Is home ownership really a smart investment? | Toronto Real Estate Blog

Is home ownership really a smart investment?

Published On Sun Nov 27 2011
 This home at 56 Simpson Ave. in Toronto's Riverdale neighbourhood first sold for $1,200 in 1906. It went for $825,000 in Nov, 2011. 

This home at 56 Simpson Ave. in Toronto’s Riverdale neighbourhood first sold for $1,200 in 1906. It went for $825,000 in Nov, 2011.

Supplied photo

 If Toronto fireman Alexander Gunn was alive today, he might well feel like the Warren Buffett of his times.

The semi-detached home he bought in Toronto’s Riverdale neighbourhood for $1,200 in 1906, sold in November for $825,000.

Conventional wisdom has it that buying a home is one of the smartest things we can do. If you have been lucky enough to live in the Greater Toronto Area, especially in the last 10 years when house prices have doubled, that would be true.

But over the long run, is home ownership such a great deal? To find out Moneyville took a close look at Gunn’s house over the last 105 years.

Here’s what we found: Adjusted for inflation, an investment in the stock market would have yielded a better return, including all the ups and downs — starting with the 1929 stock market crash that ushered in the Great Depression.

Toronto was still rebuilding from the Great Fire of 1904 when Alexander Gunn was promoted to district captain after years of climbing the ladder at the city’s No. 3 firehall at Yonge and Carlton Sts. With his new responsibilities came a pay hike, from $850 to $1,000 a year.

It was the nod he needed to buy his first home.

The three-storey house in what is now known as Riverdale was brand new, part of a development on what had been fields where locals grew food to sell at market. It promised good luck: A shamrock had been crafted into its soaring gable, most likely by Irish immigrants who helped build these turn-of-the-century subdivisions.

Each day on his way to work, Gunn would have headed down Broadview Ave. with its sweeping view of the downtown and watched the burned-out city being rebuilt.

He would have kept warm at night in front of the house’s wood-trimmed fireplace and watched through its lead-glass windows as thousands more homeowners flocked to the area after 1912 when Danforth Ave. was paved and, later, the Bloor Viaduct erected across the Don Valley.

Gunn paid just a little more than a year’s salary for the modest house on a 20 foot by 112.5 foot lot. Today, a buyer would pay a fortune, relatively speaking — about five times their annual income given that the average price of a GTA home in October was $465,000 and the average household income $82,000, according to the Canada Mortgage and Housing Corp.

Gunn and his family lived at 56 Simpson Ave. for more than four decades, through two World Wars, the Great Depression and the remarkable transformation of Toronto.

The house changed hands just four times before its most recent sale. And the average annual gain over the 105 years, adjusted for inflation, was just 3.9 per cent.

“If I had to give new homebuyers some advice, it’s that houses aren’t always the ultimate investment. You should never bet the farm on the house, so to speak,” says Francis Fong, an economist with TD Economics.

Fong and his colleague Sonya Gulati helped Moneyville adjust prices for inflation and compare the appreciation of the home against Toronto Stock Exchange returns.

The challenge was to compare apples to apples. We had the home’s sale price going back to 1906, but the Bank of Canada’s inflation records don’t begin until 1914. Toronto Stock Exchange records start in 1919.

So we opted to track gains from 1947 onward, seven years after Gunn’s death, when the house sold for $6,300. We found that in those 64 years, the house appreciated at an average annual rate of 2.3 per cent, adjusted for inflation. (Inflation averaged 3.9 per cent during the same period, largely because of spikes in the 1970s and early ’80s.)

The TSX, on the other hand, did marginally better — producing average returns of about 3 per cent.

But when the everday costs of a house were included, things likes taxes, maintenance and upkeep, 56 Simpson fared much worse

“A house is not a good investment. It is a roof over your head,” says James McKellar, director of the real estate and infrastructure program at York University’s Schulich School of Business.

These days, homeowners in hot markets like Toronto and Vancouver may feel they have hit the jackpot: Most Toronto homes have virtually doubled in price over the last decade and in Vancouver they have almost tripled.

But once you factor in the other costs — interest on the mortgage, new kitchens, bathrooms, furnaces and electrical updates, “you’re lucky to make anything,” says McKellar. Studies have shown that it’s $800 a month cheaper to rent a 1,000-square-foot home than to own it, he notes.

“By any empirical study, houses do not inflate. They are a cost. But we all have to live somewhere.

“Calling a house a good investment is a process of rationalization. The last thing you want to admit is that, ‘I bought the house because I fell in love with it.’”

Catharine Grossi is proud to admit that. She and her husband Paul bought 56 Simpson for $462,500 back in 2001 because they were keen to move back to the city from the suburbs.

“When I saw that so much of the original house was there, and it was updated . . . That was good for me. I loved it as soon as I saw it.”

She became fascinated by the home’s history — she spent a day at the City of Toronto archives — and details such as its original fireplace, century-old exposed brick, the shamrock.

The house proved to be the perfect place for Grossi’s two sons and daughter to drop their bags after university or stints abroad.

Grossi wasn’t thinking so much about the gains she’s made, but rather the life she’s lived at 56 Simpson when the house sold Nov. 4. She and Paul are downsizing into a home two doors from their daughter and her newborn twins.

Grossi asked just one thing when her realtor called to say there had been an offer at asking price: “Do they love the house?”

James McKellar gets that.

He has lost money in the housing market: About $25,000 in the wake of the oil patch bust in Calgary in 1983 and $35,000 on a Boston home during the ’90s recession.

He now owns a home in Moore Park.

“The big drawback of renting is that it doesn’t give you the emotional satisfaction of owning,” he says with just the slightest chuckle.

“At the end of the day, when you go home and make dinner and relax, the numbers really don’t matter.”

Also read:

How we paid off our mortgage in three years


Why I sold my house and rent instead



Top 10 Tallest Condos in Toronto – TalkCondo | Toronto Real Estate Blog

Top 10 Tallest Condos in Toronto


With Tridel recently announcing their whopping 75 Storey Tower at Ten York, “tall condos” are very much in the spotlight (to Register for First Access to Ten York, click here). Ten York will be the third tallest residential tower in Toronto and we thought it would be fun to see how the new mega-tower measures up against other condominium projects in the city.

The top 10 is mostly made up of projects that are either currently being built or in the pre-sale phase. The tallest residential tower that is completely built is the Ritz Carlton Private Residences located at Simcoe & Wellington. It is worth noting that while they are not 100% finished, Trump Tower and Four Seasons are mostly complete from the exterior and are both making a huge impact on our skyline. Likewise, Shangri La is currently around 6-8 storeys from the top and is beginning to dominate along University Avenue.

talkcondo new condos in toronto tallest condos Top 10 Tallest Condos in Toronto
Top 10 Residential Tower in Toronto. Image source: Skyscaperpage

1. Trump Residences (Under Construction, 57 Floors, 276.9m) by Talon

The battle rages on whether Trump is #1 or #2. While the roof of Trump is shorter than the roof of Aura, the spire on top of Trump Tower puts it over the edge making it the tallest residential tower in Toronto. It is worth noting that Trump is a mixed use building, while Aura is a residential building.

talkcondo new condos in toronto trump tower Top 10 Tallest Condos in Toronto
Trump’s Spire makes it the tallest condominium building in Toronto

2. Aura at College Park (Under Construction, 75 Floors, 264m) by Canderel

Aura is the third phase of College Park Condos and will stand an incredible 75 Storeys. The Penthouse will occupy the entire top floor and is still available for a paltry $17.5 million. Check out the link here for a full virtual tour of the incredible penthouse.

aura condos Top 10 Tallest Condos in Toronto
Aura located at Yonge & Gerrard will stand an incredible 75 Storeys

3. Ten York (Sales Begin 2012, 75 Floors, 258.7m) by Tridel

Ten York is the newest kid on the block. It will stand just 6 meters less than Aura despite having the same number of floors.

talkcondo new condos in toronto ten york1 Top 10 Tallest Condos in Toronto
Newly announced Ten York will be the third tallest tower in Toronto

4. One Bloor (Under Construction, 70 Floors, 237.7m) by Great Gulf

Located at legendary Yonge & Bloor, One Bloor has started construction and will be completed around 2014.

talkcondo new development toronto pre construction new condos in toronto one bloor1 Top 10 Tallest Condos in Toronto
One Bloor will stand 70 Storeys

5. ICE 2 (Under Construction, 67 Floors, 234m) by Lanterra

ICE 2 is the taller of the two ICE buildings and will stand at 67 Floors. ICE 2 will sit just north of Ten York and west of Maple Leaf Square in what will become a very dense neighbourhood.

talkcondo new condos in toronto ice 2 Top 10 Tallest Condos in Toronto
The ICE towers will stand 57 and 67 storeys

6. 156 Front West (Proposed, 65 Floors, 221.9m) by Cadillac Fairview

Earlier this summer, Cadillac Fairview announced that they had purchased 156 Front West, current home of popular restaurant Joe Badali’s. It was announced that the developer has proposed a 65 storey residential tower to accompany a 54 storey office tower. It will be the 6th tallest residential tower in Toronto.

7. Shangri La (Under Construction, 65 Floors, 214.5m) by Westbank

Shangri La’s bright pink hoarding may no longer dominate the skyline, but the incredible Shangri La is just a few floors away from topping off.

talkcondo new condos in toronto shangri la Top 10 Tallest Condos in Toronto
Shangri La looking pretty along University

8. Ritz Carlton (Completed, 52 Floors, 209.6m) by Graywood

Ritz Carlton is the tallest complete condominium in Toronto. The Hotel & Residences opened their doors earlier this year and was the first of the “big four” hotel chains to open in Toronto (Trump, Shangri La and Four Seasons being the other three).

talkcondo new condos in toronto ritz carlton Top 10 Tallest Condos in Toronto
Ritz Carlton is the only complete development in the top 10

9. L Tower (Under Construction, 57 Floors, 205m) by Cityzen

One of our personal favourites, located at Front & Yonge just steps to Union Station, L Tower will be one of the most visually stunning buildings in Toronto when complete in 2013. Check out recent constuction images by clicking here.

talkcondo new condos in toronto l tower new Top 10 Tallest Condos in Toronto
L Tower is one of the most visually stunning towers in the Top 10

10. Four Seasons Residences (Under Construction, 52 Floors, 204m) by Menkes & Lifetime

The Four Seasons made the press for having the first $100,000 parking spot in Toronto and for selling the most expensive condominium in Canada for a mind-boggling $28 million, but all of that points to ultra luxury living. The Four Seasons recently topped off and looks stunning. Four Seasons Residences rounds out or top 10 tallest condos in Toronto!

talkcondo new condos in toronto four seasons private residences Top 10 Tallest Condos in Toronto
Four Seasons rounds out the top 10 tallest condominiums in Toronto

So there you have it! The 10 Tallest Condos in Toronto!


A condo bubble in Toronto? Forget about it, says Urbanation’s Ben Myers – Toronto Real Estate Blog!

A condo bubble in Toronto? Forget about it, says Urbanation’s Ben Myers

Well he didn’t phrase it quite like that, but that’s the gist of Ben Myers’ new article in the New Condo Guide.

 Mr. Myers, the editor and executive VP of the market research firm, Urbanation, writes that he gets asked whether Toronto is in the midst of a condo bubble every day. So in response to all the curious investors, homebuyers, economists, journalists and condo enthuasiasts out there, his article goes about explaining exactly why there is no condo bubble in Toronto.

 Rather than re-hash the entire piece, we’ve pulled some of the most salient points and listed them below for you to peruse:

  • A bubble is characterized by rapid increases in valuations of real property such as housing until they reach unsustainable levels and then decline
  • The average sold index price in the Toronto CMA new condo market increased 7.4 per cent annually from $462 per square foot to $496 per square foot. Urbanation does not believe this is a “rapid” increase
  • People presume we’re oversupplied since they see cranes everywhere and there are a record 42,573 highrise condo units under construction in the third quarter
  • If the market was oversupplied there would be a rise in the resale sales-to-listings ratio (SLR) and the listings-to-total units ratio (LUR) as sellers would be waiting for scarce buyers
  • 50 per cent SLR and 4.2 per cent average quarterly LUR in 2011 are in line with the 5 year averages
But Ben, what about all that investor activity in the Toronto market? How can there be enough people in the city who want to rent these units that investors purchase?
  • According to the new UrbanRental report, the rental market is hot hot hot!
  • Even though a record number of condos were completed in 2011, there is still a shortage of units available for lease
  • The average condo unit took just 18 days to lease in Q3-2011, down from 29 days in Q1-2011

So what is all the fuss about? Maybe some people are misinformed about the likelihood that there’s a condo bubble in Toronto, but surely there’s something going on to fuel these concerns?

According to Myers, we’re seeing “a fundamental shift toward highrise living.”

“Many demographic and cultural changes will continue to tip the scale toward apartment living, including longer commuting times, the desire for Greener living, the fact that people are getting married later in life, the continued appreciation in lowrise housing, lifestyle changes of the baby boomer generation, and the lasting influence of new immigrants more accustomed to apartment living,” he explains.

That’s some sound reasoning from the experts. We’re convinced!


Revised purchase agreement could ease ‘sticker shock’| Toronto Real Estate Blog

Revised purchase agreement could ease ‘sticker shock’

Bob Aaron in Legal, Condo Buying

In a landmark consumer protection initiative, the Tarion Warranty Corp. has proposed a requirement that builder purchase agreements set out in one place all the extras that can be added to the price of a new home. (Tarion regulates the home-building industry in Ontario and administers the warranty program for new homes.)

If enacted, this initiative would mark a significant departure from the current practice whereby extras (euphemistically called “adjustments” by developers’ lawyers) are scattered through purchase agreements. It often requires the skills of a legal Sherlock Holmes to ferret them all out and calculate the total cost implications.

The proposed changes arose out of concerns expressed to Tarion about inadequate disclosure of the myriad of different items that are often charged on closing, resulting in “sticker shock” to buyers — and worse, an inability to raise the necessary funds.

When the regulations become law, a new Schedule B will be attached to the Tarion addendum in each builder purchase agreement. The schedule will be divided into two parts.

The first part will contain a list of fixed additional payments, fees and adjustments to the purchase price which the purchaser will be required to pay on closing.

The second part will list all variable adjustments to the purchase price. Builders will not be able to collect any extra charge if it is not shown on Schedule B.

In the category of fixed additional payments, the following types of charges will be listed for purchasers, no matter where else they are shown in the agreement:

The Tarion Warranty Corp. enrolment fee (based on the price of the unit).

A $300 fee plus HST for record-keeping to hold the purchaser’s deposits in trust.

A $50 fee for cashing and recording each deposit cheque.

A $150 fee plus HST to discharge the builder’s construction financing and give clear title after closing.

The builder’s lawyer’s $73.45 real estate transaction levy, payable to the Law Society.

A fixed fee for any NSF cheque.

A fixed fee to make changes to a purchase agreement, such as adding another purchaser.

Fixed legal and administrative fees if the builder allows the purchaser to “flip” the purchase agreement.

Under variable adjustments, purchasers will be alerted in one place to all the extra charges which cannot be determined at the time the agreement is signed. The variable charges may include:

The condo unit’s share of the cost of installation of gas, hydro, sewers and water services and meters, to an unlimited amount.

Any new taxes imposed on the home or condo unit after the agreement was signed, also an unlimited amount.

An unlimited levy for parks, public art or other municipal charges.

HST on the cost of any included appliances.

Interest on the balance of the purchase price from the day of final closing to the next banking day.

Any increase in municipal, education or transit development charges imposed after the agreement is signed.

An unlimited contribution to the builder’s share of all costs associated with a municipal development agreement.

Any new taxes imposed on the unit by any level of government after the agreement was signed

An unlimited levy for parks, community services, boulevard tree planting, public art levy or other municipal charges

Interest on the balance of the purchase price from the day of final closing to the next banking day

Estimated municipal taxes for the year of closing and the subsequent year.

With the entire list of variable charges in one place, purchasers will be alerted to them in a way that current builder agreements do not make clear. Purchasers will then be free to either accept the risk of unlimited extra charges or attempt to negotiate a maximum amount with the builder.

As a past board member and current chair of Tarion’s consumer advisory council, I am an enthusiastic supporter of the proposed changes. As I see it, they will make builder offers more transparent and easier to understand. As well, they will go a long way towards reducing “sticker shock” for new home buyers.

Bob Aaron is a sole practitioner at the law firm of Aaron & Aaron in Toronto and a board member of the Tarion Warranty Corp.  Bob specializes in the areas of real estate, corporate and commercial law, estates and wills and landlord/tenant law. His Title Page column appears Saturdays in The Toronto Star and weekly on Move Smartly.  E-mail

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Are new condos overvalued compared to resale units? | Toronto Real Estate Blog

Carras: Are new condos overvalued compared to resale units?

Published On Fri Nov 25 2011


 George CarrasSpecial to the Star

Let’s compare GTA prices for both new and resale condominiums and see what the gap looks like.

Back in January 2004, the price of a new condominium stood at $254,409, according to RealNet’s monthly New High Rise Home index. At the same time Toronto Real Estate Board (TREB) figures showed that the median price of a resale condo stood at $185,000. The difference between the new and resale prices was almost $70,000.

Nearly eight years later, as of Sept. 30, 2011, the RealNet index was at a near-record high of $444,378 (up 75 per cent from 2004). The TREB median price of a resale condo stood at $310,000 (up 68 per cent).

This means the price gap between the new and resale condominiums has grown to almost $134,000, nearly double the price difference that existed back in 2004.

Given this almost doubling of the price gap between new and resale condominiums, it might be tempting to simply conclude that new condos are “overvalued.”

However, before you make that call first take a step back and think about what the data actually shows. There is an important difference in timing here that needs to be understood.

First, consider the monthly median resale price of condos. Approximately 250,000 condominium units were built in the GTA from 1970 to this year. Each month, an average of between 1,000 and 2,000 of those units are sold. TREB calculates the statistical median (middle) price of the units sold that month. The median resale price is calculated based on the transactions involving real properties.

Now consider the RealNet monthly New High Rise Home index. This is effectively a futures contract price for condos. Each dot on the index price line is driven by a universe of some 15,000 “futures contracts” — condo units that are mostly in pre-construction or under construction. These condos do not actually exist yet but will exist sometime in the future.

RealNet researches and inspects all new condominium projects monthly and calculates the official new home and condo price index.

This index price for new condominiums applies to real estate that does not exist yet but will exist in the future. So to get a better understanding of new condo pricing from a futures perspective, you can time-adjust the RealNet index price by four years — the approximate time it takes for a new condominium project to go from pre-sale to final closing.

Doing this shows that average new condominium price, time-adjusted four years forward, line up very closely with the median resale condo price, with only a small premium added.

Considering that GTA developers are delivering 15,000 units per year of new, more valuable and more expensive condominium real estate to the universe of 250,000 older condominiums, the median resale price will likely continue to get pushed up over time.

So are new condominium prices overvalued in comparison to resale condos? Always take an informed approach. First, make sure you understand the data, then make your call.

While the RealNet index price is often used to measure changes in new condominium pricing on a monthly basis, it can also offer an effective way to predict where resale pricing is headed in the future.

George Carras is the president of RealNet Canada Inc. His column appears in New in Homes and Condos the last Saturday of every month. For more information, visit or follow on Twitter at


Monday Morning Interest Rate Update (November 28, 2011) | Toronto Real Estate Blog

Monday Morning Interest Rate Update (November 28, 2011)


Monday Morning Interest Rate Update (November 21, 2011)

Rate Sheet (Nov 21, 2011)On Friday of last week Statistics Canada released its October Consumer Price Index (CPI) report on general price changes over the most recent twelve months. It showed that the overall rate of inflation fell from 3.2% to 2.9%, and core inflation (which excludes more volatile inputs like food and energy) fell from 2.2% to 2.1%. A drop in both measures was expected, and while we always keep our eye on the CPI data because inflation and mortgage rates normally go hand-in hand, remember that the Bank of Canada and the federal government have both told us that changes in inflation won’t drive our interest-rate policy until the economic weather improves.

Speaking of the economic weather, the euro zone had another volatile week as Italian bond yields pushed past 7% again on Tuesday, before closing the week at a 6.64% thanks to aggressive support from the European Central Bank (ECB). The experts I read think that the only way to ensure the euro zone’s survival is for the ECB to announce that it will support the sovereign debts of its member countries at any cost. But like every other solution available, it’s not that simple.

While full scale ECB support would allay investors’ fears of more sovereign defaults, the Germans, who are essentially footing the bill for all of these bailouts, want fiscal control over countries who receive ECB support to ensure that they aren’t just writing blank checks with no post-bailout accountability. Angela Merkel needs the rescued countries to agree to fiscal oversight so she can sell more bailouts to German voters, but for politicians in the beleaguered countries, surrendering fiscal sovereignty to the German Debt Management Office certainly doesn’t help anyone’s re-election plans.

Meanwhile in the U.S., it looks like the bi-partisan super committee charged with recommending $1.2 trillion in budget cuts over the next ten years has reached an impasse and will announce today that it cannot reach agreement in time for this week’s deadline. If the deadline passes without a resolution then by law, a sequester will kick in that implements indiscriminate across-the-board cuts to achieve the necessary savings. While congress may well come up with a temporary solution that kicks the can down the road a little further, uncertainty around the timing and impact of the coming cuts should fuel more short-term market volatility.

Five-year Government of Canada (GoC) bond yields were flat for the week and have traded in a surprisingly narrow range over the last five business days. Lenders continue to edge rates down (as yields suggest they should) and I am curious to see if any will launch rate promotions at the mortgage industry’s national conference this week. (I’ll be there on Monday and Tuesday to find out!)

Five-year variable-rate mortgages are still priced in the prime minus .25% range (2.75% using today’s prime rate). While we have grown used to bigger discounts on variables, even at today’s reduced discounts they offer borrowers the cheapest interest cost and with rate hike expectations being pushed farther into the future, I think they still warrant a look.

The bottom line: Last week we learned that Canadian inflation is on the wane, we watched the euro-zone crisis continue to escalate, and we now see the U.S. federal government headed for another round of budget brinkmanship. All three developments should play a part in keeping GoC bond yields, and therefore mortgage rates, at ultra-low levels for the foreseeable future.

Source: Post by David Larock is an independent mortgage planner and industry insider specializing in helping clients purchase, refinance or renew their mortgages. David’s posts appear weekly on this blog ( and on his own blog Email Dave