Your Tenant Secretly Wants to Buy Your Home 

“What’s going on with the rental market? There is nothing to rent. Everything is either leased or has 3 offers . . . or super expensive!!!”

“Went in with $150 over asking with extra months up front. Married couple. What more do you want? They had 10 offers on the place.”

“The listing agent informed me that we were the highest offer but the landlord decided to go with another one.” 

That’s a snippet of what we’ve been hearing lately. In short, the Toronto rental market is insane. The Toronto Star recently ran a story about average rent in Toronto passing the $2,000/month mark, an 11% increase year-over-year. But the average rent of a condo in Toronto has been above $2,000/month since July 2016, so it’s not really the price that’s the problem. It’s that supply is being pinched and demand is rising. This being the case, tenants are looking at other possible options and one of them is doing whatever it takes to pay their own mortgage and build equity instead of paying rent.  
Condos.ca Toronto condo market index and report

Condos.ca PSF Index and Market Report

  Our Market Report Index shows the average rental PSF in July 2016 at $2.89. For an average 700 sqft condo, that’s $2023/month. Don’t believe that? You can review rental prices right back to 2008, when average rent was $1600/month. Boy, those were the days. While the primary cause behind the high stakes rental market does appear to be rental supply, blindly building more condos is not the best answer. Building more is one way to fix the problem, sure, but there are other issues that could be approached first, or at least at the same time.  

The unexpected backfiring of rent control

The new Ontario rent control measures were rolled out with the best of intentions: ensure rental housing remains affordable for average income Torontonians within fixed yearly rent increases. Sounds great . . . for renters. Not so great for landlords. The unfortunate reality of rent control is that landlords hate it with the fire of a thousand suns! Well, some of them do. Rent control means tighter financial pressure, higher risk, and less profit as a rental property investor. Rent control puts landlords into defence mode, making their lease applications much more difficult to pass for tenants. In short, it pinches supply. Potential renters have to go over and above. It’s not enough to meet the basic rental requirements right now. But even renters who are going above and beyond–offering over asking price and extra months up front—are still having difficulty securing a lease agreement. There is always a bigger basket of mini-muffins. Faced with lower revenue opportunity, landlords are looking to grab that cash up front in two ways. Either they raise the unit’s flat rental price above market value, or they fish through applications to find a tenant who is offering to pay more than the asking rate.  

Here’s a look at current rental prices for an average 700 sqft condo across the city:*

Toronto condo rental prices across the city  

Short term rentals add to the insanity

Back in the fall of 2016, short-term rentals like Airbnb became the focus of Toronto’s housing crisis craze, with the City of Toronto debating a ban on such services. The issue led to an Ontario court ruling that allowed condo boards to ban home-sharing services, but the restriction remained building by building. Over the winter, short-term rentals fell out of the media spotlight. Nevertheless, they have continued to impact the rental market in a serious way. In many cases, it’s more profitable for a landlord to rent out a unit on short terms. With the high level of travel and tourism that Toronto enjoys, it’s almost a no brainer. Unfortunately, home-sharing services like Airbnb eat into the market of long-term rental units. While it’s more profitable, it’s also less secure. Landlords must be ready to cover months in which a unit sits empty. For some, obviously, the risk is over-shadowed by the reward. As of June 2017, there were around 11,000 short-term rental units available in Toronto through Airbnb, according to the CBC. Contrast that with the 1,199 currently active MLS condo rental listings*, and you get a striking sense of the problem. The City of Toronto has put forward recommendations for short-term rental legislation, including a “one host, one home” policy that restricts hosts from renting out a unit they do not personally live in.   

Could the insane rental market bring back buyers? 

If the rental market persistently stays a problem pushing up rental prices it might lead to people eventually choosing to buy again, which could restore the market to the levels of activity we saw earlier this year. Add to this that current condo owners are in an ideal position right now if they want to get into a nice little house with a backyard. While listings are down, competition is down too, and condos remain a hot commodity. Now could be a good time to make the move, especially if renters start looking to buy. Currently, the average rent for a condo in Toronto is roughly $2,350/month, depending on your neighbourhood and building. The average price to buy a condo in Toronto is roughly $540,000. For a buyer, after affording a 10-20% down payment, the monthly carrying costs for an average condo would come in around $2,350 as well, assuming average maintenance fees of about $0.55 per sqft. Of course, buying is out of the question without the down payment, and for most renters is not even worth talking about. But for anyone who CAN pull those funds together, the monthly carrying costs are nearly neck and neck right now, if not favouring a homeowner’s investment. Condo investors are benefitting as landlords but their tenants (in this hot rental market) might be secretly planning to buy their own condos units as they start to weight their options (cost of renting vs cost of ownership). If you're interested in understanding your options in terms of financing and how far your current funds can take you, then contact us to get the conversation started (www.starionrealty.com | www.starioncondos.com | info@starionrealty.com | 905-678-8620)  
*Data sourced via Condos.ca as of August 23, 2017

Category: Starion Blog

Your Tenant Secretly Wants to Buy Your Home 

“What’s going on with the rental market? There is nothing to rent. Everything is either leased or has 3 offers . . . or super expensive!!!”

“Went in with $150 over asking with extra months up front. Married couple. What more do you want? They had 10 offers on the place.”

“The listing agent informed me that we were the highest offer but the landlord decided to go with another one.” 

That’s a snippet of what we’ve been hearing lately. In short, the Toronto rental market is insane. The Toronto Star recently ran a story about average rent in Toronto passing the $2,000/month mark, an 11% increase year-over-year. But the average rent of a condo in Toronto has been above $2,000/month since July 2016, so it’s not really the price that’s the problem. It’s that supply is being pinched and demand is rising. This being the case, tenants are looking at other possible options and one of them is doing whatever it takes to pay their own mortgage and build equity instead of paying rent. Continue reading ..

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Photo: Ashley Fisher/Flickr

Here’s how many first-time buyers are opting for condos across major Canadian markets

Many first time buyers in Canada’s biggest cities are settling for less square footage when entering the housing market, but a new study from Genworth Canada tracks just how many are opting for condos over detached homes and townhouses.

According to the residential mortgage insurer’s 2017 First-Time Homeownership Study published this week, first-time homebuyers in the nation’s hottest markets are resorting to more affordable condominiums over detached homes and townhouses. Continue reading ..

Condos are king in the Greater Toronto Area and Heres why 

condo canada

 

Records continue to fall in the nation’s hottest housing market.

Condo sales were up 79% year-over-year in February and far outstripped home sales for low-rise units.

“In the GTA in February, there were more than twice as many new condo apartments sold (as) low-rise units,” the Building Industry and Land Development Association (BILD) said in its latest report. “Altus Group recorded 3,542 sales of condo apartments in stacked townhouses and mid and high-rise buildings, and 1,541 sales of new detached and semi houses and low-rise townhomes.”
Continue reading ..

WHAT’s DRIVING VAUGHAN’S NEW DOWNTOWN??? TTC: A Tour of Vaughan’s Metropolitan Centre Station.

“I think this may be my favourite of the stations,” said Joanna Kervin, the director for Third-Party Planning and Property with the TTC‘s project to extend the Line 1 (Yonge–University) subway northwest to Vaughan. Kervin led members of the UrbanToronto team on a sneak-preview tour of the Vaughan Metropolitan Centre Station, the northern terminal for the extended line, which the TTC is planning to open at the end of 2017.  Continue reading ..

ont-economic-update-201511262016 Ontario Economic Outlook and Fiscal Review – Doubling the Maximum Refund for First-Time Homebuyers

Modernizing Land Transfer Tax and Other Tax Measures

Land Transfer Tax 

The Province is proposing to modernize Ontario’s Land Transfer Tax (LTT) system to reflect developments in the real estate market, by: 

  • Enhancing support for first-time homebuyers;
  • Updating LTT rates and brackets; and
  • Restricting the refund for first-time homebuyers to Canadian citizens and permanent residents.

Doubling the Maximum Refund for First-Time Homebuyers 

To help Ontarians buy their first home, the Province is proposing to double the maximum refund for first-time homebuyers from $2,000 to $4,000, effective January 1, 2017.
Continue reading ..

Bank_of_Canada_Building_Ottawa_(2)

Bank of Canada makes rate announcement

The Bank of Canada held the target for the overnight rate at ½% Wednesday.

Canada’s economy shrank in Q2, according to the BoC; however it’s still predicting a bounce back by the end of the year.

“Second-quarter GDP was pulled down by the Alberta wildfires in May and by a drop in exports that was larger and more broad-based than expected,” the Bank of Canada said in its announcement. “Exports disappointed even after accounting for weaker business and residential investment in the United States, adjustments in the resource sector, and cutbacks in auto production.”

Continue reading ..

OREAINSIGHT

INSIGHTS – Home sales set new all-time record in May
Highlights
  • Residential sales up 9.3% in May 2016 compared to a year earlier.
  • New listings in Ontario numbered 40,432 units in May 2016, a decrease of 7.9% compared to last year.
  • The provincial average price of homes in May 2016 rose 12.8% compared to a year earlier.

Decade of Development to Transform Etobicoke’s Queensway

T’s not close to Downtown Toronto, and it’s not walking distance to a transit hub. Yet, in the stretch between Islington and Kipling Avenues, The Queensway could become one of Toronto’s most active development nodes. Though still lined with the strip plazas, warehouse industrial, and parking lots of older suburbia, the Etobicoke Street is attracting a huge wave of high-rise projects, with a 36-storey tower at 30 Zorra Street recently joining the neighbourhood’s proposed developments.

30 Zorra Street, Toronto, by MSAi

The east and south elevations (l-r) of 30 Zorra Street, image retrieved via submission to City of Toronto

Designed by MSAi, the 379-unit condo tower would join an area already being re-made by three phases of the Remington Group‘s IQ Towers. Located Continue reading ..

Did you know? If a market correction happens, it would benefit Leading Real Estate Investors.

It may go against conventional wisdom, but this is why investors may want to start cheering for a correction. Other real estate investors may want to start fine tuning there investment strategy for the longterm.

There are two major reasons investors would benefit from a market correction, according to one leading investor.
Continue reading ..

FOUR VISIBLE SIGNS OF AN UNDERVALUED NEIGHBOURHOOD.

Up-and-coming neighbourhoods represent the strongest potential earnings in real estate investment. Given that condo prices increase after development has finished, buying pre-construction is often the smarter alternative to maximize your profit. With new condos popping up all over the place in Toronto, choosing wisely means predicting the price behaviour of a given neighbourhood’s realty.

There are a few ways you can identify an undervalued neighbourhood so you can get the most out of your property investment and find the smarter alternative:

Spot the social diversity

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