E87: Inside the Market: A Conversation with Tom Storey

“Units with wow factors still lease and still sell. So, a wow factor could be just, it’s a small unit but it has parking, and all the other small units don’t have parking. That could be your difference maker. These new condos, the floor plans, some of them make no sense. The older ones, you get a big room and bedrooms on each side and it just makes sense. So, a good floor plan, a great view, a loft-style property because if you are trying to rent or sell a property in a bad market and you don’t have a wow factor, your price has to be your wow factor." - Tom Storey

[INTRODUCTION]

[0:00:34.2] ANNOUNCER: Welcome to another episode of Sync or Swim, brought to you by Rentsync. From operational challenges to marketing mastery, we uncover the strategies in technologies and all things PropTech. So, let’s dive in as we explore the trends, tactics, and insights that define the future of multi-family investments. Sync or Swim starts now.

[INTERVIEW]

[0:00:57.1] GL: Hey everyone, Giacomo Ladas and I’m thrilled to welcome Tom Storey, a Toronto real estate team leader and host of the Tom Storey Show for our conversation today. You might have seen Tom featured on CTV, CBC, Global News, CB24, Toronto Star, basically, anywhere that Canadians get their news, you can see Tom and recently, he welcomed our CEO, Max Diamond, on his podcast. 

So, he’s returning the favour here today. Tom, thanks so much for joining me this morning, I really appreciate it.

[0:01:21.1] TS: Thank you so much for having me, I’m excited to be here.

[0:01:22.9] GL: And maybe for those who don’t know or haven’t yet seen your show, tell us a little bit about yourself, how you got started, and what kind of inspired you to go from real estate to kind of creating your own content?
[0:01:32.6] TS: Yeah. So, I mean, on the business side of things because I’ve been selling real estate now for just over 10 years, I got my real estate license when I was 22 years old. At that moment in time, it’s like now your friends can afford to buy real estate and their parents don’t trust you, that’s just how you start. So, you start actually, my first year, I built my business on rentals. I was doing rentals in downtown Toronto. 

I was running ads on like Kijiji, I didn’t even know Facebook Marketplace was a thing then, and I would meet people, and then it got to a point in about end of 2015, I had this kind of realization that the people that were doing way more business than me weren’t necessarily – they didn’t create a better client experience. They didn’t even necessarily know more about the market. They just were more seen, they were more known. 

Kind of like, you know, it doesn’t matter how good you are or what you do if nobody knows and so, that’s kind of what started it, and at the time, I didn’t have money to do the traditional marketing, billboards, flyer, I couldn’t, I couldn’t afford that. So, I started recording myself in December 2015, put out my first market report, and the goal of that was just send to my past client list, right?

I would put them on YouTube, simply because YouTube allowed it to show up in my website, that was the only reason I would post it on YouTube, and then it’s surprising to me, other people started watching, and then that’s kind of how it all started and we started the podcast over two years ago now and my cohost I is Surrey, just outside of Vancouver in BC. So, we kind of got that coast-to-coast idea of what’s going on. 

And yeah, we’ve been having a lot of fun with it and still traditionally, like, my business model is repeat and referral and my database but we are meeting a lot of people online these days.

[0:03:11.5] GL: Yeah, makes sense just how the markets changed that it’s your marketing efforts can be your contact, right? And kind of vice versa and I mean, you seem to have like a really good knack at it and clearly with news media picking you up all the time, they know that you know what you're talking about and kind of precisely why I wanted you here today because you know, you got both sides of things.

You know to chat on screen and actually talk to an audience but you also have the backing behind it all and at Rentals.ca, we are primarily in the rental space but we do talk condos as well and I think that’s kind of a good place to start about this conversation and specifically, how, you know, we know detached home prices have risen pretty steadily over the past few years but what I’ve seen is condo prices are kind of returning to pre-COVID levels, is that right? And if so, is that kind of surprising to you?

[0:03:57.8] TS: It is surprising actually. Mostly just because of how fast the freehold properties continue to go up in price. I remember pre-pandemic because I would track this, the average detached home was 700 grand more than the average condo. That’s still a lot of money. Today, it’s like a million. So, it’s gotten a lot further up, and I think what happened if you go back and look at it because when I’m meeting with condo sellers now, it’s like, “You’re right.” 

Anyone I’m talking to that I bought, even some people in like, mid to late 2019, it’s like, you’re kind of worth what you paid for, and if you look at what happened, pandemic happened, condo prices in downtown Toronto dropped eight to 12%, depending on the pocket, that first 2020. 2021, they jumped back up again, and it had a great year. ‘22, of course, we know what happened, the first few months.

They went stupid like everything else, and then they dropped off again. Last year, for six months, great, last six months, not great, and then this year, they’ve slowly started going up but it hasn’t really moved that much, and it’s kind of gone up and down a few times and it’s a weird situation because when you’re talking to buyers, it’s like, you could buy a condo in 2024 for the same price they sold for in 2020 but you're getting a 2024 interest rate.

[0:05:11.8] GL: Right.
 
[0:05:12.6] TS: So, it’s much more expensive to own, even though the prices are the same, the cost of ownership is probably 20, 25% more per month.

[0:05:20.6] GL: Oh, that’s especially with insurance, even though they are coming down a little bit they are still, you know, after years of steadily going up, it doesn’t surprise me but we’re located specifically in Toronto and I think it’s a good way to kind of centralize us a little bit talking about the Toronto condo stock in general. Like, a significant portion of it, it’s aging, right? It’s not necessarily a – the stock that people are getting into. Are these newer condos, are they older, what’s the kind of stock that seems to be moving right now?
 
[0:05:46.4] TS: You know what’s funny is, my answer is going to surprise you. For many years, if you got a listing in the condo building that was over 25 years old with big floor plans and high maintenance fees and you know, maybe amenities that need an update, they were tough to sell. Very hard sells. What’s been shocking to me this year is the listings that I've taken, and at high price points too. 

I had one recently that we listed at, just under 1.8 million and a 35-year-old condo, right down the waterfront, like gorgeous space, looked at Lake Ontario, 1,700 square feet interior, plus a huge outside space, and I was like, “You know what guys? This is going to take some time.” And we sold a hundred grand over asking with three offers in a week, and I’m like, “What is going on?” Because you were told like, we need affordable housing stock. 

But all the “affordable condos” are sitting on the market not selling, and the reason behind this is if you look at like, “Well, it always comes down to who is the buyer.” The buyer for these large, old condos is downsizers that cashed out of their two, two-and-a-half-million-dollar house in North Strong, you know, the areas that we all know, and they’re not impacted by interest rates and they’re interested in these big spaces because they came from an even bigger space. 

Where that 500 square foot, what we would typically consider investment condo or first-time home buyer, well, those two buyers, investors are just like, not participating right now because unless they’re super cash heavy, the numbers just don’t pencil, and then for some home buyers it will be or still today being stress tested at 7%, right? So, they’re just, that’s why it’s odd that you’d think the smaller, cheaper stuff would move. It’s actually the complete opposite.

[0:07:25.0] GL: That’s interesting. Do you think that could maybe potentially lead to a shift towards people building more purpose-built rentals in the coming years then? Because if the cheaper stuff is not moving, maybe the cheaper stuff is just still unaffordable. So okay, what’s – I feel like that those people would are still renting then and then, maybe they would rent longer if they can have greater supply from it because we know it’s been so under-supplied for decades now.

I’m curious, we’re seeing in the coming years there’s going to be, maybe a shift towards, “Let’s build more apartments then, than condos.”

[0:07:54.3] TS: I think that’s absolutely what’s going to happen. You know, I think for the last 10 years, new condo builds, sold to investors, and then rented out, created all the rental inventory in Toronto, right? And you look now, these purpose-built rental buildings, which I would argue is probably a better living experience. It’s better managed, it’s not like a part-time landlord that doesn’t really understand how things work. It’s a corporation running it, right? But the big caveat with those is like, it’s great, but they’re not cheap.

[0:08:23.5] GL: No.

[0:08:24.1] TS: They’re luxury-ish accommodations, even if they’re 500 square feet, and you know, in Ontario, those buildings are not under rent control. So, if I’m a renter, I’d actually probably go out of my way to rent in a building built before November 15th, 2018. If I’m a condo investor, I go out of my way to buy the building built after that, and you’d be shocked by how many people still don’t understand how the rent control date works on either side. They have no clue.

[0:08:54.8] GL: No, and it’s something that we try to really hammer home is that you know, you can get into a new apartment building but if it's after that date, then it's kind of free game for them to increase as they see fit and you know, a lot of the newer buildings that I've been touring, it seems that they're trying to really promote like a lifestyle behind it. These are purpose-built rentals specifically and it seemed like they’re really merging between apartments and condos.

Where these new buildings now, you know, they have bowling alleys, they have pools, they have an office space and you can rent out private board rooms and hold meetings there, tons of outdoor greenery space. It seems that almost new purpose-built rentals are kind of becoming more towards what people would maybe consider a condo lifestyle, and I think that’s maybe more attractive to like you said, maybe somebody who is downsizing. 

That they kind of want to have that lifestyle but want somebody to manage their building, and maybe the rent’s a little bit cheaper than their mortgage. So, it’s kind of interesting to see how that actually is changing, what a purpose-built rental is, and maybe what a consumer is looking for.

[0:09:52.1] TS: That’s a good point. I have someone I know really well that when one of these new purpose-built rentals was first launched, she got in at a relatively good rental rate, right? When they’re trying to fill the vacancies at the beginning, they offer incentives, after year one, hike the rent but she was like, “Okay, it still makes sense.” After year two, they hiked it again to a point that was like, this doesn’t even add up. 

Like, there’s no comparable that says, you can get this, and she ended up just leaving and leasing a house down the street. A house, for the same price. It’s not a huge house but –

[0:10:23.7] GL: But it’s a house. It’s a house, yeah.

[0:10:26.3] TS: And so, that’s the thing I think, you know, if you’re downsizing, I think these buildings are perfect, right? I think it’s great if that’s the lifestyle you're looking for but they’re also – so, I can give you this example as myself. I didn’t raise rent on one of my investment properties recently because the tenant’s so good, and I’m like, they’re paying close enough to market, I’m not going to do it. RioCan, or Allied or whoever, you know, builds these purpose-built, they’re not forgetting.

[0:10:50.3] GL: No, no.

[0:10:51.4] TS: They’re not going to forget. So, I think people just need to be made aware of that because you’re right, this is the future of – or at least, rental stock, and especially right now, like, developers for condos, nothing is selling.

[0:11:03.4] GL: No, that’s what I was going to ask you. What are you seeing for the current housing supply right now and maybe even condos and detached homes? What I hear all the time, you know, anecdotally from friends, family, and people in the industry is I see cranes everywhere. Everyone seems to be seeing these cranes, and it seems to be, to the public eye that, “Oh, there’s cranes everywhere, there must be a ton of new supply coming into the market.” What in fact are you seeing?

[0:11:27.2] TS: So, I mean, if you see a crane, it means, the building’s already 70% sold, minimum, right? Or else, they can’t put a shovel on the ground, and that’s actually why I think that rule, at some point, should have been adjusted because that incentivize the developer just to sell to investors, and then you get buildings when they launch just being 80, like 80 rentals hit the market the same day, right?

So, if we’re going to talk about resale housing stock, I live in the East End of Toronto in an area that people want to move to because of school districts and things like that, houses are selling in a week on my street, all around me but then, in the downtown core, like, as we’re recording this, I have nine condos for sale right now, and my job now is to deliver bad news to people. It’s basically what I do all day.

You know, I’ve been through this before, and this by the way, this isn’t actually the worst condo market I’ve been through. When the pandemic hit, prices were dropping so fast and no one knew what was happening and right now, it’s slow and absorption rate’s not there but the prices have surprisingly held a lot longer than I thought that they would but if you just look at the numbers, there’s more condos for sale right now than there has ever been before in the city of Toronto and maybe that makes sense because we’ve been building a ton of them for the last 10 years.

[0:12:46.0] GL: Yeah, are a lot of them, you know, when interest rates are really low, I guess, that’s kind of when people were building, billing, investing in them, and now, interest rates or what they are, if they’re not moving, I guess, the idea is that maybe these aren’t trying to rent them out and kind of recoup some of their losses and maybe we have a chance of a little bit softer run just because they’re not moving. 

I’m wondering if – because interest rates I’m sure, have played a huge factor, and we’ll get into that through our conversation but I would imagine, there’s a ton of condos that were built four, five years ago, maybe even 10 years ago, when rents were low. Now, they’re ready and no one wants them so let’s rent them out, maybe at a little bit softer rent than market value.

[0:13:22.7] TS: And not even, “Let’s just rent them out.” But, “If I rent it out, based on when it closed and what mortgage rate I got.” Probably, and this is being like, super realistic, it might be worse than this, I’m losing 1,500 bucks a month in carrying cost. So, I’m actually looking at I think if Canada is going to continue to cut, what’s very clear on that, they’re going to continue to cut, by the end of next year, they might be a three or lower than that on the overnight rate, and I think they probably went a little bit too far. 

They probably should have stopped at four and a half anyway. So, it’s like, getting back to where we are today is just kind of where they should have been, in my opinion, but if you just look at it right now, there are so many people trying to offload condos because they’re just getting absolutely destroyed on the monthly cash flow. They’re just so negative and if you bought it preconstruction, to make matters worse, if you bought it four years ago and you paid 1,300 bucks a square foot. 

I can tell you right now, condos resale are selling for a thousand bucks a square foot in downtown Toronto. Again, just like they were in 2020. So, not only are you losing 1,500 bucks, two grand a month, but it’s probably not even worth what you paid for.

[0:14:29.0] GL: No.

[0:14:29.7] TS: Right? So, it’s what I actually think is going to happen with the interest rates coming down is you’d think, “Okay, interest rate’s coming down, create more demand into the market.” What I actually think why it will help condo market get a little bit better in terms of transaction volume is because it’s going to force sellers to take their listings off the market. Like, if you’ve been riding the variable, and you're losing 1,500 bucks a month, well now, it’s 1,200. 

And by mid-next year, it might be 800, and I think they’re going like, “Okay, it’s not as bad as it was. The price growth still isn’t there. I don’t want to sell at a huge loss unless I make so much money in my other job that I can use that as a capital loss and that’s an accounting question, right? So, I’m just going to take it off and I’m going to wait ‘till the market gets back to a number that I like.”

I actually think the rate is going down, it’s going to pull listings off the market from the people that were like, “I’ll sell if I can do it but I’m not giving this thing away.” But there’s still many people that are in really tough spots.

[0:15:27.1] GL: Yeah, no, totally, and what I kind of thought when the rate is going down what that might do is it might incentivize turnover in these rental units because as you know, vacancy rates are extremely low. We have some areas in the country that are like, sub-1%. So, the demand is just so high for the supply that we’re seeing but a lot of that is turnover rate. People are not moving out as they used to and transitioning into the ownership market, where the big condos or homes.

So, my thought is, you know, if interest rates come down a little bit, hopefully, that would potentially spur a lot of renters who are now maybe ready to buy, and that might increase more supply in not only rentals but get these condo and homes moving. Is that kind of the relationship we’re looking more in interest rates as well? Besides the whole we have – money is cheaper, you can build more, maybe build a little cheaper and faster as well. So, that’s how we’re looking at interest rates, just to kind of see how to spur the market a bit.

[0:16:16.4] TS: I think if you break it down right now, like, if I was currently renting and I’m paying at market rent. So, not above what I’m paying market rent and I were to run the numbers on, “Well, maybe I should just go buy something similar because I’ve saved the 20% down payment” or whatever you got. Even just 15%, you have a bit of mortgage insurance, you can run the numbers. 

It’s just so much more expensive right now, to own that same property versus rent, and then I didn’t want to come in here and be all negative but even if you bought it, if you got a mortgage rate at like, let’s say four and a half. Let’s be generous, I’d say, you got a four and a half percent rate, and you break down the first five years of payments on that mortgage, 80% minimum is going to interest, every single month, right? 
So, that’s money you’re never getting back. Plus, you have a condo fee, plus property taxes, you can add all these things up, plus, you put however money thousand dollars down, 50 to a hundred grand down to buy the property. Well, that carrying cost per month is, let’s call it, 3,500.

[0:17:16.7] GL: Easily, easily.

[0:17:18.2] TS: Easily, right? Probably more. You could probably rent that same place for 25. Now, for many years, the market was outpacing how fast people could save money because leverage is a beautiful thing on the way up and like a terrifying thing on the way down, right? I still think long-term, everybody should, and I’m not saying this as a real estate agent, but I believe it to my core, homeownership is a great thing long-term in Canada. It’s hard to argue against it when you look at net worth numbers from stats. It is what it is.

[0:17:48.2] GL: We agree with that. Like, you know, we’re not trying to push the rentals are the only way forward, we totally agree with that.

[0:17:54.1] TS: But I would say, for the next two years, renting, honestly, when you break down the numbers, might be the smarter choice. I don't know if five years I’m going to stand by what I said there, but like for the next two, even if rates are coming down, the gap is just so big and even if the market goes up a little bit, you’re saving so much money for that 18 to 24 months, that maybe you could, that could help you get in in prices because I don’t think condo prices are going to go up significantly in the next 18 months.

[0:18:23.2] GL: Yeah, I don’t see how they can.

[0:18:24.4] TS: They’ll go down a little bit this year and then, we’ll see what happens at the end of the year if everyone takes off before the holidays like they did last year but there’s a strong argument right now for renting over the next two years, probably financially it could be a better decision.

[0:18:38.6] GL: That’s interesting. I’m kind of curious what you're seeing as well because what we’re seeing on our network of sites is that there’s a huge demand right now for shared accommodations, going from one-bedroom to two-bedroom. You’re not doubling the rent but you can effectively split it but there’s another side of it as well, where we’re seeing homeowners renting out their basements a lot more or spare rooms. 

You know, like you said, carrying costs are what they are and if you are on a variable rate, your mortgage payments have just pretty much skyrocketed. We’re starting to see that those listings when they come, you know some people even subdividing their basement to have two rental units in their basement. Are you kind of seeing that trend at all, where buyers are looking for a place where they can maybe rent part of it out? Is that becoming a little bit more demand just because there’s so many people who want to get into rental?

[0:19:23.0] TS: Absolutely. I literally had a conversation yesterday about this with somebody. They’re currently renting and they’re running the numbers, they need to stay under a million for purchase price so that they don’t have to put 20% down on everything, and they wanted to get – so they only want me to send them listings, and this isn’t core Toronto, right? This is, you know, they’re willing to go a little bit.

Must have separate entrance or two kitchens or basement apartment and I can filter based on that. So, I took a look and something that we do with clients is before we send them what’s on the market based on what you tell me you're looking for, I’ll create a list of what’s actually sold in your criteria in the last three months, and we would call it like the reverse search and I’d send you that list first. 

And say, “Hey, this is what match what you told me you wanted, would you have bought any of these right now if they were available for sale, right?” And I was actually kind of surprised that there was a lot of good options, and his whole thinking was, “I’m renting now, this is my current rent, I have the down payment but if I am able to buy a place and rent out the basement, my living cost is actually going to be lower than what I am currently paying right now in rent because I am able to rent out a portion of the property.” 

And I think that’s where people are being savvy and I mean, you kind of have to have freehold housing, right? It’s kind of tough – 

[0:20:39.9] GL: Exactly. 
[0:20:40.6] TS: To do with condos, so the price point is going to be a bit higher but yeah, shared accommodation I think is, and not just shared accommodation but like maybe investing in real estate with a friend to buy the property together. I’ve done that before, not the place that I lived in but as an investment and it worked very, very well. 

[0:20:58.7] GL: Tom, do you have any, maybe any advice for first-time rental property buyers who want to get into the space? Like I’m sure you have tons but for those who are maybe interested in that because it could be a great extra source of income. 

[0:21:11.6] TS: I think the first thing is that if you look at the last 24 years since the year 2000 if we’re talking about condos in this conversation what prices have done and if you look over the good, the bad, the ugly over the last 20 plus years, there’s rarely a time period under five years where you’re not going to be okay. I’m sorry, over five years we’re not going to be okay. So, let’s say even you bought at the worst possible time, February 2022. 

Now, I’m not saying those prices are going to catch up in five years from that time but they’re not going to be as bad as they are today, right? So, the first piece of advice is when I started investing in real estate, actually, the guy that owns the real estate brokerage that I worked for he sat down with me for lunch and he took out this piece of paper and he just wrote my name at the top and they put property A, B, C, D, whatever, however, many years trying to buy. 

And he’s like, “Here’s what happens, rent typically goes up, mortgages typically go down. That’s just a fact of how this all works.” And he’s like, “Let’s look at this long-term, property A is your primary residence, okay? Property B is your first investment property. So, ideally, people want cash flow and appreciation but you don’t get both in Toronto and in fact, in the last five years, you get bigger, right?” 

[0:22:27.3] GL: Right. 

[0:22:27.9] TS: So, you really have to look long-term because I was always thinking value goes up, that means my net worth goes up. You know, I know you pay capital gains and everything when you sell it but you know running all the numbers on it and he’s like, “No, who cares about just all you got to focus on is get that mortgage paid down and then in 30 years when the mortgages is paid off, rent has gone up.” 

“And there’s risk involved of course with renting out properties, how much would you need to retire right now, inflation-adjusted, when it’s time to retire, and like figure out what that number is.” So, and he’s like, “Whatever you think it is, it’s more.” So, I started looking at him, I’m like, “Okay, I have my primary residence, I have a cottage which I don’t really rent out but – and then I had a few investment properties.” 

And so, I looked, like okay, 25, 30 years down the road if these are all paid off because they will be, how much do I think I could get in rent from each of them if you add that all up? That’s just – at that point, it’s money in my pocket. It’s just – it’s going to happen, right? Because there is no mortgages attached and of course, there is maintenance and taxes and things like that. That was kind of eye-opening to me because many people just think, “Oh, I’m going to buy it.” 

“Maybe I’m going to cash flow on it or it’s going to do well.” But the last five years, it’s been like a punch in the face to investors and a lot of people are going to sell because they can’t see the long-term and I promise, in ten years from now, they’re going to regret it. So, my general advice would be like I actually tell some people that watch our podcast, once you bought stop watching us. Stop, just go live your life. 

[0:23:58.4] GL: A ringing endorsement, yeah, I hear you. 

[0:24:00.9] TS: Go live your life. The market is going to do what the market does regardless of what me or Steve say or anyone else on the Internet. It just is what it is but if I was investing right now, I’d be buying. I would be buying a building that’s not currently under rent control because that just gives me more options. Ideally, even if I am buying it as an investment, I would want to buy in a building that is more owner-occupied than tenanted. 

You can get that information, the status certificate but it’s not always perfect and you can also just do math on the last two years how many properties leased out in the building and try to figure it out and sorry, last thing, we talked about this a lot, in crappy markets, units with wow factors still lease and still sell. So, a wow factor could be just it’s a small unit but it has parking and all the other small units don’t have parking, that could be your difference maker. 

These new condos, the floorplans, some of them make no sense. The older ones, you get a big room and bedrooms on each side and it just makes sense. So, a good floorplan, a great view, a loft-style property because if you’re trying to rent or sell a property in a bad market and you don’t have a wow factor, your price has to be a wow factor. 

[0:25:11.4] GL: You touched on it very briefly, so properties with existing tenants I’m assuming are much more challenging to sell. I would assume that’s the idea behind it, you don’t want to look for that, you were saying? 

[0:25:22.9] TS: It’s like a Mission Impossible movie, where he does the mission every time but you got to – you know it’s a battle. On the selling side, I’ve run the numbers on this, just percentage-wise for the properties I listed there tenanted that I actually sell is much lower than owner-occupied and vacant for obvious reasons that when there’s this much inventory, why would you take the risk to buy one that’s tenanted if you didn’t have to. 

It extends out the closing date because of the notice that you have to give and people hear the horror stories online that if the tenant doesn’t leave and you do close on it, you know that’s a six-month battle even if you do everything the right way. So, yeah, personally right now with our first-time home buyers and even investors, I’m just saying owner-occupied or vacant that’s where I would start your search. 

Unless you can find a tenanted property that you can get at such a good price that it’s worth the risk involved and on the flip side, when we’re talking with our sellers it’s hey, even if you sell this place with a tenant in it, you have to pay them a month’s rent compensation when you give them the N12 when the new buyer moves in. Why don’t just offer them two month’s rent and see if they’re willing to sign an 11 and go find another place? 

And most people, I know we hear the horror stories, most people are super reasonable and they’re like, “Yeah, okay. Two months, I was going to get one month and you give me 90 days to go find a new place? I’ll sign that.” So, I found that works pretty well. 
[0:26:36.3] GL: It’s interesting to see how like reasonable most people are. We are seeing it too when we talk to renters and when we ask them about rent control and a lot of them seem to really get it. Look, we understand why. For a landlord, sometimes rent control is not as ideal for them but they understand why for the renter. Rent control is a good thing because it knows that their housing cost are going to remain relatively stable if they’re of course in a building that allows for that, right? 

It does seem like renters and landlords and home buyers, we’re kind of all in this together in this housing supply crisis peak now. We’re kind of all in this together, even renters seem to understand that in a way. They get rent control and they get maybe why it’s not as provocative for a landlord to just fall in line with whatever the rent guideline is because their costs are going up too and it seems like we’re all kind of in this together, which is kind of nice to see. 

[0:27:27.0] TS: Yeah, there’s fringe on both sides of it, in the one percent on both sides that are bad and aggressive and – but I’d agree. Like in my experience, I tell people this a lot, 98 to 99% of the time when we help a client buy properties and investments, they rent it out, it’s a smooth experience. Once in a while, something happens but very rarely. It’s just those are the headlines that make CBC News. Then that’s why people think, “Oh, this is a regular thing.” It’s not. 

[0:27:53.5] GL: At the time of this recording, we’re kind of getting to the end of the summer. Are seasonal changes something that you look for? Are there certain seasonal changes that seem to happen every year regardless of the market and maybe there is certain pockets or windows that are more beneficial for somebody to either get into the buying market, getting into the rental market, whatever that may be or are you – as we get closer to the colder months of the year?

[0:28:17.7] TS: Yeah, if you just look at price wise, rental prices and average sale price across all property types, August and December arguably, you will get the best price as a buyer and there’s a few reasons. One, nobody else wants to do it because they are enjoying the summer or they are getting ready for the holidays, right? But more importantly, maybe people that are for sale in August probably listed in July and they’re still on the market now. 

And the summer is about to wrap up and everyone else is at a cottage or on vacation or you know, the kids are out of school and at the end of the month, we found a lot of people are getting really good deals on things in August and the same thing happens in December but also saying that there’s typically not as much to look for, so it’s always kind of that trade-off. Our stage or actually just put something on social media saying she’s fully booked for the first two weeks of September. 

So, listings are coming, it’s not like we’re magically and become a seller’s market now. We’re pretty balanced out now but have active inventory in the 416 in Toronto, condo ownership, townhouses as well is 70% of active listings. We are very much in a buyer’s market for condos and we’re in a balanced seller’s market for everything else but when you clump it all together, it looks like a lot on the market because it is but it’s mostly condos. 

[0:29:36.4] GL: That’s interesting and you know, maybe this is a shameless plug but we post every month a rental report on Rentals.ca that we partner with Urban Nation. 

[0:29:44.9] TS: Which is great by the way. 

[0:29:46.2] GL: Yeah. 

[0:29:46.7] TS: Which is awesome. 

[0:29:47.4] GL: Thank you, and what we’ve been seeing for a while now is Vancouver and Toronto, rents are actually going down a little bit but what we’re seeing more is the secondary markets kind of impacting it differently where affordability is much more prioritized and accessibility right now and because work from home, renters can now effectively live further away from this metropolitan in course and seek rentals anywhere and search for more affordable rents. 

I kind of think that the secondary markets are really what’s going to impact the housing market in the future for much more potential growth because people are willing to go to these secondary markets, especially as interest rates decrease, maybe it becomes a little bit more, actually much more affordable to just live a little bit outside of where you’re – maybe where you would like to live. 

Do you think that these secondary markets are going to impact the housing market more in the future because it seems to be where we can actually build and people will buy for a variety of price reasons? 

[0:30:43.7] TS: I think absolutely because I think you have the people that have acknowledged that at least what they want, maybe they feel like they can’t afford it in the big markets. They may have already realized this a while ago and gone to the secondary markets based on population size but then you look at you know, when you put out your monthly reports and it’s Edmonton rent is up, Calgary rent is up, Halifax rent is up. 

Toronto is down, Vancouver is down, Winnipeg is going crazy, it’s like weird. It’s like, okay, so the markets that I would deem as more affordable are going up in price and the markets that are expensive are going down and Toronto is not like going from really expensive to wildly affordable. It’s three percent on a CAD 3,000 rental isn’t life-changing, right? I guess if it compounds year over year, you could have that. 

I’ll actually give you a real story. I just had a client, they had an investment property, the tenant was paying 3,400, the tenant gave notice, and I was like, “Okay. Well, do you want to rent it out again or do you want to try to sell it?” And I ran the numbers. We rented that out in July of ’22, which maybe was the peak of rental prices, I’m not sure. Today, we could have got 31 if we were lucky and we had it for 34. 

So, that’s like a real-life example of yeah, rental prices have come down in Toronto since the summer of the craziness and then maybe this is more of a question for you is if you look at all those other markets where things are going up. It’s not just rental prices, it’s sale prices too. So, you have the people from maybe the bigger markets are going there purely based on affordability but then you have the people that are just like they’re looking at those markets as the new place to invest and that’s what I think is interesting. 

We kind of joked when the pandemic happened that everything outside the GTA just went up so fast in value that Toronto went up but nowhere near what the – it was like the great equalizer. I think it’s now like Canada-wide. 

[0:32:35.3] GL: I think so too and you touched on a really good point where – well, I try to make sure I say this when I am talking to people is rents that go down in Toronto and Vancouver but after three, four years of exponential growth, it’s not like something that we want to celebrate for renters because it’s still extremely expensive but the provinces that have the most affordable rents are the provinces that are going up the most and it’s quite a swing. 

BC Ontario for this last month, they’re the only provinces where asking rents have gone down. Small, one to two percent but other provinces have 20% increases, right? So, that is quite the swing and it’s interesting when you look at what’s happening too as interprovincial migration and we saw from stats can. BC actually had a decrease for the first time since 2012 that 8,500 people leave British Columbia for interprovincial migration go throughout the country. 

And it makes sense when a one-bedroom apartment in Vancouver right now, it’s not cheap, and if you can go to Saskatchewan and get a one-bedroom for 1,300 bucks a month, it adds up, right? 

[0:33:31.9] TS: Definitely. I was going to say all those people from BC probably just went to Alberta. 

[0:33:35.1] GL: Alberta was calling, yeah. 

[0:33:37.1] TS: You know what could be interesting and this is 10 years down the road but from the data you guys have, going back to, let’s call it pre-pandemic, let’s say January 2020, what was the difference in the asking rents in Toronto versus Vancouver versus Winnipeg versus Halifax, all the markets, right? And then in 10 years from now, it’s still going to be expensive across the country. 

But the other may kind of go like this where they’re never going to be the same. Toronto may hover for a while where other markets is going to go up and it’s going to get close and we used to have this saying that used to apply, which was how far do you have to drive until you – it was, drive until you qualify and then we were joking when the pandemic happened is like some people are like, “Oh, I’m going back to the city because things got crazy.” 

Now, it’s like how far do you have to fly to go get a more affordable housing alternative but if everyone is thinking that same thing, at what point do the number get too close that then it swings back the other direction? 

[0:34:32.2] GL: Yeah, and that can be something that happens too where it seems to be that the number one thing that they’re talking about right now, politics is supply, supply, supply, increasing supply, and you know the government whether it’s provincial or federal, they’ve added a lot of policies, changes, and regulations. They’ve removed HST for developers who want to build purpose-build rentals in the hope that this does impact not only the rental market but the housing market in the future. 

Are we positive on how this is going to be? Do we like the changes made or is it so much as maybe it’s not necessarily some of the new policy changes, it is just the fact that they’re willing to address it and so much attention is being brought to it that that might be a win in itself? 

[0:35:07.8] TS: I think you make a good point there, everybody on all levels of government and even different political parties have the same understanding at least in what they’re saying, which is like something has to change here. I know we have these wild projections of what we need to build over the next however many years that it’s unrealistic. Like, it’s not going to happen. It’s not going to happen.

I don’t want to be pessimistic about it but if immigration is even close to what it’s been in the last few years and that continues, if shovels are not going in the ground right now, what’s going to happen in five years? We’re going to have the same conversation like we had five years ago and five years before that and sure, maybe some markets will do better than others and things like that and perhaps, a change in government, if that does happen, they’ll make adjustments on immigration or I don’t know what they’ll do. 

Who knows? But long term, it’s very difficult to just look at the fundamentals of population growth, unemployment, and interest rates. Those will be the three things I would track. Unemployment right now is not great, that’s why rates are going down, so then that goes to number two, which is okay, rates are going at a downwards direction maybe you give that a checkmark for the first time in a long time, and then population growth is the most we’ve ever seen. 

And I’ve always looked if those are the three pillars, if two of them are strong then the market will be fine. If all three are weak, that’s when things are going to get really bad. 

[0:36:30.3] GL: And just to add more context, I believe CMHC, their estimate was by 2030, we need three and a half million homes built to restore affordability, which is I think three times the historical record of pace that Canada has ever built. It’s not going to happen. There’s no way it can happen, right?

[0:36:47.1] TS: And you know what could be interesting too, let’s say, magically, they do it. What do you think they’re building?

[0:36:52.4] GL: Yeah, that’s interesting because that’s the other caveat that I try to say as well. You know, it’s not necessarily luxury condos that we need. We need student housing supply, we need affordable housing, right? I’m assuming they’re going to build what will make them the most money back.

[0:37:05.1] TS: But like, who is building right now? Purpose-built rentals, right? They’re the only ones really –

[0:37:09.7] GL: That’s what the cranes are, they’re purpose-built rentals, there’s three of them on my street right now.

[0:37:13.4] TS: Yeah. So, let’s say they even hit half these projections and we do bring two million new units, are a million and a half or 75% of them rent purpose-built rental apartments? Not to say that’s good or bad, it’s just, what are we building things to get people into home ownership or just building more rentals? Not that one is good or bad but it’s just an interesting conversation.

[0:37:34.7] GL: No, it absolutely is. I like to look at it as because all the attention is brought to it, it seems you can’t turn the TV right now and not hear someone in government talking about the housing supply issue. You know, there is that whole thing that I’ve heard sometimes as well, maybe they’ll over correct and they build so much supply that it will start to devalue the supply that’s already here and I’m like, I think we’re so kind of apart, that that would take an exorbitant effort but I don’t have to worry too much about that.

[0:38:00.0] TS: I also think it’s important to understand that like, they need to build the supply that people actually want to buy. We have condo supply, there is like, 2,500 condos, if not more, just in the downtown core for sale right now. They’re not selling. Well, why aren’t they selling? It’s because the – we have the supply but then, unless he will sell me for 1.8 million dollars is flying in a week. Well, that’s way more expensive, why is that moving?

Well, that’s what people want. It’s this weird thing where we can continue to build but if we don’t find out what people actually want, then even when it’s ready, are they going to want to actually be interested in buying it? I don't know.

[0:38:37.4] GL: I don't know either. You know, it would be interesting to see what’s going to happen. I mean, for those who do kind of want to follow along with you, whether it’s to get in contact with you about your real estate team or your show, what’s the best way to do so?

[0:38:48.1] TS: Yeah, if they just type my name into YouTube, Tom Storey, you’ll find me there, you can check us out on our website at StoreyTeam.ca. 

[0:38:54.0] GL: And we’ll link it all in the show notes as well. Tom, I really appreciate it. We love your content and I think it will be interesting to touch base again in a couple of years from now and see where we’re at if we’ve changed, if things got better or worse, and just kind of relay what the market is. So again, thanks so much for your time, Tom, I appreciate it.

[0:39:08.6] TS: Thank you. I will say, I am still optimistic, I like Canada, it’s a great place. I’m not leaving.

[0:39:14.4] GL: No, we love Canada.

[0:39:15.7] TS: People are just so negative online. I know a lot of what we talked about today is how tough it is and things like that. There is still massive opportunity in every market in every market. You can say, “Well, woe is me.” And give up, or you can figure out how to make it work for you, and maybe that’s being created by buying the property with the basement suite or buying with a friend or whatever it is, renting with roommates to save yourself so it’s cheaper.

I think there’s still opportunity and great things can happen, it’s just interest rates went up like crazy and it actually should have been worse. So, the market doing what it’s done I think and so it is kind of magnificent. Now, let’s see what happens moving forward.

[0:39:49.5] GL: That’s exactly it and we try to say the same thing is, look, it’s going to be a little tougher but these are some things that you can maybe do as a renter, right? Make sure you get your references in check, make sure you got an employment record, or where you still got – you’re applying for billings. You have all the stuff already that can maybe separate you from the rest because like you said, competition is really high. 

But you know, we’ll see what it is but again, Tom, thanks so much. I really appreciate this and we’ll be following along with all your content for the time going. So, thank you.

[0:40:13.2] TS: Sounds good. Thanks, man, thanks for having me. 

[0:40:14.6] GL: Thanks.

[END OF INTERVIEW]

[0:40:15.8] ANNOUNCER: Thank you for tuning in to another episode of Sync or Swim, brought to you by Rentsync. If you enjoyed today’s show, make sure to visit www.rentsync.com/podcast, for detailed show notes, key takeaways, and more. Thanks for listening. 

[END]