Toronto Real Estate Returns in January 2012

ORES Real Estate Index for January 2012

 Ontario Real Estate Source

By Brian Madigan LL.B.

Here is the “ORES REAL ESTATE INDEX” which tracks the average resale prices of single family homes and condominiums in the Greater Toronto Area (GTA). It also tracks certain benchmark comparisons such as the price of oil and gold, as well as the Consumer Price Index.

In addition, the stock market indices for Toronto, and the three largest US markets are also compared.
For ease of comparison, everything we look at is worth 100 points on the Index as of 1 January 2005. That time period compares favourably with the five year average used as a standard benchmark comparison in the mutual fund industry.

As of 31 January 2012, here is the Index representing average prices with the December 31st, November 30^th, October 31^st, and September 30^th, numbers appearing in brackets for comparison:

Real Estate

143.45…..(139.70)…..(148.67)…..(147.97)…..(144.01)…..GTA single family

Other market comparisons

407.76…..(357.92)…..(408.18)…..(402.57)…..(378.73)…..gold (per ounce)
223.98…..(224.82)…..(228.30)…..(211.99)…..(186.24)…..oil (per barrel)
135.29…..(129.89)…..(132.60)…..(133.12)…..(126.29)…..TSX index
143.45…..(139.70)…..(148.67)…..(147.97)…..(144.01)…..ORES sgl family
114.15…..(114.81)…..(114.72)…..(114.53)…..(114.25)….CPI index
136.43…..(126.32)…..(127.05)…..(130.16)…..(117.12)…..NASDAQ index
120.43…..(116.49)…..(114.83)…..(113.97)…..(104.04)…..Dow Jones index
111.10…..(106.46)…..(105.56)…..(106.10)…..(95.78)……S&P Index

Using the Index

Just a quick note on reading the information. Have a look at the ORES Index for Real Estate (single family homes). As of the end of January, the index stood at 143.45. That’s a 43.45% increase in 85 months. That means the increase is 0.511% monthly, or it could also be expressed as 6.13% annually. The performance here is shown without annual compounding for the sake of simplicity. It is noteworthy that the annual percentage was 7.01% as at the end of October. Both numbers were calculated using 1 January 2005 as the starting point.

The other statistics are reported in a similar fashion for the ease of comparison.

Observations (on the Index)

As we use index, there are several notable comments:

· Commodity prices are just commodity prices
· There is no other “extra return” for commodities
· The same is true for the CPI
· The CPI is a benchmark to see whether you are keeping pace with inflation, that number is 114.15; increases have been modest and inflation appears to be under control; this is significant. There was even a slight decline since December.
· For a realistic performance goal, you should aim for CPI plus 3.5% annually
· Stocks provide dividends in cash or extra stock. This return is additional to that shown in the stock market indices
· The stock market Indexes only measure the survivors. So, in 2009, both GM and Chrysler would have been dropped due to the bankruptcies
· If you held GM and Chrysler, you lost everything, but two new companies moved in to replace them in the Indexes
· Real estate offers a return in terms of occupancy. You can rent out the property and receive income, or occupy the property and enjoy it yourself

Comparative Observations Using the New Index

· Gold overall is still the best performer, reaching 407.76, increasing this past month by almost 9%, but just making up the ground it lost in December; note the peak for gold was in August 2011 at 423.96
· Oil was the most volatile, (it dropped in half over our measurement period), also declining this past month
· Real estate was the most stable, with solid predictable returns at about 6.13% annually
· Our own stock market posted reasonable gains, but still falls behind single family homes over the measurement period, however, don’t forget that the TSX is still well off its highs and is substantially resource based
· All three US stock market indicators now show positive numbers, and may truly be a better overall indication of the true state of the North American economy. The S&P matches inflation, the Dow is now measurably under the Nasdaq which now exceeds our own TSX

Conclusion

For steady, predictable, measured gains pick real estate. It’s a solid performer with lower risk (less volatility) and generally moving in a positive direction.

And remember, when it comes to real estate, it’s never “wiped out” completely, like GM or Chrysler stock. So, unless you’re sitting on the edge of a tsunami, you’ll still own something when the storm is over.

For a benchmark of success, there’s 1,000 years of history to point to a rate of return in real estate being about the equivalent of 5% per annum, simple interest (non-compounded). That means that real estate doubles in value every 20 years. There are a lot of companies (now bankrupt, including CanWest Global, and many US Banks) that would have been happy with that return.

The present rate of return although high by historical standards appears to be sustainable in sought after locations like the GTA. At the moment, over our measurement period we are looking at a 1.13% annual premium over the benchmark 5%.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300
http://www.ontariorealestatesource.com%20/

Brekland Realty Group Subject to Suspension Order

Brekland Realty Group Subject to Suspension Order

Ontario Real Estate Source

By Brian Madigan LL.B.

It is indeed unfortunate that the Real Estate Council of Ontario (RECO), the governing body of the real estate profession has found it necessary to issue a suspension order.

Such an order causes difficulties for the 211 employed sales force and the clients.

Hopefully, the real estate profession will join together to provide assistance to the sales staff and their respective staff until permanent arrangements can be made.

The public is encouraged is contact RECO in the event that they have a transaction already booked.

Sales staff, being registered either as brokers or sales representatives may not “trade in real estate” until they have registered with another brokerage.

In the interim, I would encourage other registrants to assist any such brokers and sales representatives, as may be required, until they have found a suitable new brokerage.

This is a time to “rally the troops” and “pay it forward”. Whatever assistance is required by the newly displaced brokers and sales representatives, now “in limbo”, should be provided, “no strings attached”.

I am sure the entire industry wishes these brokers and sales representatives, the best and an opportunity to enjoy success in 2012.

Here is the public announcement as it appears on the RECO website; the issues are very serious:

“RECO freezes accounts and suspends registration of Brekland Realty Group

Consumer deposit insurance protection available to public

Thursday, Feb. 2, 2012 (Toronto) - The Registrar of the Real Estate Council of Ontario (RECO) has issued an immediate suspension of registration to Monster Realty Corporation which operates as Brekland Realty Group. To further protect the public interest, the Director, under the Real Estate and Business Brokers Act 2002(REBBA 2002), has frozen the bank accounts of the brokerage.

RECO has also charged the Mississauga-based real estate brokerage with failing to disburse trust funds in accordance with the terms of the trust.

REBBA 2002 requires all employees of a suspended brokerage to also be served with suspension orders. As a result, the brokerage and its 213 employees can no longer trade in real estate. The employees can apply to RECO for transfers to another brokerage.

“The suspension order and the charges relate to a significant shortfall of funds from the brokerage’s trust account. After RECO booked a routine inspection, it was revealed that a large sum of money was missing from the brokerage’s trust account,” said Registrar Allan Johnston.

Brekland Realty Group’s head office is located in Mississauga and it operates three branches in Mississauga, Milton and Oakville. The company is owned by Jason Laramee of Oakville.

REBBA 2002 allows an immediate suspension order to be used in circumstances where the Registrar considers it to be in the public interest.

“The investigation is ongoing and further charges may be laid,” added Johnston.

Any home buyers or sellers who have representation agreements or deposits with Brekland Realty Group can visit www.reco.on.ca for further information. All real estate brokers and salespersons in Ontario must participate in an Insurance Program that provides consumer deposit protection.”

COMMENT

For the public: please contact RECO directly for any reassurance required.

For brokers and sales representatives: contact another registrant for assistance with any transaction, or if you are unsure or uncertain about such, then please do not hesitate to contact me and I will provide whatever assistance to you that I can.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300.
www.OntarioRealEstateSource.com

Toronto "HOT" real estate market

January 2012 Sales Figures for Toronto and GTA (Up or Down?)

Ontario Real Estate Source

By Brian Madigan LL.B.

The 2012 market started out with a bang! The sales were 4,567 compared to 4,199 last year.

Pressure also was placed upon the price which moved up to $463,534. Last year it was $425,762.

Sales are up 8.76%

Prices are up 8.87%

Those are the year over year numbers. So, that certainly appears to have things going in the right direction.

That would seem to be good unless you looked carefully at the numbers and realized that the high number was achieved in May 2011. That was $485,520, which means that we are still about $22,000 shy of the peak.

Are the prices up this January?

Compared to what?

Yes, compared to last January.

No, if compared to the market peak.

You be the judge as to whether the market is up or down. But, it will be interesting to see how different people comment on the market.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300.
www.OntarioRealEstateSource.com

Brian Madigan LL.B. 416-745-2300 ~ Real Estate Credit Courses

If you are a real estate professional who requires credit courses, you may wish to attend one of my programs.

18 credits available in total.

All you require to renew is the RECO update.


If you need assistance, then please give me a call.


Brian Madigan LL.B. (Broker)
RE/Max West Realty Inc. (Brokerage)
(416) 745-2300 (tel)
(416) 745-1952 (fax)

http://www.ontariorealestatesource.com/ (web)

http://ontariocommercialproperty.blogspot.com/ (blog)

Brian Madigan LL.B., Broker ~ 416-745-2300 RE/MAX West Realty Inc.

Brian Madigan LL.B., Broker ~ 416-745-2300 RE/MAX West Realty Inc.

Ontario Real Estate Source

By Brian Madigan LL.B.

I wish to confirm that my new contact information effective January 25, 2012 is:

Brian Madigan LL.B., Broker
RE/MAX West Realty Inc., Brokerage
96 Rexdale Boulevard
Toronto, Ontario
416-745-2300

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through RE/MAX West Realty Inc., Brokerage 416-745-2300.
www.OntarioRealEstateSource.com

Negotiating Real Estate Transactions over the Internet

Electronic Negotiating

Ontario Real Estate Source
By Brian Madigan LL.B.

It certainly seems that everyone would like to negotiate real estate transactions by email.

The only problem is that it doesn’t appear to be allowed.

There is a current difference in approach by OREA which drafted the new standard form Agreement of Purchase and Sale effective January 2012, and RECO.

The new standard form has incorporated emails into the “Notices” provision. They are given the same status as faxes.

The new clause permits Offers, Counter-offers, and Notices of Acceptance to be communicated by email. The provision goes on to include various notices and other documents.

The concern arises with the “negotiating of the agreement. Notices and other documents suitably can be exchanged through email. RECO accepts the latter but is concerned about the former and recommends that legal advice be obtained in a Registrar’s Bulletin.

Here’s the issue. The Statute of Frauds requires any agreement for the sale of land to be in writing. The Electronic Commerce Act enabled and permitted certain contracts to take place over the internet.

But, the problem is in the Act:

Section 31 (1) 4 of the ECA reads:

This Act does not apply to the following documents:

4. Documents, including agreements of purchase and sale, that create or transfer interest in land and require registration to be effective against third parties.

Clearly, it applies to Transfer/Deeds which are registered. Does it also apply to Agreements which are generally not registered. The wording in the Act certainly could have been better.

No changes have been made to the Act since it came into force in October 2000, so why adopt the OREA approach now. It’s risky and flies in the face of the RECO Bulletin.

I would recommend that you be cautious and follow the RECO approach until this matter is resolved. Let someone else take this to Court, or have the Legislature pass an amendment to the Act.

Brian Madigan LL.B., Broker
www.OntarioRealEstateSource.com

Supreme Court of Canada Affirms Municipality's Right to Set Tax Rates

Municipal Right to Tax Upheld by Supreme Court

Ontario Real Estate Source

By Brian Madigan LL.B.

A municipality has broad and wide latitude in assessing municipal taxes.
This follows a Supreme Court of Canada decision released on 20 January 2012 involving Catalyst Paper Corporation v. North Cowichan.

The company was a forest products company and major employer on Vancouver Island in the south east area. The appeal against taxes was based on what it felt was the disproportionate share of the overall tax burden of the entire municipality assessed against it. A municipality has the right to tax commercial, industrial and residential properties at different rates

While the Supreme Court of Canada upheld the municipality’s right to tax, and set the rates as it sees fit, it recognized the company’s right to:

1)     stay put and pay the tax, or
2)     close the mill and move.

Ultimately, the Court wants these types of decisions to be made at a local level without access to the court system.

As a matter of interest, in 2007 Catalyst paid 48% of all of the municipality’s taxes, and by 2011 that burden had been reduced to 37%.
Brian Madigan LL.B., Broker
www.OntarioRealEstateSource.com