Market Commentary - September/October 2011
August was another strong sales month in Toronto. The Toronto Real Estate Board (TREB) reported 7,500 in sales – 24% higher than for August last year. In the total condo market, sales were ahead by the same percentage. However, Downtown condo sales were 30% higher. What is more impressive is that the sale-to-listing ratio went up from 34% a year ago to 42% this August in spite of more product. A balanced market – between buyers and sellers – is usually 25-35%.
The real question for many is: how will this market perform going forward? We are expecting about 7,000 sales in September. While this will be down from August, it is consistent with the seasonality of real estate sales. October is usually the largest sales month in the fall. If you want an early indication of the market for 2012, just watch the numbers for October and November for a clue.
But for most people it is all about the prices. While we hate talking in generalities about prices per sq. ft. for the overall market, our feeling is that prices are about to level off. In the condo market, there are really two markets. The pre-construction or new condo market is fuelled by investors who then rent or resell their units into the resale market for end-users which gets reported as TREB sales. Investors are only concerned with prices and our new projects are now approaching the $600-700 per sq. ft. range. Only ten years ago we were talking $300. On the other hand, New York prices have been at the $1,000+ range for several years and are not moving much. We all like to compare ourselves to New York but we are not New York in terms of either money or appeal. Resale prices are always lower – today about $500-600 per sq.ft. Investors only buy if they believe they can sell for more later and the price difference with New York is now quite small. And if pre-construction does not move higher, then neither will resale.
So let’s look at actual prices in the Distillery District. – just east of Downtown. We selected a building that appeals to people who like the soft loft feel and has minimal amenities, which keeps condo maintenance fees low. The building is 80 Mill Street and with 1965 units, has a good sales history. The first unit we tracked was a one bedroom plus den with balcony and no parking. At 640 sq. ft., it sold for $303,000 in June of this year. That’s $473 per sq. ft. The same unit sold in 2007 for $237,000 and in 2006 for $223,000. The price gain is 36% over five years. The second unit was bigger at 974 sq. ft. It is two bedrooms two baths, with den and parking. It sold in August of this year for $435,000 or $446 per sq. ft. The same unit sold the year before for $395,000 which represents a 10% increase. So why are these units selling below the $500 per sq. ft number? First the east side of Yonge St. has historically sold for about $50 per sq. ft. less than the more popular west side of Yonge. The building is also ten years old and has limited amenities which eliminate a lot of first time buyers.
People renting in August are now looking to the fall market. The lead time from renting to occupancy is about 45 days on average. In August the downtown condo market leased out 19 studios, 256 one bedroom units and 174 two bedroom units. This was about 20% lower than in July. Studios were renting for $1275 per month. The entry level for a one bedroom unit without parking is now $1500. The most popular unit is a one bedroom plus den with parking which now rents for about $1725 on average. Two bedroom units start at $2,000 per month and rise to over $2500 on average for two bedrooms plus den and parking. If you can find a three bedroom unit (three were leased in August), you can expect to pay over $4,000 per month.
For more information on the market or to discuss your personal Real Estate goals, do not hesitate to call or simply complete the form below.