Lately, I’ve received a few questions about investing in Toronto real estate from friends and clients. Because the Toronto skyline is continually expanding (and sometimes making headlines), it’s natural to wonder if a secondary property as a long-term investment is a good idea.

As an investor in real estate myself, I say: yes. But like with all major purchases in life, you can’t just jump in with eyes wide shut. Here are the four rules to buying smartly that I live and die by:

1. Buy small. One bedroom or one bedroom plus den units are what I’m talking about. The ideal size for rental condos is between 450-650 square feet. They are the most easy to rent and you typically get the least amount of vacancy. You will likely rent it to a single person or a young couple. Two bedrooms or more will get you roommates, which can be more difficult to manage. These types of properties are also popular with young professionals who are just starting out in their careers and are looking to live and work in downtown neighbourhoods.

2. Buy cheap. Your best return for your money is better on smaller and cheaper condo units. Your other associated costs are lower as well, such as maintenance fees, mortgage and property taxes. The ideal price range for an investment condo is around 300,000 or, if possible, even lower. This price range is achievable in certain area of the city and not possible in most parts of downtown.

3. Buy location. For investment purposes, the best area to buy would be “up and coming” areas rather than established neighbourhoods. I personally prefer to buy in areas/buildings where there aren’t a lot of other investors, so there will be less competition for renters and the building will likely be better maintained in the long run because there are more owners rather than renters. I like up and coming neighbourhoods like West Queen West, Dundas West, Dufferin Grove, Leslieville and Corktown, just to name a few. Most of these areas are in the fringe part of downtown and I see a lot of upside potential. I prefer them to the downtown core where prices are already quite high.

4. Buy unique. Personally, I prefer to invest in smaller, more boutique-style buildings. I tend to stay away from high rises. Smaller buildings are always more desirable and tend to hold their value.

For more on new developments, visit our sister site, www.newcondosalescentre.com.

Blake wasn’t the only one to fall in love with this sophisticated loft in west Toronto — we admit, we did too. Here’s how Blake landed this awesome (and temporarily) bachelor pad.

For more, visit www.howedwardhelps.ca.

The cranes are up! Here’s what else is happening at EDGE on Triangle Park, the latest and greatest in the Art & Design district.

Greetings from 48 Abell Street, the future home of EPIC on Triangle Park. Here’s what’s happening right now.

The Toronto market received another boost in average prices as March wound to a close. While the close of February saw average prices hit the half million mark throughout most of the Greater Toronto Area, prices showed no signs of receding. Historically, March through to June continue to be some of the busiest months in the spring/summer real estate market.

Comparably, March’s $504,117 average is a 10.5% jump in comparison to March 2011. Blame the low interest rates or the lack of inventory on the market but it’s clear: buyers are still out there, and they’re hungry.

Many real estate forecasts — which were, for the most part, written at the end of 2011 — called for low to moderate gains in average sale prices. The heated market has already prompted some housing corporations, like the Canadian Real Estate Association, to modify its predictions for the year.

The amount of new listings for sale has improved from 2011, but it remains well below the expected amount for a balanced market.

As Jason Mercer, the Toronto Real Estate Board’s Senior Manager of Market Analysis points out, “if competition between buyers remains as strong as it is right now, we will almost certainly see an average selling price above $500,000 for 2012 as a whole.”

View our April newsletter

Quick hits:
- detached homes continue to be the top money-gainers in Toronto and Mississauga, with a combined average of $631,509; detached homes in Mississauga rose to an average price of $816,169, up 13 per cent from 2011
- in Mississauga, condo townhomes fared the best, with an average selling price of $378,614, marking a 17 per cent gain from last year
- the number of condominium sales in the Toronto market is down two per cent from 2011
- similarly, Toronto semi-detached homes are also down three per cent from last year, and condo townhomes are down seven per cent
- in the market for a new home? Here are five Toronto real estate hot spots (Moneyville)
- be aware of that “basement apartment” on a listing (The Toronto Star)
- are you a bit of an architecture geek? Then you might want to check out the annual BILD awards and vote in their People’s Choice category; the winner will be announced on April 27

…comes Suite 204 at Camden Lofts — the perfect complement to any urban dweller who loves to spend his or her summers enjoying the great outdoors on a 700+ square foot private terrace. Not to mention that the interior, with its polished concrete floors, towering ceilings, and enormous warehouse-style windows, is pretty nice to boot.

If you’re in the Queen & Spadina area, come join us for the open house this weekend, March 31 and April 1, from 2:00 to 4:00 PM. For more information on this sleek loft, click here.

…and here are some ways that you, as a home owner, can be prepared.

MOVING FOR WORK. You can claim expenses associated with moving for work (granted that you are within 40 km of the new work location). This can include real estate commissions, penalties for breaking a mortgage, and even your temporary living accommodations. But be diligent: claiming large amounts like this will most likely end up with a friendly audit from your local tax man.

PRINCIPAL RESIDENCE. With real estate prices going up markedly, you’ll breathe a sign of relief to know that any increase in value of your principal residence is tax exempt. If you own more than one property, you may still be able to qualify the others as a “primary property” by living in each for a couple of days out of the year. Keep in mind, though, that you may only claim one primary property per year. If you are in the business of “flipping” homes, though, you’ll probably be out of luck.

EXPENSES. Mortgage interest, property taxes, utilities, repairs, and landscaping may be claimed for a partial deduction if your primary residence houses a home-based business or earns income through a tenant.

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With the average price in Toronto reaching over $500,000 in February (consider that in February 2011, the average price of a home in Toronto was $454,423), it might be curious to hear that a recent study conducted by The Royal Bank of Canada found that housing affordability in Canada is improving.

By definition, “affordability” is the percentage of pre-tax income needed to pay costs associated with owning a home, such as mortgage, taxes, and utility bills.

In its March 2012 study, RBC concluded that in the last quarter of 2011, affordability improved across all housing types, especially in the two-storey home category. The Housing Trends report also found that “for the majority of markets across Canada, the level of affordability is now close to where it was a year ago (within 1 or 2 percentage points) and to the long-run average.”

In Ontario, affordability for all housing types “fell modestly between 0.2 and 0.3 percentage points in the fourth quarter,” though Toronto still continues to bunk the provincial norm. Owning a two-storey home takes roughly 61.3% of a typical household income, while a detached bungalow will take 52.2%. Condos, on the other hand, are “more affordable” at 33.9%.

How does Toronto rank among Canadian cities? Well, we might be number one when it comes to die-hard hockey fans or questionable mayors, but we’re only second when it comes to the highest affordability rate. Vancouver — unsurprisingly — has us beat, with an average bungalow taking up 86% of pre-tax income. Ottawa (roughly a little over 40% for a two-storey home), Montreal (“the area posted some the bigger improvements in the country for the second consecutive quarter, with the RBC affordability measures falling between 0.7 and 2.0 percentage points”), and Calgary (roughly 35% for a two-storey home) round out the top five cities.

Gregory Klump, Chief Economist at the Canadian Real Estate Association, says that low interest rates continue to be the “silver lining” in the Canadian housing market, though the RBC study stresses that “contrary to previous quarters, steady mortgage rates in the closing months of 2011 were a negligible factor behind the latest movement in affordability.” Rather, softening home prices and income gains are playing an integral role in improving affordability.

Download the RBC Housing Trends and Affordability Report here.

It was only a matter of time before average home prices in the Greater Toronto Area hit the $500,000 mark: in February, average prices jumped to $505,508, up from January’s $499,045 number and 10.8 per cent higher than February 2011′s posted average.

The number of sales and new listings also enjoyed a robust jump from the previous year. 7,032 sales were reported for February (up 16.1 per cent from 2011), along with 12,684 new listings (up 11.2 per cent from 2011).

The upward pressure on average sale prices can, in some part, be explained by the lack of inventory on the market, which can foster an environment of bidding wars and multiple offers. “Price growth will continue to be very strong until the market becomes better supplied,” said Toronto Real Estate Board President Richard Silver.

Jason Mercer, the Board’s Senior Manager of Market Analysis, concurs, adding that “if tight market conditions continue to result in higher than expected price growth as we move into the spring, expectations for 2012 as a whole will have to be revised upwards.” Mercer refers to the slew of market forecasts (CMHC, BMO, and the Canadian Real Estate Association among them) have predicted a modest rise in prices — far lower than what we have been experiencing in the past twelve months. These analysts are also predicting a “correction” in the market as prices stabilize in 2012 and 2013.

View our March newsletter

Quick hits:
- in February, prices of detached homes in Toronto rose 13 per cent from 2011, coming in at $818,815
- semi-detached and attached homes in Toronto also enjoyed large gains, with average prices at $585,325 and $432,493 respectively
- average days on market for the GTA dropped 10 per cent, with homes selling in about 24 days
- homes priced between $300,000-$399,000 were the popular choice for buyers in February, with 1680 sale recorded in the GTA (including 559 detached homes and 530 condo apartments)
- homeowners, brush up on the rebates before filing your taxes (Canada Revenue Agency)
- home ownership: headaches and tax breaks (The Globe and Mail)
- bought a home in 2011? Read up on refunds for first-time home buyers (Government of Ontario)

Bank of Canada Governor Mark Carney recently spoke at the U.S. Monetary Policy Forum in New York, and opened his speech with an declaration that:

price stability does not guarantee financial stability… [The Bank of Canada has] consistently pointed out that low, stable and predictable inflation can feed complacency… Indeed, risk appears to be at its greatest when measures of it are at their lowest. The tendency to overreach is particularly marked if there is a perceived certainty about the stability of low interest rates. In short, complacency can lead to extremes and, ultimately, crisis.

Carney’s introductory overview was no news to us: the Bank of Canada has long been apprehensive about prolonged low interest rates and high housing inflation, especially in some Canadian markets. As house prices continue to rise amidst historically interest rates, some are starting to wonder if Canadians are living beyond their means.

While The Bank of Canada is set to keep interest rates low for the foreseeable future, a recent TransUnion survey brings about good news.

The study, which looks at non-mortgage debt trends, found that average credit rose to $25,960 (up 1.4 per cent from 2010) in the last quarter of 2011, the only anomaly in an otherwise flat year. This is also in line with the holiday spending, which always sees a slight increase in average consumer debt.

Despite the rise in the last quarter, debt as a whole only rose by one per cent in 2011, the lowest annual rate since 2004.

Before Canadians start patting themselves on the back, it should be noted that Statistics Canada has reported that an average household now carries about 153 per cent more debt than its annual disposable income — with roughly 70 per cent of that going to mortgage loans.

The silver lining: although debit levels have risen, delinquency levels continue to remain low in Canada.

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