Yesterday’s blog allowed us all to re-live some of TRB’s finer moments in 2015, for better or for worse.

If I were a reader on this site, just having discovered it, I might think there’s a lot of different themes, and a lot of different opinions on subject material, via the comments section of each blog.  That’s what I enjoy the most about TRB, even if I’m on the receiving end of criticism!

Today, let’s take a look at the Top-5 real estate stories of 2015, chosen by me, but I assure you it’s only after combing through 140-some-odd blogs and noticing “themes” in the content.

If you feel I’ve missed anything, please comment below!  Enjoy!

How in the WORLD do you come up with the Top-5 real estate stories in a year that was so jam-packed with content?

I’ve spent the last four days re-reading all of my blogs, and many of them elicited an “oh yeaaaah…” as I was reintroduced to a story I had completely forgotten about!

What a year.

And I say that with equal amounts of positivity and negativity, as evidenced by some of the stories you’ll read below.

Real estate is, and will continue to be, the hottest topic of discussion in Toronto.  No matter where I am, people want to talk about real estate, and it’s not because they know I’m in the business.  It just continues to be a hot topic, every day, every week, every year.

So here are the top five stories of 2015, as I see them…

5) Urbancorp “Stealing” Their Condos Back

Maybe this story flew under the radar a little bit, but it really shouldn’t have.

Trump Towers has received a ton of media coverage over the last few years, and yes, they have issues.

But what happened with Urbancorp should have received far more press.  It should have been one of the top stories of the year, and yet, it faded away within a couple of weeks.  What happened with Urbancorp was a microcosm of all that is wrong with how pre-construction condos are marketed, sold, built, and closed, in the Province of Ontario.

Folks, I’ve been singing this tune for better part of the last decade, and while more and more people are starting to listen, there are still naive, uninformed buyers with dreams of getting rich quick, who walk into condo sales centres, with their flashy VIP events, represented by either the developer’s agent (who of course, only pushes the developer’s best interests), or a Realtor who is chasing 4% commissions, and/or doesn’t have the experience, knowledge, expertise, or conscience to simply tell the buyer it’s a bad idea.

What happened with Urbancorp in January of 2015?  In a nutshell: they cancelled a project that was nearing completion, after holding deposits since 2011, and gave the buyers their deposits back.

In essence, they sold condos to buyers back in 2011, and as the prices of real estate and condos increased through 2011, 2012, 2013, 2014, and into 2015, somebody at Urbancorp had the bright idea to say, “Why don’t we just keep these condos for ourselves?”

And that’s exactly what they did.

Sue Pigg covered the story in the Toronto Star HERE.

I wrote a blog about this HERE.

Urbancorp can say all the right things.  They can say that the “project wasn’t viable,” or that they couldn’t get construction financing, or that they were “exercising this right, or that right.”

But if you read between the lines, Urbancorp “borrowed” money from buyers in the form of deposits back in 2011, used that money to finance the project, and then as the project neared completion, and all those condos were worth more than they were in 2011, they simply stole them back.

Urbancorp could now sell the whole building to a REIT, or keep the units as rentals, or, amazingly, they could complete the project, and re-sell them as condos!

I’ve been saying for years that Urbancorp is one of the worst developers in the city of Toronto.  Their “West Side Lofts” on Sudbury Avenue was an absolute, almost-decade-long, debacle.

I always figured that one day, they’d get their due.

The story about the cancelled “King’s Club Condo” was the start of a few months of negative media coverage for Urbancorp.

They also received bad press about their Val Homes project in Etobicoke in January, and again in June when they were holding buyers’ deposits that should have been returned.

In the end, however, there are enough people in this city who are so desperate to “get rich quick” that they’ll ignore the results of a simple Google search, and plunk down money for this awful developer’s next project.

I had hoped that this story would start some sort of inquiry into how pre-construction condos are sold in Ontario, or maybe a re-working of the now-outdated Condominium Act of 1997.  But does any member of Provincial government really care?

It’s sad when we need to enact legislation to protect naive consumers from themselves.

4) Real Estate Commissions

I told a friend that I was going to include this on my list, and he said, “Why would you advertise that this is even a topic of discussion?  Why would you put this out there?”

Well, I already put it out there, several times, in fact.

I blogged about it in January, and the topic produced seventy comments from blog readers, and an exceptionally lively debate.  You can read that article HERE.

In that blog post, I talked about my experience with discount and part-time agents, and gave real-life examples of how awful those Realtors are, and how much money they cost their clients.

In the end, some readers will listen to what I’m saying, and some will not.  It’s only natural for the vote to be split, but as we all know, those who disagree with just about anything in life will be the loudest, and any time I write about real estate commissions on my blog, the outpouring of hate runs deep!

I don’t blame consumers for feeling that real estate commissions are high.  But it’s no different than any other product or service out there, and no different than complaining about wages in any other industry.

I have always maintained that the market sets the price, in any industry.

Is David Price “worth” $217 Million to throw a baseball?  Well, the Boston Red Sox gave him that money, so it would seem that he is.

Is a Realtor “worth” a 5% commission?  If the market bears it, then they are.  If the market, today, tomorrow, or five years from now, deems that Realtors are not worth 5%, then guess what?  They won’t be paid 5%.

Or 4%.

Or 3%.

Or whatever the market bears.

We can complain and grovel about any product or service, and any wage.

You can get your Lexus repaired at the dealership, or you can have Joe the mechanic repair it for you.  I’ve been to Joe the mechanic, and I’ve seen what he can do.  I go to Lexus now, for a myriad of reasons that I won’t get into now.  But consumers have choice, and the price that Joe and Lexus set will result in their success or failure.

I’ve never seen a “ComFree” sign in Rosdeale, Or Forest Hill.  Or the Bridle Path.  If those are the most wealthy, affluent, and successful residents in the city, how come they are hiring top, brand-name brokerages to sell their properties, rather than a discount service?

In any event, hire who you want, whether it’s me, my colleague, or the Realtor down the street.

I could argue this all day, and undoubtedly so could you.

It wasn’t my intention in this section to re-argue my side of things, but rather open the discussion to the future of real estate commissions, and business models.

I believe in the full service model, which is why I’m with Bosley Real Estate, and not XYZ Realty on a 100/0 split, working from my car.  And day-in, day-out, I see agents – both those “full service,” and those “discount,” who are terrible at their job.

So I will grant the nay-sayers this: not all agents are worth the “traditional” 5% fee, and not all agents are going to receive it in the future.  Commissions will shrink on average as we move forward, and as other business models take shape.

3) The Media’s Continued Obsession With The Pending Real Estate Crash

If Google had better search tools, I could probably find articles from 2003, 2004, and the like, which detail Canada’s pending real estate crash.

Wouldn’t that be a sight?  An article from before house prices went up 70-80%, talking about house prices going down?

Forget about 2003 and 2004.  Let’s keep this current, since this is a 2015 blog post.

Let’s go back a year, almost to the day.

December 14th, 2014, the Bank of Canada says that housing in our country is overvalued by as much as 30%.  Read the whole article HERE.

That article came out one year ago.  Those sentiments about overvaluation came out one year ago.

And yet if we look at the latest numbers from TREB, we see that the The MLS Home Price Index (HPI) Composite Benchmark was up by 10.2% year over year in November.

I’m not gloating.  I’m not bragging.  I’m not saying any form of “I told you so.”

I’ve long maintained that I’ll sell real estate in an up, down, or sideways market, so I really don’t have an obvious bias.

I just can’t believe, or understand, all the negative press we’ve seen over the last decade.  As prices continued to rise, year-in, year-out, media machines predicted the complete opposite.  Everybody wants to be the “first” to call it when it happens.

The media has given us every topic possible for the crash, and they continue to re-invent the wheel.  If it’s not an article about rising interest rates (which you’ll see in the next section, are not currently a concern), then it’s a theory on an underestimated amount of foreign-ownership that is unhealthy for our market.

Of course, sometimes the media is simply reporting what’s out there.

Every time the CMHC, or OECD, or Moody’s, or The Economist, or any other body or publication says anything negative about Toronto real estate, the media is there to write about it.

I’ll pick one at random – THIS article, from May, whereby the CMHC forecasted a 3.4% increase in the price of a Canadian home for 2015, and a 1.5% increase in 2016.

FYI – the November numbers show a 10.2% increase in the value of a Canadian home.

So while we have journalists that will cover CMHC et al’s “predictions,” where are the columnists to point out that they’re constantly wrong?

As I just said – I’m not trying to convince people that real estate is going to skyrocket in value every single year, forever.  But I do wish that the media would stop their obsession with the crash, when the ascent continues.

2) CMHC, The Bank of Canada, and Monetary Policy

“Will they, or won’t they?”

It should be the the tagline for the CMHC and the Bank of Canada collectively.

“Will they raise rates, or won’t they?”

“Will they increase the minimum down payment, or won’t they?”

Hey, I mean it’s not quite as suspenseful as seeing who Juan Pablo gives a rose to.  Or which one of Blake, Gwen, Pharell, or Adam will hit that magic button to turn their chair around.  Or even whether or not Ross and Rachel will FINALLY get together, after toying with viewers for the first three seasons!

Wait…..I may have dated myself on that last one…

This is one of those reoccurring stories, that we feel every day of the year.  Just as we constantly hear “housing prices are rising in Toronto” from just about every person, everywhere, we also hear about some form of monetary policy that is being debated, scrutinized, or rumoured to be changed.

Interest rates are always a topic of discussion, and those discussions can be positive or negative, depending on the participants of those discussions, and their agendas.

The real estate bears love to talk about how a rise in interest rates is going to cause the market to plummet, and since “negativity sells” in the media, we saw countless articles in 2015 about interest rates.

Those articles, for the most part, were nothing but fluff.

“Are rates going up?”  That’s an ever-popular topic that never seems to go away.

“What happens if rates go up?”  That’s another topic that produces fear-mongering coverage.

The irony is, after starting 2015 with all this talk about interest rates going up, and the CMHC wanting to take steps to “cool off” the market, the Bank of Canada actually cut the overnight lending rate from 0.75% to 0.50% on July 15th, 2015.

And with every successive interest rate announcement by the BOC in September, October, and December, came more fodder in the media, more scrutiny, and more members of the peanut gallery figuring that they knew best.

The discussion about interest rates will not go away any time soon, and with the US Federal Reserve raising their rate for the first time since 2006 just one week ago, and with some experts predicting the Fed could raise rates four more times by the end of 2016, it’s going put the Bank of Canada on the hot seat as we enter 2016.

As interesting as interest rates were this past 2015 (was I being sarcastic?  I don’t even know anymore…), there were far more important discussions at CMHC headquarters this year about far more important policy.

“Should CMHC increase the minimum down payments required?”

This has been hotly-debated for years, and while the idea has been discussed and analyzed constantly over the last couple years, and we’ve heard rumours that policy could be changing, it’s just business as usual, and let the good times roll.

My colleague, Ben Rabidoux, wrote THIS article almost two years ago about four policies the CMHC should consider enacting.  Changing minimum down payment requirements was a focal point of his article, and subsequent articles have been written in countless publications, ever since.

I’ve written about the idea several times as well, like THIS post from 2014.

As well know, after rumours and conjecture hit the papers for weeks, the CMHC announced on December 11th that minimum down payment requirements would be changing as of February 1st, 2016.

Lastly, let us not forget that CMHC increased mortgage insurance premiums in April of 2015, making this quite the busy year for our friends in Ottawa!

All of this, apparently, has to do with “cooling the market.”  But as I’ve argued before, is it really the CMHC’s job to cool the market?  Or the job of the Bank of Canada?

I can’t wait to see what they have up their sleeve for 2016…

1) The Market

How is that for succinct?

Care to elaborate on “the market?”

Well, this point is all-encompassing.  I think it goes without saying that the ever-increasing Toronto real estate market has to be the number-one story of the year, as it was last year when I wrote a similar column.

I certainly don’t want to pull chute on this point, but is there really more to say?

It’s December 22nd today, so while we don’t have a final tally on the numbers for 2015, I think we can assume that house prices in Toronto increased somewhere around 10%.

Last December, I posted these numbers, representing the average value of a Toronto home, and the increase year-over-year, since the last time we saw a decrease in price:

1995 – $203,028
1996 – $198,150, -2.4%
1997 – $211,307, +6.6%
1998 – $216,815, +2.6%
1999 – $228,372, +5.3%
2000 – $243,255, +6.5%
2001 – $251,508, +3.4%
2002 – $275,321, +9.5%
2003 – $293,067, +6.4%
2004 – $315,231, +7.6%
2005 – $335,907, +6.6%
2006 – $351,941, +4.8%
2007 – $376,236, +6.9%
2008 – $379,347, +0.8%
2009 – $395,460, +4.2%
2010 – $431,276, +9.1%
2011 – $465,014, +7.8%
2012 – $497,130, +6.9%
2013 – $522,963, +5.2%
2014 – $567,198, +8.5%

So now let’s add one to the list, based on the November numbers (although I’d expect December to be slightly lower, FYI):

2015 – $632,685, +11.5%

Remember when 2009 was real estate Armageddon?

Remember when 2010 was going to be “the year?”

Remember when “it simply can’t continue” in 2011?

Remember when…..okay….you get the picture.

As I said in a section above, I’m not gloating here.  But rather I’m fascinated, amazed, bewildered, and confused.

People constantly want to know why.  WHY does the market continue to rise?  WHY are houses so unaffordable?

I wrote a very sarcastic and snide blog back in June called, “The Blame Game,” whereby I presented individual cases of “fault” for the following:

1) The Government
2) CMHC
3) Bank of Canada
4) Lenders
5) Realtors
6) Society
7) The Free Market

In actual fact, having just re-read that post, I might have included it in yesterday’s “Top-5 blogs of 2015.”

The public wants somebody to be at fault.  People are no longer willing to accept the fundamentals of supply and demand for the continuing increase in real estate prices!

Then again, on a relative basis, you could argue that Toronto is still cheap!

The average price of a Toronto home in November was $632,635.

But the average price of a Vancouver home in November was $930,652!

And did you read my blog post from April of this year called, “Sure, But What Would That Cost In New York?”

Maybe we’re lucky that our average condo, townhouse, or house only costs about one-third of what it does in NYC.

So let me make this prediction for 2016: there will be more doom and gloom.  There will be more talk of the market correction, there will be more wild predictions about 90% drops in average home prices, and there will be more fear-mongering about rising interest rates – even though rates are not going up, might go down, and are at all-time lows.

I suspect prices WILL rise again in 2016, like it or not.

Every year, I predict, based on hope, that we see modest 2-3% growth so our market can catch its breath.

So perhaps if this year, I predict 10.5% increases across the board, then we’ll see stagnant growth? 🙂

–

Officially the longest blog post I’ve ever written at just over 3,000 words, although that’s not really something to be proud of.

Brevity has never been my strong suit.

I go on, and on, and on.

And on tangents!  Yes, tangents!

Remember the time when my buddy and my “intro to blogging” web developer told me back in 2006 that blogs should be 150-200 words each?

Wait…I got sidetracked there for a moment…not sure what happened…

Anyways, that’s it for the 2015 recap, that’s it for this post, and that’s just about it for TRB in 2015.

I’ll be back to officially sign-off on Wednesday.

David.