Does crime pay in real estate?

The Federal government is putting up for sale Hell’s Angels’ former clubhouse in Leslieville, and realtors are saying it could go for $700K. A bar, a meeting room, two bedrooms and fixer-upper pricing? What else could you want from a bunker?

Leslieville not that long ago was a last bastion of affordability in an increasingly unaffordable city, but not even weeds in the yard, stains on the floor, steel double front doors or wire-reinforced windows can keep a property from fetching top dollar these days.

The Eastern Avenue property is about 2,500 square feet and was taken over by the Feds in 2007 using its proceeds from crime legislation; a few weeks later, a police raid led to drug and weapons charges against five members.

Although it was assessed for tax purposes at $371,000 this year (actually down from $383,000 three years ago), tax appraisals don’t carry a lot of meaning when it comes to highly sought after neighbourhoods. Comparables aren’t much use either — what could possibly compare? So the government looked to a handful of realtors for a market value assessment.

In much the same way that a leaked sex video once carried enough stigma to ruin a career and has now become a stepping-stone to, if not legitimate stardom then at least temporary notoriety, there doesn’t seem to be much stigma attached to the property.

Curious visitors drop by regularly for a gander at the exterior, although only members, realtors and police have seen the inside up until now. I’m guessing the internet traffic to the MLS site when the property is listed in a couple of weeks is going to be heavy. These days, criminality is pretty glamorous stuff.

Al Capone’s Palm Island house sold for nearly $10 million a few years ago. If planning the St. Valentine’s Day massacre and Capone’s on-site death can’t bring up the property values, what the heck can?

While name recognition does open some interesting marketing doors, it doesn’t historically add a great deal of value to a property. Capone’s Chicago two-flat house was originally listed in 2009 for $450,000 but sat on the market for a year before being relisted at the half the price.

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Of the myriad expenses that can add thousands to the cost of a home sale, the land transfer tax won’t be one of them for the 443 Ontario municipalities outside Toronto. Municipal Affairs minister Ted McMeekin announced during a question period in the legislature yesterday that although local governments are looking for ways to increase revenues, they won’t extended the same power Toronto has to impose the tax we’ve been collecting since 2006.

The provincial equivalent remains in place. With the provincial/municipal double-dip in Toronto, buyers of a million-dollar home can expect to spend another $30,000+ to close the deal.

It’s ironic that the province’s most expensive market is yet more expensive, but obviously there is necessary infrastructure in running a city this size that other markets don’t have. At least it helps keep prices semi-affordable, and was roundly celebrated by PC members when the announcement was made.

In the spring, MoneySense Magazine published its list of the best deals in real estate, and the lack of land transfer tax continues to give buyers a reason to consider homesteading outside the GTA. First on its list overall was Thunder Bay, with average 2014 home prices of $208,705.

The next Ontario communities were Barrie, Brantford and Hamilton, with average prices of $338,624, $275,622 and $405,619, respectively. Guelph and Durham Region came next in the province, with $357,569 and $387,492. All were in the top 10, and except for Thunder Bay, are in theory commutable from Toronto.

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CMHC said yesterday that if oil falls to $35 US a barrel and stays there for five years, it would trigger unemployment of 12.5% in Canada, with a 26% price drop for houses as further collateral damage.

Agency CEO Evan Siddall told a Canadian Association of New York luncheon audience that the scenario wasn’t realistic, but is one of the factors they’re considering in assessing housing risks to come.

Widespread global deflation was another such factor, which they said could mean a 44% drop in house prices. It’s again the ensuing result on unemployment — which they said could go as high as 16% in such a case — would be the most impactful fallout. A major earthquake in Vancouver could drive prices down by 30%, they said.

The good news is that Canadians rarely default on their CMHC-insured mortgages, at a rate of less than half of a percent as of September. CMHC says it has enough money to ride the tide although it would have to reduce the amount of money it gives to the government if such events were to occur.

CMHC presented a variety of outlooks for 2016, from a 4% drop to a 6.5% rise in housing prices depending on the location.