the 10-year first half average of 10,471 sales.

“Fewer new pre-construction condo sales this year will help to keep the supply pipeline in check as construction starts and completions move to new highs over the next couple years”, said Shaun Hildebrand, President of Urbanation. “Ultimately, low unsold inventory and a stabilizing resale market will provide support for the new condo market in the second half of 2018.”

Other highlights

  • The average opening price for new launches in Q2-2018 was $835 psf, up 18% year-over-year but down from the high of $954 psf for units launched in Q4-2017.
  • Unsold inventory in development moved up to 9,341 units — the highest level in six quarters but well below the 10-year average of 15,807 units
  • Condominium apartment resale volume was down 17% annually in Q2, marking an improvement over the 31% drop recorded in the previous quarter. Second quarter resales of 6,019 units remained 5% higher than the 10-year Q2 average (5,708)
  • Annual resale price growth of 5% in Q2-2018 represented a strong deceleration from the 30% annual growth recorded a year ago in Q2-2017. Continued positive resale price growth has been supported by low levels of supply, as total listings have declined year-over-year for 10 consecutive quarters
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These condo units are Toronto’s hottest commodity

Condo investment in Toronto tenders diminishing returns, but the discerning real estate investor can still turn a tidy profit.

Two-plus-twos— that is, two bedrooms and two bathrooms—are among the scarcest commodity in downtown Toronto real estate today. In a city wherein glass towers are sprouting faster than weeds, units are shrinking in size.

According to Manu Singh, a veteran investor and broker with Right At Home Realty, close to 70% of units in new builds are smaller than two-plus-twos, ergo, they teem with value.

“For an investor, the more scarce a product or service, the more valuable it will be down the road,” Singh told CREW. “That applies to everything, but when it comes to real estate you definitely want to be on the scarcity side, in terms of the unit you purchase.

“There’s more value to a two-plus-two, or even three-bedroom unit, because when they flip it for a profit they’ll have less competition and less supply that can dilute the sales price because buyers won’t have as much choice.”

Not only is there a dearth of two-plus-twos in downtown Toronto, they appeal to a wider cohort of buyers. Downsizers prefer the two-plus-two because, while significantly smaller than the house they sold, it’s still large enough to host their visiting children, who will have their own bedroom and bathroom.

Young professionals, too, flock to two-plus-twos, and are willing to pay premiums.

“You have extra room for a nursery and extra washroom for guests,” said Singh, adding that young professionals who cannot afford Toronto’s exorbitant rents or to buy a place of their own are also ideal candidates to rent a two-plus-two.

“Roommates are popular in the downtown core for urban professionals. You can increase the rent because you can split it among two income-earners.”

Toronto’s condo units are getting smaller by the build, so Singh recommends anything over 1,000 square feet.

“From an investor point of view, you want to focus on getting a larger two-plus-two in terms of square footage,” he said. “If you can get greater than 1,000 square feet, it’s a great investment because, again, newer developments are becoming smaller and smaller for the specs. In general, two-plus-twos rent higher and they sell better for those reasons. It’s great for investors.”

According to Sunny Sharma, president and co-owner of Century 21 Leading Edge VIP Realty Inc., the bedroom and bathroom combination is usually split so that each resident can have a semblance of privacy.

Alternatively, in student areas one-bedroom-plus dens equipped with two bathrooms are popular are commonly rented to university and college students.

But during preconstruction, two-plus-twos offer the best bang for your buck when it comes to square footage.

“The two-plus-two per square foot might be a little cheaper during preconstruction than one-bedroom-plus-dens and two-bedrooms because the demand isn’t as high,” said Sharma.

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