Market Commentary - July/August 2011
We have reached the midpoint of the year with June sales on TREB ahead 21% over June of 2010. On a year-to-date basis, sales are still 4.5% lower than a year ago. Condo sales were also up 23% over June of last year and downtown condo sales were up by 25% over the same month a year ago. On a year-to-date basis, downtown condo sales are actually up 1%. But the real story this year has been a reduction in active listings by 24% over the same time last year. Even in the downtown condo market, active listings are down 3% from June 30th of last year. And that is after we have had several thousand new condo units being registered this year. What is happening is that these units are either being sold as assignments before registration or investors are renting them out.
In a normal year, 55% of all sales take place in the first six months. Last year, with the introduction of the HST on July 1st, that number was 57%. Even the experts have now conceded that 2011 sales will be greater than 2010. They are now forecasting a market correction in 2012. If you recall, these same experts have been calling for a market correction every year since 2007! One year they will be right. But by that time, those who have been renting will have lost too much to ever make it back. The secret to real estate is: don’t try to time the market but be in the market! If prices rise and you are not in the market then you lose. If you are in the market and prices fall, then what you want to buy next has also fallen – in fact falling prices are the best time to trade up as higher priced properties tend to drop more in absolute terms than cheaper properties.
It is summer and everyone wants a property on the water. For Toronto we have Queens Quay and this month we looked at sales at 550 – a very popular 10 year old building with some great lake views. The first unit we looked at has a one bedroom, one bath with parking and locker. At over 600 sf, it sold in June of 2011 for $324,000. The same unit sold in 2005 for $208,500 and in 2002 for $218,000 (See the market has not been going straight up over the last 10 years!). The unit has partial lake view and sold at just under $500 per sf. It has appreciated at 5% per year. The second unit we examined was a two bedroom, two bath unit with parking, locker and balcony. It also sold in June of this year for $520,000. It previously sold in 2004 for $370,000. The unit at over 1100 sf sold for $460 per sf and this is with direct lake view! This unit also has appreciated at 5% per year over the last seven years. What do these two sales tell you about our market? Are we in a speculative market ready for a big price correction, or in a steady, healthy market with good technical support?
Vacancy rates for condos continue to be below 1%. Multiple offers exist in the rental market as well! In the Downtown market in June, 29 studio units were leased for $1300-1350 on average. There were just under 400 one bedroom units rented, starting at $1400 per month without parking. The most popular one bedroom units include a den and parking. These are renting for $1650 per month. Over 200 two bedroom units were leased in June. Two bedroom units without parking were averaging $2000 per month. The most popular model included a den and parking, and these were averaging $2350 per month. Total rentals for the month were actually lower than in May and this is solely attributable to a lack of rental supply. We expect rental rates to continue to move slowly higher for the balance of the year.
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