MARCH 2013MARCH 2013

Our 6th AnnualReal Estate Roundtable

Seven housing hotshots gaze into their crystal balls and tell us if North Toronto’s bubble is about

to burst or if the market still has room to run

JOANNE KATES ON NEW LOBSTER HOT SPOT

MARITIME OF YOUR LIFE?JEANNE BEKER ON SPRING’S HOTTEST SILK TOPS

FINDING PRINTS CHARMINGTHE HEAD OF THE CLASSARE PARENTS FIBBING TO GET KIDS INTO NTCI?

THE HOLY ROMAINE EMPIREGRANT VAN GAMEREN ON T.O.’S TOP CAESARS

There are more than 50 homes over $2 mil currently for sale in North Toronto. This $6.188 mil Riverview Drive home is one of our area’s top-priced MLS listings.

NT-Mar 2013-OFC_NT-Sept 2011-OFC 13-02-21 7:13 PM Page 1

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2013 PANELISTS

01 PAUL MIKLASPresident, Valleymede Homes

02 HARRY STINSONCondo developer; president, Stinson Properties

03 ELISE KALLESToronto’s leading carriage trade broker

04 BRAD LAMBBroker-president, Brad J. Lamb Realty Inc.

05 GARTH TURNERInvestment advisor, best-selling author, former MP and minister of national revenue

06 MICHELLE ERVINModerator and senior editor, Post City Magazines

07 MATHEW ROSENBLATTPrincipal, Cityscape Developments; Distillery District developer

08 BARRY COHENTop Canadian sales representative, Re/Max

POST: Let’s start with a commenteconomist Sherry Cooper made at lastyear’s roundtable: “What we will see in thehousing price range and condo price rangeis a continued excess demand and pricesrising. It’s just that they probably won’t riseas much. The big unknown is whathappens to the foreign inflow of capital.”

Garth Turner: The market seems to be in astate of transition. How deep it changes andhow quickly, we don’t really know yet.Certainly the condo market does havetensions, and I think that her comment wasprobably too strong in that regard. I thinkthe condo market will be weaker than manyexpect. Foreign capital is the other key pointthat Sherry brought up. It’s a difficult one.There was an article in the Globe and Mailyesterday — I’m sure we all read it — wherethere is no good tracking of numbers orforeign investors in Canada, so you tend toget a lot of anecdotal evidence, which Ithink then becomes urban myth.

Brad Lamb: Listen, there’s no doubt thatthe real estate market is slower now than it

was last spring and in 2007. There’s lots ofgood reasons for that, and probably some ofthe reasons are what you spoke about. Butthe principal reason why we’ve had a realestate market change in Canada is, in myopinion, mostly due to the sustained changesto the policies that CMHC [CanadaMortgage and Housing Corporation] hascarried, by Jim Flaherty. He’s changedamortization dates, from 40 years to 25years, in five years — it’s made real estate 35per cent more expensive. So it’s taken a hugenumber of first-time buyers out of themarket. He’s [Flaherty] also savaged theone-million- to 1.5-million-dollar marketbecause he said no longer can you put fiveper cent down. You now have to put 20 percent down.

Barry Cohen: Sherry’s comments are moreto do with condominiums, and thisconversation has spilled over into real estate.Detached, single-family homes have risen,both in activity and in price, year after year.That’s very stable.

Elise Kalles: It’s gone down since August.

Brad Lamb: But if and when there is asetback in the real estate market in Toronto(and of course it is going to come; Garththinks it’s going to be tomorrow — he’sthought it’s going to be tomorrow for thelast 10 years), we are going to have arecession, a bad one, and real estate’s goingto get whacked. Condos will get whackedworse than houses in Toronto.

Harry Stinson: It’s a totally different financeworld now. What I’ve noticed now versus’88, ’89, ’90: we were selling individualcondos then, and it was people who had nointention of closing. It was just a speculativegame. And now the buyers — I don’t seethat same thing. They’re buying. They’d likeit to go up, but they’re not saying to you,“Well, I’m just going to flip it.”

Mathew Rosenblatt: There’s a differencebetween investing for the long term, to bepart of the rental pool, and someone tryingto flip it. If you’re buying a whack of them,you might not be able to afford it, when thetimes comes, when you actually have to ownthem and prices are going down.

REAL ESTATE ROUNDTABLESPRING MARKET 2013

As we sat down at the Granite Club for our sixth Annual Real Estate Roundtable, last spring’s narrative of bullyoffers and bidding wars had given way to slowing sales. Here’s what the GTA’s top market experts had to sayabout whether we should brace for bearish conditions in 2013 Story: Michelle Ervin Photos: Greg Dean (above), C.J. Baek (page 22)

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Paul Miklas: But who’s your investor? Yourinvestor’s coming from China or Iran andthe problem is, they’re not making anythingon their money over there, or they’reworried about their money, so they’relooking for a place to place it. Because I cantell you, we’re building 522 units. Themajority of it — I’d say 55 per cent of oursales — went to foreign buyers. They cameup with a 25 per cent deposit, and they’relooking for somewhere to place their money.

Garth Turner: I don’t buy the “It’s differenthere” argument. It’s not different anywhere.Where prices go up far faster than incomes,far faster than individual or family incomes —

Paul Miklas: But they aren’t going up fastanymore, Garth, they really aren’t: one percent a year at best at this point. It’s reallyactually slowed down. When you starttalking to Elise or Barry Cohen and Brad,and they’re telling you there’s product nowout on the market and where, for example,you’d see in one area 15 sales, you only sawfive this past month. That shows you themarket is adjusting and there’s no bubble.

Barry Cohen: A correction comes afteryears of double-digit inflation. We don’thave that here. That’s what happened inVancouver; that’s what happened in the ’80s,’90s; that’s what happened in the US: fouryears of double-digit inflation. We havesteady five years. We’re where we’resupposed to be.

POST: Elise, despite slowing sales, we arestill seeing prices inch upward, especiallyin our neighbourhoods where the million-dollar-plus market is strong. As a topcarriage trade broker, what are you seeingon the ground?

Elise Kalles: Well, it’s definitely sloweddown, but I have to disagree with Garth. Inthe price range we work in, a lot of them areforeign buyers, and they’re closing, they’resolid. The Toronto market, I think, issustainable in our neighbourhoods. Certainneighbourhoods will always be in demand,and single-family homes with easycommuting distance to downtown will holdtheir value. I’m not saying it’s not going to

go down. It’s going to take longer. ButCanada has moved to eighth place in theannual ranking of the most tax-friendlyplaces for companies to do business.Toronto is a popular destination for peoplelooking to move from their big city fromelsewhere in Canada, the U.S. and abroad.It’s also attractive because of themulticultural communities. You go to theprivate schools or the universities, 80 percent are from India, from China.

Barry Cohen: If you just step back and lookat the year, last year we had priceappreciation pretty much right up untilJune, then we flat-lined, and then hadmaybe another one per cent gain from Juneuntil December. During that second half ofthe year, all you had was activity falling. Weare actually starting this year up two percent over last year.

Garth Turner: Sales or prices?

Barry Cohen: Sales.

Garth Turner: Actually, we’re not. If you’regoing by the Toronto Real Estate Board[TREB] numbers, the TREB numbers arewrong. TREB says it was a 2.4 increase inDecember. They revised last December’s

numbers. It’s actually a 2.1 per cent decline.

Barry Cohen: I think Elise can agree withme: in our marketplace, you had lack ofconfidence the second half of the year, andthen all of a sudden, December rolled around,and we had this confidence and this vigourthat we’re feeling right now in January.

Brad Lamb: And we’re on two distinctmarkets now because the condo market andthe housing market are distinct. If you put ahouse up for sale right now in Toronto,you’d probably get multiple offers. If you puta condo up for sale, you’ll probably sell for95 to 96 per cent of the asking price.

Garth Turner: Let’s look at my littleneighbourhood of Leaside where you havelistings now that are not selling in 30 daysanymore.

Brad Lamb: House listings?

Garth Turner: You get the odd one thathappens. One sold last night — it was 999,sold for 1.1 — but that’s because you’rebelow the million price point. You get 1.1 to1.5, that stuff ’s sitting.

Brad Lamb: The reality is, we’ve lived in an

unreal marketplace for eight or 10 years inthis city, and we all got used to it, and it’sjust not real life. So it was like a market onsteroids; the market was cheating. Now thereal guy stands up. He’s not cheating, hedoesn’t run as fast, and that’s the marketwe’re really in. We can’t expect to sellproperties the day they list. You can’t expectto have a lineup of people down the streetshowing it. That’s just not realistic in anycity.

Elise Kalles: And I think it’s healthy in thelong term.

Garth Turner: And you don’t want amarket where you have gains and houseprices that are exceeding gains in householdincome. That will catch up to you. The gap’sbeing made up by debt, and we just getinundated by how much debt people arebuilding up. Again, we’re looking at a coupleof different markets. Elise is talking aboutthe high-end market, which is really unique:small number of sales. In the overall schemeof how many sales in the GTA in the yearthere are, this is one per cent.

Elise Kalles: But housing prices in Canada,Toronto especially, are lower than any othermajor global country.

Garth Turner: We’re not a major globalcity, though, are we? You’re going tocompare us with London and New York?Paris?

Elise Kalles: We’re cosmopolitan. We haveeverything.

Brad Lamb: Well, we’ve changed a lot. Ithink for people that live here, we are.People who live here appreciate what wehave. You travel elsewhere, like Paris andLondon, and Singapore, and these cities, Iwould far rather live here than any of thosecities.

Elise Kalles: I was going to say I haveclients from London, England, that bought a house here. They’ve never been happier.They could never have this kind of house inLondon.

A 2012 Snapshot of Real Estate in North Toronto

AVERAGE 2012 SALE PRICES

Source: Toronto Real Estate BoardA side-by-side comparison of average selling prices in Leaside and Rosedale, by housingtype, for each quarter last year

CONTINUED ON NEXT PAGE

North Toronto’s most expensive 2012 sale: a Rosedale home located on Castle FrankRoad, fetched $605,000 over asking.

The longest an area home sat on the marketlast year: the St. Leonard’s Avenue abodeeventually went for $45,000 under asking.

North Toronto’s least expensive 2012 sale(of a detached home): a residence on RoslinAvenue sold for asking price in one week.

The total number of combined sales inLeaside (215), Lawrence Park (389) andRosedale (294) last year.

898230 days $559,000

Between sensational media reports and contradictorystatistics, it can be hard to make sense of what’s happeningon the ground. Herewith, we bring you the area’s highest andlowest priced homes sold last year, as well as the most daysa house sat on the market and the total volume of sales(Source: Toronto Real Estate Board).

$6.6 million

At $6.188 million, this is one ofthe area’s top-priced listings53 RIVERVIEW DR.Bedrooms: FiveSquare footage: 5,000+Lot size: Approximately 1.2 acresSpecial features: Pool with waterfall, soccer-sized fieldAgency: Chestnut Park Real Estate Limited, Brokerage

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Detached Semi-detached Condo apartment

Leaside Rosedale

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POST: What percentage of your currentsales results in bidding wars?

Barry Cohen: Nothing more than 30 percent.

Elise Kalles: I don’t have bidding wars.

Barry Cohen: Don’t forget, we have generallytwo markets. We have the finished productand we have what everybody called before aphenomenon (which is really not): it’srejuvenation of the older, tiredneighbourhoods. So those homes, the infillhousing we refer to, that’s where you’re goingto see bidding wars, on those older, tiredhomes. For ultimately they want to knock itdown, and you’re competing with buildersand users alike.

Garth Turner: You take a look at the averagesingle-family detached home in Toronto. Itwas $818,000 in 416 in May; now it’s$736,000. That’s a pretty goddamn big drop.

Barry Cohen: But you’re working withDecember. You’re working with the latterpart of the year.

Garth Turner: I know it’s December, but ifyou’re saying, “Oh no, don’t worry, we’regoing back up $80 grand, that’s going tohappen by the spring,” I don’t think it’s there.

Brad Lamb: If you look at the first fivemonths of the year, we had two monthsbreak 10,000 sales, which never happens,ever. So a lot of the sales were done to beatthe new CMHC rules.

Garth Turner: One final point: when yousee sales declining for a significant period oftime — not month over month, but year overyear — that means something when it’scombined with a price reduction. Will thisrecover quickly and just zip back up again?That’s a leap of faith I’m not ready to takebecause I think that the conditions havechanged.

Mathew Rosenblatt: Do you think thatthere’s any difference in the conditions today,like this month, than there were threemonths ago or six months ago, other thansort of psychological ways that purchasersmight be viewing the market? I don’t see anybig real changes happening. If people want tobuy a house for their family, their foreverhouse, not that much has changed.

Garth Turner: I think what Brad referencedis a key point, and I think the injury toaffordability is fairly significant that we saw.And the changes that were made, and themajor changes — amortization dropping,cash-back mortgages are now disallowed andyou’ve got no million-dollar insurance from

CMHC — those are really significantchanges, and I think that they kind ofsqueeze the market like this. You’ve got themillion-dollar-plus listings. Now you have tocough up 20 per cent, plus a land transfertax.

Barry Cohen: They’re all selling well. It’saffected the condo market.

Garth Turner: No, actually, they’re not allselling well.

Barry Cohen: TREB numbers, GTA issitting at 85,000 homes year after year withthe exception of 2007 that went to 93,000,and then 2008 was at 70,000. We’re wherewe’re supposed to be.

Harry Stinson: The more information andstatistics you hear, the less you can figure outwhat’s going on. Everybody’s got a healthylittle statistic that justifies their position. Thereality is, though, that real estate in Torontois still regarded, I think, increasingly, as adecent investment. The stock market, mostpeople haven’t any intention of evenstudying, let alone getting involved in,anymore.

Garth Turner: I agree, but that’s part of thedanger. When you have a society where 70per cent of the people in that society own the

same thing, you’ve got a potentiallydangerous situation.

Harry Stinson: It’s safer to own a house thanto own shares in General Motors or Nortelor whatever.

Brad Lamb: But that’s where the condomarket saves us because the condo market isreplacing apartment buildings, so you don’thave to build a condo and sell it to an enduser. You can sell it to an investor, and asHarry stated, and it’s true, there’s a very goodbusiness in that.… In the condo market,about 5,000 to 6,000 units a year of the25,000 we’ve been selling will find their wayinto the rental market, real rentals, and that’sa good thing. We’re actually decreasing theamount of home ownership and increasingthe amount of home rentals by deliveringcondominiums, so it’s actually working toopposite ends from what you’re talkingabout.

Barry Cohen: What do we have, a vacancyrate of less than 1.7 per cent?

Elise Kalles: Less than one per cent.

Harry Stinson: There’s a change in people’sattitudes toward renting an apartmentdowntown. It’s a practical, viable thing.

REAL ESTATE ROUNDTABLESPRING MARKET 2013 CONTINUED

Clockwise from top left: Brad Lamb; the roundtable panel (l-r): Harry Stinson, Barry Cohen, Garth Turner, Brad Lamb, Elise Kalles, Paul Miklas and Mathew Rosenblatt; and Elise Kalles, far right

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Elise Kalles: There’s a lifestyle buying acondo today. I bought a little tiny apartmentat the King Edward Hotel because, forsentimental reasons, when we were married,it was very special — there’s no lobby likethe King Eddie. I closed on it yesterday.They have a workout room, they haveeverything, they have a club floor like in thefinest hotels. All that comes with it. It’s 750square feet.

Brad Lamb: How much did you pay for it?

Elise Kalles: $479,000. I didn’t upgradeanything.

Paul Miklas: Look at the condos, look atthe hotels that are being revitalized, andlook at all these young kids actuallygraduating from school. They can’t affordsomewhere to go, and they want to work inthe Financial District, and they have anopportunity to go to foreign investors. Theydon’t want a house, and they don’t want tolive north of Newmarket. They want to beright in the city where they can build theircareers and go forward, and this is actuallywhat the condo market is providing.

POST: What are some of the best areas ofour neighbourhoods to buy into rightnow?

Mathew Rosenblatt: Forest Hill,Rosedale… places where people with themoney, if they want to live in an area, havethe ability to pay 10 per cent, 20 per cent,30 per cent more. If you’re on a salariedposition, even if it’s a good area, you willhave [price] ceilings. These other areas,there really aren’t ceilings.

Paul Miklas: Banbury, which is right acrossfrom Edwards Gardens — you’ve got theDVP and 401 close by, you’ve got the DonMills mall, you’ve got great schooling. Allthe amenities are right there. If you’researching to upgrade to a second home, findsomething there that you can do a fixer-upper on. Stay there because the communityis fantastic. That’s where I would go.

Garth Turner: I would take a slightlydifferent approach. I don’t think it’s somuch the neighbourhood if you’re lookingfor best value.

Paul Miklas: That’s the best value. That’swhy I’m there, that’s what I do all day long.I start with value, then I go to amenities.

Garth Turner: The actual physicalneighbourhood is somewhat irrelevantbecause we all know what the goodneighbourhoods are. What is moreimportant is where people can find value. Ithink the biggest change in that regard isthe one we talked about a little while ago,which is CMHC now withdrawinginsurance for properties over a milliondollars, and that’s now where you’re going tosee the best value. From a million to amillion four to a million five you’re going tosee much better value there —

Paul Miklas: Welcome to Banbury.

Garth Turner (continues): than you wouldhave prior to last year. I think there’s astrong economic argument there becausethose buyers are under pressure. Theowners, the vendors right now, they’re underpressure, and they’re under pressure becauseof that move. You may not think it, but yougo into a Leaside or Bennington Heights orMoore Park — the number of people whoactually bought in there, over the last fewyears with five, 10, seven, eight, nine percent down? Significant. They’re gonebecause CMHC won’t give them mortgageinsurance.

Harry Stinson: But if they’re there now.

Garth Turner: No, I mean those new buyers.

Harry Stinson: But you’d have that samesituation of, do they have to sell? They areliving there, they don’t have to sell.

Garth Turner: There are always people whohave to sell.

Mathew Rosenblatt: Is the question, what’sthe best value or where should you beinvesting?

POST: What neighbourhoods offer themost value?

Barry Cohen: I think it’s harder even as areal estate practitioner to pick the nextneighbourhood or the neighbourhood, but Ithink, if you look at the trends, because youguys in the condo development are in there,you look at these tired neighbourhoods likewe talked about before: homes that are onbig lots, well situated. Those homes, becausethey’re in the GTA, they’re under pressure.God’s not making any more land. Let’sknock them down, let’s build them, andthen you’ve got theDistillery District.

Mathew Rosenblatt: Thatmight be the best value inthe city.

Full disclosure: Rosenblatt isthe creator of the DistilleryDistrict.

Barry Cohen: You were saying it. AndLeslieville, look at the Beaches, theirborders are expanding. I’ll give you anexample: like Don Mills — that area you’vegot great shops, highway access, old, tiredhomes — there’s an opportunity a little bitlike what Paul was saying on Banbury.…Bathurst and Sheppard — that’s the sameold thing. If you follow that practice all theway through the city, you’ll find yourneighbourhood that is tired and ready torock and roll.

Paul Miklas: You’ll get in at the bottomand you’ll enjoy the lifestyle surrounding it.

Mathew Rosenblatt: All of these

neighbourhoods are in generally equaltransition. I would look at concentric circles from the core, and the closer you’re going tobe to the core, especially in the future of thisgrowing city, with growing traffic, expensivegas, people want to live downtown. That’swhy they are buying the condos. But if youwant to buy a house, and you want to beclose to the core, it’s going to cost you a lotof money today and it’s going to cost you afortune tomorrow because there are only somany houses that are downtown. Peopledon’t want to commute, and you’re going tohave a big population fighting over a verysmall stock of houses.

Brad Lamb: Houses will rise more vis-à-viscondos because you cannot add a singlehouse in the city of Toronto. You can builda few townhouses here and there. So you’llsee house prices rise more than condoprices, except in pockets like perhapsYorkville because we can add more stock tocondominiums for a while, but you can’t addany more houses in Rosedale. It’s fixed. Ifyou want to buy a house in Rosedale, thereare more people that want them now than10 years ago, and 10 from now, there aregoing to be more people who want themthan today.

Mathew Rosenblatt: The proximity to thecore will also, in part, be relative to how fastthe prices will go up over time.

Paul Miklas: Picture a nucleus and thendraw rings around it. The closer you are tothe nucleus, the more it’s going to cost you.The further you get away, it’s more traveltime and it’s less money.

Elise Kalles: The Annex has gone up morethan any area.

Brad Lamb: It’s sort of affordable. It’s notmulti-million dollars. You can buy a house

there for a million something, and it’s rightdowntown.

Elise Kalles: It’s like being near FifthAvenue, but not being right on it.

POST: Fast-forward a few months —where is the market a year from now?

Brad Lamb: I think we’re going to be in asimilar position to what we are now. It stillprobably will be considered a seller’s market,but I think it will be a more balancedmarket. Prices will rise slightly overall,volumes will probably drop, new condo saleswill be down — probably 14,000 units in 2013 — and I bet you we do less than

80,000 in resales from 85,000.

POST: Will condo prices rise as well?

Brad Lamb: I don’t think condo prices willrise. They may fall slightly, but we’re at $600a foot. I think that’s where we should be forright now for the market. You can still buy asmall condo, put 25 per cent down and rentit and make positive cash flow, so that kindof protects the price at $600 a square foot. Idon’t think we’ll see a big increase fromthere this year, but long-term, prices are goingup in Toronto.

Barry Cohen: I generally agree with Brad. Ithink that this year will be much like lastyear. I think it will be just as hot in thespring market, and I think it will level off inthe fall market, and I don’t think that thecondos will be as big a story as they have beenin the past year, and the rates will stay low.

Harry Stinson: I think the story is going tobe that there isn’t a massive collapse of thecondo market: that it sort of stabilized andsales went down, but that it wasn’t the endof the world and people weren’t bailing outand there were thousands of listings outthere, and that they continue to be rentedand people are sitting on them.

Paul Miklas: I think it’s going to be asteady ship, the waters are good, smoothsailing. Maybe a one per cent gain, possiblytwo per cent on the homes side and on thecondo side, I agree with Brad. I actuallythink it will just be a flat line. I don’t thinkthere will be any gains, any losses on that side.

Mathew Rosenblatt: Flat or slight increaseon housing, and new condominium sales Ithink will be way down just because I thinkthere will be way less product. I think thatthe downtown condo market overall will bedown slightly, but not anything material.

Garth Turner: There’s little doubt 2013 willbe a year of transition for Toronto realestate. The media will still be pumped onthe occasional multiple-bid story and indenial over changing conditions, and thatmay mask things for many people. But thetruth is, new housing starts, condo projects,building permits and investor confidence areall on the wane. Economic growth will betepid and unemployment creeping higher.In other words, the conditions are ripe for aweaker market in the spring of 2014 thannow. We should expect lower average prices,flat-lined sales and the cancellation of scoresof new residential towers.

WE SHOULD EXPECT LOWER AVERAGE PRICES,FLAT-LINED SALES AND THE CANCELLATION OF

SCORES OF NEW RESIDENTIAL TOWERS.GARTH TURNER