26 Oct

Toronto real estate readies for another boom

General

Posted by: Iko Maurovski

Toronto real estate readies for another boom

Toronto real estate is set for another boom in the near future.

Thanks to the city’s flourishing tech sector, Ron Sally believes the city’s condo market is going to catch fire.

“Our tech industry in Toronto is about to explode,” said broker of record and owner of REMAX Millennium Real Estate. “It’s been slowly climbing up the ranks; it hasn’t reached its peak yet but it’s about to come out into the open. It’s currently ranked number two in North America and number four in the world.”

That Toronto’s financial sector is ranked third in North America could also provide a glimpse into what is to come.

“As of 2017, the ranking is number 11 globally for the financial sector,” he continued. “What this means is that in the world, Toronto is the eighth-most livable city and our job sector is going to grow, as well, in the next few years. Toronto’s condo market is undervalued, so whoever can get a piece of Toronto real estate should do it while it’s still available.

“Our transportation system is being improved—the city is changing implementation,” said Sally. “A lot of changes are going to turn this into a global city. Right now everyone knows where Toronto is. We had 28,900 new tech jobs created in Toronto, and that’s more than the San Francisco Bay Area, Seattle and Washington D.C. combined.”

Major players in the tech industry are setting up shop in the city, including Microsoft, Uber, Shopify, Airbnb, and Google Sidewalk Labs. Moreover, a slew of new jobs in the sector will be created and Sally believes that will have an impact on condo valuations, believes Sally.

Coupled with the fact that new tech sector jobs will be created in the years ahead, and the fact that supply already lags well behind demand, Toronto condo valuations are on pace to surge.

“Downtown on King St., condos are selling for $1,500 to $1,600 per square foot; Pemberton is also selling one at $1,200 per square foot,” said Sally. “Things are slowly changing and those who see the big jump coming in the next two or three years understand it’s the same jump we had in 2014 and 2016. We have one million immigrants entering Canada in the next three years.”

Toronto-based Daniel Johanis, a Rock Capital Investments broker, has noticed the influx of tech talent into the city and says it will be good for the city.

“I’ve got three clients right now working in tech, one of whom is in bitcoin, and they found me online. All three are young, under 30, and ready to jump into the market. They’re in the market in the city for the long haul. If we see an influx of people here because jobs are here and they’re looking to settle down, that’s great for the prosperity of the city.”

Your Interest is my Only Interest

 

9 Oct

CASH BACK AND DECORATING ALLOWANCES ON NEW BUILD OR PRE-SALE PURCHASES

General

Posted by: Iko Maurovski

As the market shifts, developers will increase their incentives to buyers with cash back and decorating allowances on new build or pre-sale purchases. It is very important to review those options with your real estate agent representative and vital to consult with your mortgage broker. Although these offers may seem attractive, they can impact your financing and could cost you thousands of dollars.

Before you write a contract on a new build or pre-sale, ensure you have set up your team including a real estate agent and mortgage broker. Always consult with them to ensure you have sound advice. Do not rely solely on the developer’s sales representative.

What happens when you sign a contract on a pre-sale?

When you visit the sales centre for the pre-sale and decide to write a contract you have a rescission period where you can back out of the purchase. The contract you sign is drafted by the sales centre and once you remove any conditions, you are locked into the purchase. Therefore it is essential you have your real estate agent with you at the time of signing or at a minimum, they review the contract. It is in your best interest you fully understand the terms, the disclosure statement, what you are buying, schedule to build, GST, deposit schedule and any incentives.

Once you remove any conditions, the deposit is paid to the developer and a schedule set for all other deposits till the building is complete. Those total deposits are typically 20% of the purchase price. That is money you will not receive back if for any reason you are unable to proceed with the purchase. Some contracts allow assignment to another buyer, but those must be approved by the developer and may come with restrictions. Your realtor can guide you on these matters.

How Will Cash Back or Decorating Allowances Impact Your Purchase?

When the market slows, developers will use incentives such as cash back and decorating allowances on new build or pre-sale purchases as a strategy to increase sales. Regardless if this is a cash back or a rebate for decorating, it will have an impact on the purchase price for the lender on the financing. This is a common misconception among buyers and even realtors who do not understand the process from a financing perspective.

For example: A purchase price plus GST is $800,000. The developer is offering a $20,000 decorating allowance. The lender will automatically deduct the $20,000 from the purchase price. Your new purchase price will be $780,000 for financing purposes. This does not change the actual purchase price. You still have to pay the developer $800,000 for the home. The lender will lend on the $780,000 only. Therefore you must pay in cash at the time of funding the $20,000 difference.

The developer has sold you the idea you are receiving decorating upgrades of $20,000. You are receiving the value of that allowance BUT make no mistake you are paying for it.

If the incentive is a cash back amount in the above example, you will receive the cash back from the developer at the time of completion. However, the lender will still only offer financing on the lower value minus the cash back amount.

 

Your Interest Is my Only Interest

Iko  M.

647-200-0723