Chris and I have known each other since elementary school. He lived on the street next to mine. We’d take the same public bus home from high school, and so the bus stop at Finch and Kennedy was a routine that involved conversations about food, Mid-East politics, and women.

Chris is CFO and COO at PURE Building Group. We met for coffee and a discussion on the housing market. Turns out he’s not a fan of real estate agents.

So what do you think, Chris? Is this a good time to buy a house? Should one wait?

It’s always a good time to buy. And it’s always a good time not to buy. Depends. And I hate hate hate, loathe some real estate agents for being so one-dimensional. And obviously they’re looking out for their best interests. But the stuff they put out is propaganda. Don’t get me wrong, there are some honest realtors with objective opinions out there but they are rare to come by.

And the ones you dislike, are they pushing out negative or positive opinions about the market?

Always positive about the market. And it serves them in that respect.

So are things not as rosy as we read? There are some people who talk about a possible housing bubble in Canada. How true is that? 

I think a lot of the criticism out there is not founded. All this bubble talk, I think it’s over exaggerated. I think you need to separate the condominium market from the single-family residential market. Because really, the condo market is supported by investors. It’s led to a lot of speculation. And with the condo market it takes time, from planning a condo to getting approvals to actually building a condo, so it’s a lot more vulnerable to the whims of the market. So I can see the condo market being susceptible to a bubble. I don’t know the magnitude of the correction because Toronto is supported by consistent immigration, even within Toronto with people migrating downtown.

The reason why single-family homes aren’t susceptible to a big correction or a bubble is because there is way more demand than there is supply. And that’s what is driving the prices of houses in Toronto. And when I say houses I’m excluding condominiums.

What about those who are in the market to flip a house?

If you’re flipping you have to consider tax issues. A lot of people, what they do is they actually live in the house and have it classified as a primary residence and then sell it, so they avoid capital gains that way. When it comes to flipping houses it’s all about timing. You have to find a hot pocket and you have to be quick about it. And the most important thing, well, there are two things: the time you buy in, and the time until you sell because you carry the mortgage and you have carrying costs. And who’s to say that the swings in that pocket are going to continue over x amount of years. So you want to get in and out as quickly as possible.

However, with income producing properties, if you have positive cash flow, meaning what you put into the house as far as mortgage expenses, utilities, insurance costs, property taxes, is less than what you’re actually getting from your renters, then you have positive cash flow. Now, regardless of where the property value goes over the long term, if you’re in an area that has good fundamentals over time you can ignore the fluctuations in the property value because you’re getting positive cash flow from that property. So you can wait it out because it takes times with those types of areas. A huge factor for a lot of people that buy into income producing properties to rent out is transportation infrastructure.

I was reading a recent article, in The Globe and Mail,  about home prices in the Sheppard and Bayview area. The area between Finch and Sheppard, and between Yonge and Don Mills… that area is just booming!

In that area, because it’s going through a transition, there are quite a few new developments. It’s close to Bayview Village, close to the 401, close to Yorkdale Mall, close to the DVP and the subway. A lot of speculators are buying property to flip in that area and that has brought land prices up.

So is it too late for an investor to move into that area?

You wouldn’t have a problem selling in that area, but rising land prices are eating into potential profits. If you want to live there, it’s a great area to live. But for an investor, I wouldn’t recommend it unless they have experience working at that price point.

Would you buy right now?

Would I buy a property right now? It depends. There are a few things to consider. The condo market is at more risk than buying a house or a town home. Like I said, the momentum pushing the condo market is speculative investing. A lot of the buildings going up today are based on the drive towards getting that return and knowing that interest rates are very low. I don’t know how long this will last and a correction will happen. We’re already seeing some condos begin to have vacancies. My theory is that people who want to buy condos to live will buy them up once the pricing comes down.  They’re not going to wait long. People will see a drop in prices and feel the homes are affordable.

Is there a way to manufacture a bubble-pop and bring house prices down sooner?

(laughs) You can manufacture one. They did it in the States. But I don’t think that would happen in Canada. I’m sure someone with experience in financial engineering could. I don’t think it would be based on fundamentals, so it would have to be psychological. I don’t know…push out propaganda. (laughs)

(laughs) Like a real estate agent!  But one pushing negative propaganda.

Joshua Moraes and I bump into each other every so often. And when we do we talk about economic bubbles, letterpress printing, rent vs. mortgage payments, and Goa…we’ve never lived there.

One of Joshua’s latest projects has been outreach for the MP and MPP in the Davenport riding on the issue of the new commuter Air Rail Link between Pearson International Airport and Union Station. During our last bump, we discussed it.

What’s the Clean Train Coalition?

It’s about Torontonians uniting against plans to have diesel trains run through 12 neighbourhoods. Everyone agrees we need the ARL (Air Rail Link) but let’s do it right. Let’s electrify the line. It’s environmentally sound and can serve a ton more residents.

Why haven’t the trains been electrified as part of the plan then? Is diesel cheaper? 

The plan to use diesel can be attributed to the initial costs being cheaper, as well as the rush to have this line up and running for the 2015 Pan Am Games.

Although it is initially cheaper to build the line diesel, the operating costs, once the line is built, are far cheaper if electrified. Studies have indicated the costs would be recouped in 10 years. Also, the diesel plan only allows for two stops between Union Station and the airport, less stops because stopping and starting diesel trains is expensive, dirty and loud. However, electrifying the line would allow for more stops and thus be accessible to a ton more residents, bringing in more revenue.

As for the Pan Am Games, well, my response is ‘who cares’? It’s a two-week sporting event. Why should 300,000 residents in 12 neighbourhoods along the line suffer a lifetime of pollution for that?

Having more stops on the line would defeat the purpose of an express train. Would you rather they forget making it express and just have another commuter line? 

I grew up near Steeles and Victoria Park, the outer edges of Scarborough on the border of Markham. As a teen, heading downtown was rewarding but one hell of a trek. The Sheppard line didn’t exist yet. I would have to take the Steeles 53 bus to Finch station. The 53 did provide one of 4 choices, one of which was the 53E, an express bus that made very few stops on the way to Finch station.

We can do the same here. We can build a line with great flexibility. One that serves multiple commuter needs. While it is possible to electrify the line and still have it be only an express route with two stops, does that make sense? Is that building accessible, multi-use mass transit? Keep in mind that a route like that targets a smaller select group of people able to pay a ticket price upwards of $25.00 to $30.00 to get to the airport. Having more stops opens the line up to more users and brings down the cost per user.

With electric it doesn’t have to be one or the either. 140 trains per day works out to a minimum of 5 trains per hour. How about two express trains and three all-stop trains per hour?  Or maybe three express and three local during peak hours? Electric gives us options, diesel doesn’t.

The people doing the development say that it will take too long for environmental studies, etc, to build an electric train line instead of diesel. They say an electric line won’t be ready for the Pan Am Games. This may be true, but realistically, can this be approved much faster if all levels of government dedicate their attention to getting the approvals pushed fast? Or am I just being overly optimistic that the slow chugging bureaucracy of government can ever speed up?

Greater emphasis should be placed on getting this whole thing done right first and then setting up a deadline. Having 300,00 residents (including day care centres, schools, and a long term respitory care centre within proximity of tracks), and having people across the GTA suffer diesel pollution for years to come because of a two-week sporting event doesn’t make sense.

Red tape is a nuisance for sure but careful assessment is paramount. It’s not just the environment but also making sure that a project like this works to improve the transit needs for the widest number of Torontonians.

(See Clean Train Coalition for more information.)