[Admiral Beez]

Toronto-area home sales surge 40% in November as prices start to edge up​

And now we’re down?

‘New home buyers are nowhere to be found.’ Toronto-area January new home sales near ‘record low’ despite excessive inventory, falling prices

Buyers continue to wait on the sidelines hoping the Bank of Canada will cut interest rates further.

www.thestar.com

Paywall free: https://archive.is/ukwPl

It’s not that hard developers. Make what the market wants at prices it is both willing and able to pay.

 

[Undead]

Edit: the article you posted refers to new home sales. Those have been in the shitter because of interest rates.

The November article is about resales which have been trending upward as the BOC cut rates. But falling again recently because of the tariffs uncertainty.

 

[Admiral Beez]

This condo investor is being sued for $860,000 for failing to close. He’s one of dozens facing lawsuits as default rates soar

He’s one of dozens of buyers facing lawsuits as defaults soar as high as 30%.

www.thestar.com

Paywall free: https://archive.is/QglDU

Or, how about you buy residential real estate that you can afford, to live in yourself, for the long-term rather than as an investment?

 

[evandyk]

That article reads like satire.

 

[afransen]

Mark Mitchell has been covering the practice by big banks to apply 'blanket appraisals' for new condos closing, where properties are valued at the pre-sale price and not their current market value.

 

[Northern Light]

Regular UT readers will know I have strong opinions on the subject of pre-construction sales of condos.......... as in, I think they should be illegal.

My take is that they are directly linked to catering to investor preferences of small 'shoebox', low-cost units, as well as the practice of watered-down, VE'd renders. Where one says one thing to make sales, and then does another to lower costs once one has secured said sales; something I continue to feel should be treated as bait and switch fraud.

Well.........in today's Star, I see a major developer, Devron, coming out with the same view.

Many cities around the world sell condos only after they’re built. This developer says Toronto needs to do the same

Many cities around the world sell units only after they’re built, ‘which is better for the whole ecosystem’ and leads to ‘high-value and quality, end-user homes.’

www.thestar.com

I'd be interested to hear @ProjectEnd 's take on the above......... and @ADRM 's

 

[adys123]

Regular UT readers will know I have strong opinions on the subject of pre-construction sales of condos.......... as in, I think they should be illegal.

My take is that they are directly linked to catering to investor preferences of small 'shoebox', low-cost units, as well as the practice of watered-down, VE'd renders. Where one says one thing to make sales, and then does another to lower costs once one has secured said sales; something I continue to feel should be treated as bait and switch fraud.

Well.........in today's Star, I see a major developer, Devron, coming out with the same view.

Many cities around the world sell condos only after they’re built. This developer says Toronto needs to do the same

Many cities around the world sell units only after they’re built, ‘which is better for the whole ecosystem’ and leads to ‘high-value and quality, end-user homes.’

www.thestar.com

View attachment 650736

I'd be interested to hear @ProjectEnd 's take on the above......... and @ADRM 's

Paywalled for me, but was curious if they explained how other cities do it. I think it would be great to buy a fully completed product.

 

[ProjectEnd]

Regular UT readers will know I have strong opinions on the subject of pre-construction sales of condos.......... as in, I think they should be illegal.

My take is that they are directly linked to catering to investor preferences of small 'shoebox', low-cost units, as well as the practice of watered-down, VE'd renders. Where one says one thing to make sales, and then does another to lower costs once one has secured said sales; something I continue to feel should be treated as bait and switch fraud.

Well.........in today's Star, I see a major developer, Devron, coming out with the same view.

Many cities around the world sell condos only after they’re built. This developer says Toronto needs to do the same

Many cities around the world sell units only after they’re built, ‘which is better for the whole ecosystem’ and leads to ‘high-value and quality, end-user homes.’

www.thestar.com

View attachment 650736

I'd be interested to hear @ProjectEnd 's take on the above......... and @ADRM 's

I'd agree with all of that, however I think the ire is a bit misplaced as developers would (I think) mostly agree that presales thresholds lead to shittier units and a higher proportion of investors over end-users. The real enemy here are banks and lenders. Canada's banking culture is extremely conservative and risk averse and it's they who uphold the 70-75% presales requirement. Because you need to meet these targets in a compressed timeline, we end up pushing the stuff that moves quickest - small units to investor buyers at the highest PSFs - and everyone else suffers.

 

[Toronto Rocks]

I'd agree with all of that, however I think the ire is a bit misplaced as developers would (I think) mostly agree that presales thresholds lead to shittier units and a higher proportion of investors over end-users. The real enemy here are banks and lenders. Canada's banking culture is extremely conservative and risk averse and it's they who uphold the 70-75% presales requirement. Because you need to meet these targets in a compressed timeline, we end up pushing the stuff that moves quickest - small units to investor buyers at the highest PSFs - and everyone else suffers.

We love how conservative the banks are when we hold them in our Mutual Funds but hate them when we are customers.

 

[ADRM]

Regular UT readers will know I have strong opinions on the subject of pre-construction sales of condos.......... as in, I think they should be illegal.

My take is that they are directly linked to catering to investor preferences of small 'shoebox', low-cost units, as well as the practice of watered-down, VE'd renders. Where one says one thing to make sales, and then does another to lower costs once one has secured said sales; something I continue to feel should be treated as bait and switch fraud.

Well.........in today's Star, I see a major developer, Devron, coming out with the same view.

Many cities around the world sell condos only after they’re built. This developer says Toronto needs to do the same

Many cities around the world sell units only after they’re built, ‘which is better for the whole ecosystem’ and leads to ‘high-value and quality, end-user homes.’

www.thestar.com

View attachment 650736

I'd be interested to hear @ProjectEnd 's take on the above......... and @ADRM 's

I mean, it's a very conceptual argument because "Toronto should shift how it finances condos" is literally just the choice of major lenders. The risk profile of financing condo via pre-sales and financing rental are drastically different, which is one of the reasons why there is a much more limited realm of lenders for the latter model (and also why CMHC is far and away the largest lender-insurer of multi-family rental housing in the country).

A recommendation to move away from the extant condo funding model is tantamount to asking the major lenders to make dramatic changes to their lending practices, which is just not a thing that really happens in any formalized way.

 

[Northern Light]

I mean, it's a very conceptual argument because "Toronto should shift how it finances condos" is literally just the choice of major lenders. The risk profile of financing condo via pre-sales and financing rental are drastically different, which is one of the reasons why there is a much more limited realm of lenders for the latter model (and also why CMHC is far and away the largest lender-insurer of multi-family rental housing in the country).

A recommendation to move away from the extant condo funding model is tantamount to asking the major lenders to make dramatic changes to their lending practices, which is just not a thing that really happens in any formalized way.

I take your point; but inquire as to why all these other places Devron listed do it differently.

Citing one or two may play easily to an assumption of the a more conservative lending culture vs the other markets.

But are we really that more conservative vs most other markets?

If so, why?

 

[ADRM]

But are we really that more conservative vs most other markets?

Yes, Canadian banks are known the world over for being conservative -- and I say this as a reformed/recovering Canadian banker -- to the point where they're considered something of a laughingstock, particularly by American and British bankers. As others have pointed out, that meant that our banks were an international safe haven during the 2008 financial crisis, but this thread is the flip side of that benefit.

 

[lenaitch]

As others have pointed out, that meant that our banks were an international safe haven during the 2008 financial crisis, but this thread is the flip side of that benefit.

Was that a result of our level of banking regulation or a culture of small-c corporate conservatism (or both)?

 

[ADRM]

Was that a result of our level of banking regulation or a culture of small-c corporate conservatism (or both)?

Certainly up for debate, but personally I think it's a bit of both but much more the latter. But there is a flip side: a combination of some of our banking regulations and that conservative corporate culture are what saved our banks from the worst of the sub-prime mortgage crisis and financial institution contagion that disappeared or nearly disappeared a number of US companies (Lehman Bros, Bear Stearns, Merrill Lynch, AIG, Citi, Wachovia, Washington Mutual) and threatened the collapse of the global financial system.

For example, our banks did not engage in prop trading (betting their own money rather than their investors' money) to the same extent as US banks, and were permitted by law from using client deposits to fund prop trading activities; insanely, US banks were not prohibited from doing so, as a result of the mid-80s deregulation regime. After the crisis, the Dodd-Frank legislation made this illegal again in the US.

So that's about regulation. But Canadian banks technically were permitted to engage in some of the risky financial instruments that also contributed to the collapse of those aforementioned companies, namely CDOs (collateralized debt obligations, which packaged shitty mortgages and other bad investments in a larger financial product that was then given a higher credit rating than its underlying investments), but chose not to at scale.

So, to tie it all together, we should all be generally thankful that Canadian banks are as conservative as they are, at least when times are tough, but it also means that we aren't going to see a widespread change to the way they finance multi-family residential building construction anytime soon.

 

[Northern Light]

Certainly up for debate, but personally I think it's a bit of both but much more the latter. But there is a flip side: a combination of some of our banking regulations and that conservative corporate culture are what saved our banks from the worst of the sub-prime mortgage crisis and financial institution contagion that disappeared or nearly disappeared a number of US companies (Lehman Bros, Bear Stearns, Merrill Lynch, AIG, Citi, Wachovia, Washington Mutual) and threatened the collapse of the global financial system.

For example, our banks did not engage in prop trading (betting their own money rather than their investors' money) to the same extent as US banks, and were permitted by law from using client deposits to fund prop trading activities; insanely, US banks were not prohibited from doing so, as a result of the mid-80s deregulation regime. After the crisis, the Dodd-Frank legislation made this illegal again in the US.

So that's about regulation. But Canadian banks technically were permitted to engage in some of the risky financial instruments that also contributed to the collapse of those aforementioned companies, namely CDOs (collateralized debt obligations, which packaged shitty mortgages and other bad investments in a larger financial product that was then given a higher credit rating than its underlying investments), but chose not to at scale.

So, to tie it all together, we should all be generally thankful that Canadian banks are as conservative as they are, at least when times are tough, but it also means that we aren't going to see a widespread change to the way they finance multi-family residential building construction anytime soon.

How would you approach the idea that larger institutional developers (pensions funds, insurance companies etc.), as well as any large, properly capitalized landlord could simply put up a greater portion owner's equity towards building?

From the point of view of a bank, even if only 40% we're owners equity, that should make a mortgage a pretty safe play, assuming proper underwriting.