LONG TERM CONDO MARKET IS POSITIVE

Just about every article I read on the real estate and condo markets in Toronto deals with the short term- what is going to happen in the next month or six months? The truth of the matter is that owning a condo is not a short term decision. Unlike owning a stock portfolio, everyone needs a place to live and investing in ownership rather than renting has proved to be the best choice over the long run for as long as I can remember.
Hysteria over falling prices is way overblown. First of all, everyone reports average prices for Canada and that in itself is a problem. Western Canada experienced rapid price growth and that is where prices are correcting. Toronto did not experience the same price jump and so the downside is much less. Detached housing will come under more price pressure than condos in Toronto because they had a bigger price run up. Secondly, a study by CREA, supported by several banks, shows that where the average house price declined by 10% in Canada, a weighted average to take into account a changing mix in sales – less higher priced homes and more lower priced homes are now changing hands – reduced the price drop to just 5%. But still the only way to get an accurate view is to track price changes for the same or identical unit over time. For that you need a Realtor! And that is what our Company does in our own research. In fact certain types of condo units have not dropped in price and in fact some smaller units are still increasing in value!
What is happening now is that buyers are waiting, because the experts who could not forecast the bank problems suddenly are experts in the real estate market. And people buy the story. That is why prices are softening now. A significant price correction from mortgage foreclosures and excess builder housing stock does not exist in Canada.
Long term, CMHC is forecasting a net increase of people to Toronto from a low of 65,000 to over 100,000 every year – it is going on now and it will be ongoing for the next 10 years at least. Where will these people live? The second trend is that people of all ages are moving away from detached housing into condominiums. And this is expected to continue. By next year over 60% of all new and resales in Toronto will be condominiums. At the same time, we know that several of these new condo projects sold by developers will never be built and these buyers will be come back into the market. The end result is that condo prices will continue to rise over the long term. Yes we will get some modest price corrections, but historically you can bet on the fact that prices will rise by a minimum of 5% annually over the long term. And you can take that to the bank!!

November/December Market Report 2008

SALES COMMENTARY:

Last month, we spent the entire Report trying to educate the public on how the real estate market operates. It did not seem to have much effect as the rest of the Media was intent on doing the ‘Chicken Little’ thing and the public bought in! So let’s go back to reporting the Stats.

Residential sales in October suffered their biggest single month decline this year over ’07; down 35%. The 416 area code was worse, down by 38%. In terms of condos, the overall market was off 25%, but Downtown, where condo activity is stronger, sales were down more, to 32% from the same month a year ago. There is no doubt the New City Land Transfer Tax introduced in 2008 pushed forward sales into late 2007 and this also had a negative impact on this year’s sales. Only the politicians who imposed the tax seem surprised! But the telling signal for Downtown Condos is that the sale-to-listing ratio which last year stood at 65% (a sellers’ market) is now at 25% (a buyers’ market). But before anyone thinks that everything is being sold at fire sale prices, the sale price to list price ratio for condos selling is still at 98%. What is happening is that sellers either get their price or their properties just don’t sell.

Going forward, we cannot emphasize enough that ‘market timing’ never works. Sellers who were waiting for the top of the market missed it six months ago. So if you don’t have to sell now, take your property of the market and wait! Buyers who think that the market will be even softer in six months are also in for a surprise. The long term fundamentals of the condo market are extremely positive and all of the bad economic news has already been factored into this market. The best time for buyers is now when there is so much product available. Wait a year and you will be back in the herd, running after listings with multiple offers.

So let’s look at today’s real estate prices by tracking some sales at the Waterview condos – 2119 and 2121 Lake Shore Blvd. on the Etobicoke waterfront. The first unit we tracked was a two-bedroom with parking at 1550 sq.ft. With upgrades and great water and city view, it sold in December of 2006 for $570,000. The same unit sold again in May of this year for $590,000. Two things to note: at $380 per sq.ft, the price is reasonable and in fact is lower than comparable new developments. Secondly there was no drop in price in 2008. To further prove this point, we looked at two other smaller units in the same complex. The first, a bachelor sold in 2007 for $155,000 and then again in 2008 for $169,000. The second, a one-bedroom sold in September of 2007 for $225,000 and again in May of 2008 for $237,000! So why are average prices down in 2008? As we explained in our last Report, the mix of sales has changed dramatically from 2007 to 2008 – less of the expensive properties and more of the cheaper units are now selling in 2008. That will produce a drop in the published average price, even when individual properties are actually increasing in price! In this market there is no doubt that some properties have declined in price but there are plenty of examples of properties increasing in price too!


RENTAL COMMENTARY:

The rental market remained strong in October with over 150 one-bedroom units leased. The most popular type was a one plus den with parking that averaged just under $1700. The entry level Bachelor without parking averaged $1200. There were 90 two-bedroom units leased. Two-bedroom prices averaged $2340 with parking and a den, down to $2000 for units without parking or a den. The average days-on-market for one-bedrooms was 12-14, while two-bedrooms took 17-20 days to lease up. This is usually the slowest rental period of the year but it is pretty clear what is happening. As more people decide to rent (and wait to buy later), the result has been increased rental prices of $100-150 per month.

UNDERSTANDING THE NEW REAL ESTATE MARKET

Recent events in financial markets have spooked people about the stock market and of course the real estate market. While everyone blames the subprime mortgage market as the primary culprit in bringing down some banks, it is surprising that economists from these same financial institutions are now considered to be the experts when it comes to real estate markets.
First of all, real estate is not all about economics as most economists would have you believe. Real estate is still about accommodation. You can get out of the oil, gold, or stock markets, but you cannot escape the need to have a roof over your head. Most sales transactions occur because of a change in family circumstances – marriage and divorce, children, and even death. So there is always going to be an active real estate market.
Secondly, the BUY versus RENT option that economists keep talking about is not an option for most of us. Already 68% of Canadians own their own home. If everyone tried to rent, how would that work? And if you see most of the rental stock, most Canadians would rather live in their car!
Thirdly, demand and supply is not the primary determinant of price. Unlike other markets, residential sellers either get their sale price or they just take their property off the market. The only time where excess supply can depress price is when properties must be sold by mortgage foreclosure and where developers have built on ‘spec’. This was the problem in many, but not all U.S. markets and is definitely not the case in Toronto!
Now that we have a better understanding of market mechanics, where is the Toronto real estate market headed? For starters, we will not experience any major price correction. We are seeing a pull back in detached housing in central Toronto and at the high end. That’s because the market experienced several years of double digit price increases and household incomes did not keep pace. Historically over the long term, real estate prices will appreciate at about 3% plus inflation. When you get several years of price increases above that level, you always experience a flattening out or a marginal decline.
In the condo market, we experienced only one year of double digit increases. The demand by young people remains strong and our real estate prices are cheap by international standards for non-resident buyers. So don’t expect any drop off in prices in the condo market segment.
This market is also a great time for ‘move up’ buyers. While prices are softening at the high end, the strongest part of the market is at the ‘entry’ or ‘first-time’ buyer level. Move up buyers have a great selection and can negotiate the price of their new property while being assured that there is demand for their current one.
While real estate has never claimed to be the absolute best investment vehicle, I don’t know another asset you can purchase, use, and have it go up in value – all at the same time! So when stock markets can drop by 5% in a single day, putting your assets in real estate that can only go up in the long term is not such bad idea.

October/November Market Report 2008

Everyone seems to be preoccupied with the falling stock market and the inevitable recession. So let’s dispense with the usual report on monthly stats showing declining sales on the Toronto Real Estate Board this year and focus on what people really want to know. Where is the condo market heading in terms of prices?

But before we start, we need a refresher. First disregard what you read in the newspapers and what economists are forecasting. Real Estate is a local market – not a national or even a city wide market. National stats and city stats mean nothing. Yet that is what everyone reads. Secondly, average price means nothing too! Last year more high priced properties sold than this year. So even if the price of a particular property went up, the average price of all sold properties fell. Average price is misleading because it assumes the mix of sales never changes – yet it is always changing. Unfortunately there is no other public price information to use unless you can access detailed Board data such as we rely on. If you follow our Reports, we previously told you that the price of detached housing in downtown Toronto peaked in January – you did not have to wait until October to learn that. The primary reason was the introduction of the Toronto Land Transfer Tax. Sales that would have taken place in the spring happened last December and January. A second reason was that house prices went up too quickly in Toronto - double digit increases in each of the last three years. It is impossible for income growth to keep pace, and that means prices will always go flat or decline slightly until income catches up.
Historically, real estate prices increase by about 3% per year plus inflation. When prices rise faster, there is always a correction later. It happened in the U.S. And it is happening with detached housing in Toronto, but not to the same degree. Why? Another rule of real estate – excess supply does not necessarily mean falling prices. In most markets, if people don’t get their price, they simply take their property off the market. The only scenario where excess supply can depress prices is if people must sell at any price such as when power of sales and builder spec housing dominate a market. This is definitely not the case in Toronto.

So what is driving the condo market? Affordability. We have experienced only one year of double digit price increases. The rest of the time, prices have been rising by about 5%. Again if you read this Report, you know we track price changes of a particular condo in a specific building over a three to four year period in each issue. These types of price increases are certainly sustainable. Right now, the condo market is still experiencing year over year price increases up to the $350,000 price point, and a leveling of prices up to $500,000. Over that figure the condo market has shown some price softening. Most buyers in the higher price range are baby boomers, who because of economic uncertainty are postponing their buy decisions.

To provide a little statistical analysis to this Report, we looked at sales at 1001 Bay Street. The area is a great rental market and is popular with both end users and investors. The first unit we looked at sold twice in 2008. The first time it sold at $275,000 and then in July at $305,000, after the seller had changed the appliances and repainted the unit. The unit is a one bedroom plus solarium without parking at 640 sq.ft. The price increase was 10% and the sale price was $476 per sq.ft. The second unit we looked at, also a one bedroom plus den without parking, sold in May of this year for $285,000 after some minor renovations. It had been purchased 19 months earlier for $245,000 and realized a 16% appreciation. The price per sq. ft. here was $460. The final unit was a two bedroom with parking that was renovated and sold for $540,000 in July. It had been purchased, unrenovated, in 2007 for $350,000. At just over 1300 sq.ft., it sold for $410 per sq.ft. When you exclude the renovations, the conclusions are clear. Prices are still rising in 2008 and they are still in the annual range of 5%.

What we can also tell you about the condo market is that prices below the $500 per sq.ft. level will continue to appreciate. At this time we see NO significant price corrections. In fact we see the condo market leveling off at $600 per sq.ft. with Penthouse and premium view units selling in the $800+ range. That has been our forecast all year - unchanged.

September/October Market Report 2008

SALES COMMENTARY:

Toronto real estate sales continued their 2008 trend – downwards by 22% in August over last year and 15% on a year-to-date basis. Downtown Condo sales are also down on a monthly basis by 13% and 12% on a year-to-date basis. In most commodity markets, lower sales means falling prices. But not necessarily in real estate! If sellers do not get their price, they simply do not sell or they take their property off the market. So how are U.S. real estate prices falling? First many owners have defaulted on their mortgages and banks have to put these properties into the market to sell at any price. Secondly, builders constructed a lot of housing on ‘spec’ and they have it to sell it. In the U.S. there is a ten month supply of housing inventory. This scenario does not exist in Canada – minimal foreclosures and very little ‘spec’ construction. On the Toronto Board, even with active listings up by 31% over last year we have an inventory of only 3.5 months. The Downtown Condo market is in even tighter supply – just over 60 days. A balanced market is closer to 90 days!

Negative economic news from around the world is putting a drag on our market but the underlying fundamentals for condos are favorable going forward. Those people who elect to rent rather than buy are not coming out ahead as demand for downtown living remains strong and the rental market is getting tighter (see below).

In this Report we tracked sales at 230 King Street East. While the East side is not as popular as west of Yonge, it is edgier and this is a great building. The first unit we looked at was a one bedroom loft, without parking at 550 sqft. One unit sold in late 2006 for $189,000 and the same unit again in June for $218,000. An identical unit on a higher floor also sold for $189,000 in late 2006 and then again in July this year for $242,000! One month later for an extra $24,000? The average sales price without parking is $420 per sq.ft. The price appreciation was just over 21% in twenty months. Let’s look at sales of two bedroom units in 2008. We looked at three units, all with parking and ranging from 755 sqft. up to 850. The price per sq.ft was $450 to $475 but two of them have sizable terraces and when you deduct the cost of parking - $30,000 and a terrace from $30,000 to $50,000 – the price per sqft. comes back to the $410 to $440 range. The market can certainly support these types of prices.

RENTAL COMMENTARY:

Predictably, rental volumes dropped in August as demand for October and November occupancy is approaching the slowest months of the year. The number of one bedroom units leased was just over 130 versus 200 per month over the summer. The most popular unit is a one plus one with parking. The average rent is now $1650. Very few bachelor units reach the market and they are renting for $1250! Just over 100 two bedroom units were rented – the most popular included parking and the rent averaged $2150. Those with a den are now going for $2325. It is obvious that people are using the den as a third bedroom as it is almost impossible to find a three bedroom condo to rent – and if lucky, expect to pay just under $4000 for rent. Days on market to rent has dropped to just under ten! Experts advising people to rent rather than buy a condo have made the rental market extremely tight at this time.

Who are Buying Toronto Condos in Today's Market?

Newspapers have documented the slowing of the Toronto real estate market - off about 15% from last year. Toronto condos have also recorded lower sales in 2008 - about 11% lower.

Negative press has made many 'baby boomers' more cautious. A slowing economy and the U.S. mortgage market problems which have spilled into the U.S. real estate market have made these people think that it is only a matter of time before Toronto prices trend down. The result has been a slowing in sales for condos priced over $500,000. Still condo prices have moved up another 5% this year - steady but hardly an indication of a price bubble.

On the other hand, 'first time buyers' either don't read the papers or they don't know the meaning of the word recession! Their belief is why worry about the next year, long term real estate has always been an excellent investment and you cannot dispute that! The proof - sales of condos in the $300,000 to $400,00 range are 21% higher than July of 2007.

But the other group still buying condos in Toronto are foreign buyers. They believe that Toronto condo prices are still under valued versus other major markets around the world. And they are right. Saturday's Toronto Star showed that high end condos are priced at half to one third of the prices, of condos in London, Paris, New York, Sydney, and Dubai. And when you think that condo prices are also lower in Toronto than Vancouver or Calgary, then the chance of a price correction for Toronto condos is not on the immediate horizon!

August/September Market Report 2008

SALES COMMENTARY;

Another month in the books and the results are the same. Sales on the Toronto Real Estate Board were down by 12% in July from July of last year. Active listings are up 28% and the average price was up by just 1% over last year. It certainly suggests that the market is slowing down and we do to disagree with that assessment. In fact, you read it several months ago in this Report that house prices in Toronto ‘peaked’ in January of this year! Yet we continue to believe that owning is a better option than renting- and so do most Canadians!

But the biggest problem with reporting numbers like these is that both bank economists and newspaper reporters somehow believe that the housing market is just another commodity when in actual fact real estate consists of many micro markets. In July, condo sales between $300,000 and $400,000 were 21% higher than in July of 2007. In July of 2008, 16 condos over one million dollars were sold compared to just 9 in July of ’07. What does that tell you about market segments? There is no doubt that overall condo sales in the Downtown market are lower – about 8% from last July. The sale-to-list ratio – what we believe is the best economic indicator of any market segment is at 46%. Last year in July it was at an unsustainable 80%! Remember that a balanced market is in the 30% range and the Toronto Board is at 29%.

In this Report, we wanted to look at a variety of sales in 2008 that took place at the three towers of Water club Condos – 208 and 218 Queens Quay and 8 York. This complex has great facilities and appeals to the under 40 group. While most units have narrow layouts, they offer great lake views. The first unit we choose is 704 sqft. without parking. It has a bedroom and solarium. It sold in February of this year for $295,000 and the same unit sold 15 months earlier for $279,000. The real facts - $419 per sq.ft. without parking and a 5.7% increase in price over 15 months. Let’s look at another unit – a smaller one bedroom with parking. It sold this year for $275,000 and also 15 months earlier for $249,000 – that’s a 10% increase. Parking in the complex is scarce and sells for over $30,000. If you eliminate the parking, this unit sold for $470 per sq.ft. – at the high end of the resale market. Finally we looked at a Penthouse which sold for $1,130,000 this year. It is only two bedrooms and two baths, parking, locker, but has 4 walk outs to a large terrace with great city and water views. The furniture was included. The same unit sold without the furniture 18 months earlier for $880,000. While the price increase was 28%, if you adjust for the furniture it is less than 17%. The price for this Penthouse is just under $700 per sq ft, which is not unreasonable.

What’s the moral of this story? Prices are still rising for condos in 2008 – at a rate of 5% annually, which is certainly sustainable going forward. Prices per sqft. in a prime building are still under $500 and the Penthouse price is not unreasonable. Conclusion - we don’t see the possibility of any price correction in this building or in the Downtown condo resale market.


RENTAL COMMENTARY:

The rush to rent for September 1st has been intense for the last 30 days. Multiple offers are the ‘norm’ not the exception and who would believe that. Rentals are averaging less than 15 days on the market and are renting out at 100% of ‘ask’. The condos under construction can certainly be rented out in this market. Last month we reported that rental rates were up by $50 per month across the board. Bachelor units are scarce and the entry level is $1200. One bedroom units start at $1400 without parking and will go over $1600 for a one plus one with parking. July was the biggest month ever for two bedroom rentals. Expect to pay $1800 without parking (rare) to $2,000 with parking. Two plus a den start from $2200. The market for three bedroom condo rentals is basically non-existent.

July/August Market Report 2008

Sales Commentary

June's results on the Toronto Real Estate Board continued the downward trend in sales and the upward trend in active listings. Sales were down by 18% from the same month last year while new listings increased by 10%. A sure recipe for prices to level off at a minimum! So don't get fooled by average prices being higher than a year ago. The condo market fared slightly better. Downtown condo sales were lower by 12 % but new listings were up by 17%, partly because the condo market is generally more active over the summer.

The HALF YEAR report card is in! Overall sales are down by 15%. Our forecast is that annual sales for 2008 will be 80,000 units (in 2007 it was 93,000). Sales will also be lower than in 2006, 2005, and 2004!! Prices for detached housing peaked in January. Downtown condo sales in total have slowed as well by 11% but active listings are only up 4%. What has happened is that we now have a two-tier market. The condo market under $350,000 is still very strong. Affordability and the fact that young people are not as 'up tight' about the economy, explains the strong buyer interest in this segment, which still can produce multiple offer scenarios. Also there is strong buyer interest from non-residents who still feel that Toronto condo prices are cheap compared with other major world cities. Unfortunately, those Torontonians over forty seem to fear a possible recession which is creating caution at the high end of the market. Market fundamentals suggest that condo prices are not going down! They are just going sideways for the balance of the year!!! While some may preach doom and gloom, the long term outlook for condos remains strong for those who take a longer perspective.

This month, we focused our attention on one of the original and largest loft conversions - the Merchandise Lofts at 155 Dalhousie. To trace the market over the last three years, we tracked the sale of the very same unit, sold in 2006, 2007, and again this year. The unit, one-bedroom with balcony, parking, and locker, occupies 743 sq ft. It was listed for sale in 2006 at $278,000 and sold for $295,000. In 2007, it was listed at $310,000 and sold for $317,250. This year it was listed for $324,000 and sold for $320,000. In three years the unit appreciated by 8% - hardly inflationary! But compared to the stock market, it may not be so bad! While the unit sold over list price twice in the last two years that is more a reflection of sellers trying to create activity by under pricing as opposed to speculation. The price per sq ft at $430 with parking, or $400 without is hardly something to worry about. Buying a new, prebuilt project at $550 per sq ft without parking is something that would cause concern.


Rental Commentary

We are now in the peak of the rental season Downtown. Activity is up - over 200 one-bedroom units were leased in June. Rental rates across the board are up about $50 per month on average. A one-bedroom with parking is going for $1550 on average. A one plus one with parking is $1650. A parking spot is still averaging about $100 per month. Bachelor units are starting to hit the market - $1200 without parking and $1300 with parking. Over 110 two-bedroom units were leased, the most popular being with parking, no den, at $2200 per month. There were only 30 furnished units leased last month. A furnished unit will cost from $300 extra per month for a one bedroom up to $700+ for big units. Most rental units lease out in 10 -20 days on market. The average rent-to-list price is still 100%.

June/July Market Report 2008

SALES COMMENTARY:

May sales on the Toronto Real Estate Board were again lower than the same month last year – down by 16%. At the same time, active listings were 8% higher than a year ago. Condo sales fared better. They were down 9% overall, and off by 10% Downtown from May of 2007. After FIVE MONTHS, let’s put the condo market in perspective by looking at the YEAR TO DATE condo stats. Yes, sales in 2008 are 9% lower than 2007 but listings are up only 2%! At the same time, the days-on-market for solds dropped from 28 days in 2007 to 23 days this year. The sale-to-list-price ratio was 100% in 2007 and is still 100% in 2008!

What does that tell you? Price it right and it will sell. Price it wrong and it will sit. We have a strong and active market in 2008. What we can also tell you: is that while condo prices are higher today than a year ago, they are also lower than January of this year! But what we are hearing from some potential buyers is that a major price correction is around the corner because their financial planner told them so! When we asked, where their financial planner was basing this insight from, all we got was this is the time to buy mutual funds!! So what will trigger a market correction? A price bubble? Not likely as condo prices have only experienced one year of double digit appreciation which was last year. You need three years at least, or a 50+% jump in prices, as was experienced in Western Canada. A significant change in economic factors? While we did not get a further drop in the bank prime, mortgage rates are still at historically low levels. And while the country may be heading into a no growth stage for a couple of quarters, that’s not the case in central Toronto where shoppers on Bloor Street are still plentiful. The one concern is an oversupply of new condos coming to the market, but condo construction has been delayed on a number of projects and the huge completion numbers for 2010 have been pushed out to 2011/2112. So relax!! It’s still a good time to buy, but it could be better, if sellers would be more realistic in their price expectations and buyers not spooked by financial planners.

In this Report, we tracked sales at 909 Bay Street – the Allegro built in 2000. This is one of the top buildings on the street with the most condo sales in Toronto last year! We compared a one bedroom plus den at 786 sq.ft. with parking and balcony. The highest sale price for this unit in 2008 was $390,000. The very same unit sold 12 months earlier for $355,000, or 9.8% more. An identical unit, on a lower floor sold for $359,000 in 2007. This same unit sold in 2006 for $293,000, a 22% increase in price. Prices are now approaching $500 per sq.ft. in this building. We are still forecasting the market to level off at $600 sq.ft. on average for premium buildings Downtown.

RENTAL COMMENTARY:

In May, over 190 one bedroom units were leased – the most popular being a one bedroom plus den with parking at an average price of $1600. A one plus one, without parking averaged $1500. Furnished one bedroom’s will go for over $1800. For those who need to know, premiums are still $100 per month for parking and a $100 for a den! There were 85 two bedroom units leased in May. The average was $2000 per month without parking and this increased to $2500 for furnished with parking. The rental market should remain strong to September because of seasonality. Throughout the market, the list to rental price averaged a 100%, leaving not a lot of room to negotiate for potential tenants!

CONDOS ARE THEIR OWN MARKET

Condo sales and prices in the U.S. have generally bucked the overall real estate market. Of course there is Miami, Las Vegas, and Phoenix where overbuilding on spec has caused a real market weakness.

But what about cities like New York and Boston? In Manhattan, the home of the financial services industry and where 'sub prime' mortgages were securitized and circulated around the world, like some infectious disease, we have seen thousands of job losses in the financial services industry. Still condo and co-op housing prices rose by 5% last year!

In Boston, a city not unlike Toronto in size and industry infastructure, we have seen condo sales remain steady and prices continue to edge up.

So what about the Toronto condo market? May sales on the Toronto Real Estate Board were again lower than last year and listings are rising. This is good news for buyers and for the overall market. Price increases are moderating which will sustain the market are current levels. History shows that three years of double digit price increases will create a price bubble and eventually a price correction. The Toronto house market has already experienced that, and price reductions are starting to be observed. In the condo market, we have seen only one such year of double digit increases. My guess is that price appreciation will continue this year for condos, but at a much lower rate than last year.

Again the condo and house markets are moving in different directions.

IS THE CONDO MARKET HEADING DOWN??

TV's Condo Broker, Brad Lamb, always has an opinion and he now believes the condo market is heading down. He says condo sales are down over 15% this year. He is probably talking about his own Company. Also Brad is so busy, he is not doing any personal sales. If he was, then he would know that multiple offers are still taking place on condos under $300,000 and that days-on-market (for solds) are the same as last year.

Yes condo sales are lower than last year's record numbers but the market is still very strong and I don't see any fire sale prices!! In fact our Company is enjoying record sales this year.

The key to this market is knowing value: pricing your property to sell for owners, and knowing what to offer for buyers. The properties that are selling are averaging a 100% of list price! What does that tell you? Over price and get no sale! Under bid and get no buy!

You just need to know your way around the market. The following link http://www.remaxcondosplus.com/market-statistics.3.php will take you to the latest twelve month trends on condo sales in Downtown Toronto. You can then draw your own conclusions!!

May/June 2008 Market Report

Sales Commentary:

April was the third month in a row where sales were lower than the same month last year on the Toronto Real Estate Board. Only in January, when buyers were trying to beat the New City Land Transfer Tax, were sales higher than the previous year. It is also safe to say that May's sales will be lower too! In terms of numbers, residential sales were off by 7%. But for the first month, the listing inventory was 18% higher than the same month in '07. That is the telling factor!

Remember that we have always stressed that real estate is not a national market, although it makes for a good story. Real estate is not even regional but is a local market. Unlike other commodities, you cannot 'truck' excess capacity i.e. listings from one market to another. Economists simplistically think that excess bungalows for sale in Brampton will drop the price of penthouse condos in Toronto.

So let's skip the rhetoric and focus on the facts that only we have access to in the Downtown Condo Market. Condo sales were off by 12% - all of it happening in the area east of Yonge Street. In fact west of Yonge and the Etobicoke Waterfront, sales were even with last year. But what Buyers and Sellers need to focus on is the SALE-TO-LISTING RATIO. Last year it was 52% (east of Yonge it was an incredible 96%) and this year it dropped to 46%. Remember that a balanced market runs at 25-35%! While buyers may be in a stronger position than last year, condo sales in April averaged 101% of list price! The message is clear to sellers. Price it right and it will sell. Be greedy and be prepared to sit with all the overpriced listings! Finally, this is still a good real estate market - the fundamentals for the condo market have not changed.

This month we looked at sales in the DNA building at 1005 King St. West which was registered in 2006. DNA is one of the hottest buildings in the trendy King West market, the preferred area for first time buyers. We looked at two one-bedroom units with parking. The first unit, at 645 sq.ft. was sold in December of 2006 for $240,000and was sold again in April of 2008 for $277,500. Another unit, measuring 650 sq.ft. with parking, was sold in January of '07 for $249,000 and then 12 months later for $279,000. The key points are: prices are averaging $430 per sq.ft. and prices are rising at 12% annually in this building.

Rental Commentary:

People still want to know what an entry level - bachelor unit Downtown goes for - $1100! But the average bachelor unit will rent for $1200+. In the one-bedroom market, over 170 units were leased in April with an average stay on the market of just 15 days! The rental market is picking up. Expect to pay between $1400 and $1500 for a one-bedroom. The two-bedroom market recorded over a 100 rental leases in April, which is a much bigger number than a year ago. Rental rates ranged from a low of $1850 without parking to a high of $2200+ for parking and a den.Three-bedroom condo apartment rentals are scarce but if you find one, expect to pay $3500+.

TORONTO CONDOS ATTRACTIVE TO FOREIGN BUYERS

We always knew that foreign investors liked our condos. Our Company sells a lot of these properties every year to these kinds of investors.

Now the world read ECONOMIST Magazine in its April 5th edtion confirms our views. It compares house prices around the world in terms of over and under valued and where a housing bubble is most likely to happen. Now we have never believed in national real estate markets - they are defintely local, but you can use their findings for general trends. The Economist has compared average house price increases over the last TEN years against corresponding increases in incomes and declining interest rates to determine where prices should have increased over this period if affordability remained fixed. It looked at the top 20 countries in the world. House prices were overvalued in Ireland by 30+%. Britain was at 28% and the U.S. was at 11%. All are experiencing house price declines in 2008.

Only two countries had negative numbers - Austria and Canada at minus 3%. That means prices in Canada could rise by another 3% on just affordability alone. Now these numbers are for Canada as a whole and when you consider Alberta, and Saskatchewan with price increase over 50% in the last two years, and Ontario having the lowest increases in prices in Canada, then Toronto condo prices have a long way to go. The 'locals' don't seem to get this, but foreign investors, who look at the world markets sure do.

And when you factor in our currency - sure it is stronger against the U.S. dollar, but it is still relatively cheap when compared to the Euro and British Pound.

Why is it that Canadians have less faith in themselves and their country than people looking in from the outside??

April/May 2008 Market Report

Sales Commentary:

Here we go again explaining why sales are down. Yet the market is not correcting, as many newspaper experts want you to believe. Remember last month's Report when we told you that bad weather can impact a market, and that we also expected March sales would be lower too! Well they were! Residential sales for the month were off by 22% from March of '07. Overall condo sales were also lower by 10%, and the Downtown and Etobicoke markets were off by 18% and 14%. So condo sale numbers do lie!! What is more important is that the average 'days on market' is only 24. In the U.S. it is measured in months - try 8 to 10. The average 'sale to list price' is 101% - and multiple offers are very common on good properties. Finally the number of active condo listings Downtown in March of '08 was 92 units lower than in March of '07! Preliminary numbers for April suggest that this month's sales will be 3-5% lower than last year. If you just track the sales numbers, we are simply lagging last year by about 30 days.

The only problem with this market is that Buyers and Sellers can't get on the same page! Buyers read the papers and think they can kick the tires, because properties sales are down; and Sellers think they can list at any price and that multiple offers will be forthcoming. What they need to do is to get the real facts about this market and their property. This can only be done by someone who has access to all the market data - read a real estate agent and not a newspaper reporter.

This month we looked at sales at 65 Harbour Square, an older but well maintained condo on the waterfront. Besides excellent amenities, the units tend to be larger than in most buildings. The first unit we looked at was a two bedroom, two bath unit with parking with the best water view in the building. It sold this year for $839,000. The same unit sold two years ago for $730,000 or an increase of 15%. The price per sq.ft. was only $550. Many new developments are asking the same price without the parking and without a premium view! And only a couple of years ago these units could be purchased for less than $500 per sq.ft. The second unit we tracked was a small one bedroom unit with parking at 640 sq.ft. The most recent sale in 2008 was $256,000. In 2007, these units were selling for $240,000 and in 2006 they were averaging $230,000. Where can you get value like this at $400 per sq.ft.

Rental Commentary:
The rental market is beginning to heat up as 154 one bedroom units were leased in March. To help tenants and owners, we decided to break down the one bedroom market. One bedroom units without parking averaged $1300. Add a parking spot and now you are at $1500. Suppose you want a den - that's another $50 a month. And if you get that second bath or powder room $40 more will cover that. So the one bedroom range is $1300 to $1590! Two bedroom units run from $1900 without parking to $2250 with parking and den. And of course furnished units will cost another $300+ per month.

CONDOS IN MIAMI VERSUS SOUTH BEACH

Having just returned from a short trip to Miami, it is interesting to look at how real estate and particularly condos are faring. Everyone knows about the oversupply in Miami. Cranes are still everywhere, there are lots of supposed bargains to be found, and condos can be purchased from $300 per sq.ft. The U.S. real estate market with all its horror stories can be found in Miami.
Now take a drive across the causeway to Miami Beach and South Beach in particular. There, existing buildings are being protected and are being renovated in the Art Deco motif. There are very few new condo buildings that have been built. These new condos sell at $600 per sq.ft. and go up to a $1,000! Reno’d condo units are also selling for $600+.
What does that tell you? Just look at some of my earlier Blogs. Real Estate is not a national market; it is not even a regional one. It is local! In areas that have not been overbuilt and sold out to investors – flippers, the market is stable.
Unfortunately, bad news and disasters with people losing their homes makes page one of the newspapers. A normal or steady real estate market is not newsworthy. You need to search out the statistics yourself.

REAL ESTATE SALES NUMBERS DO LIE

Sales numbers for March on the Toronto Real Estate Board are down 22% compared to March of last year. Condo sales are also down by 18%. And based on sales only, the Media has decided that the market has turned decidedly downwards.

The trouble is that the Media does not have all the facts. Now I don’t pretend to be an expert on all real estate markets because real estate is not one big market but a series of local markets – see previous blogs on this comment. We do have the facts and the statistics about the Downtown Condo Market to know more about what is going on than the Media!

The weather for March was certainly a factor but the Media has dismissed that. However the real facts are these: we have a shortage of listings! The sale-to-listing ratio is at 50% Downtown and at 40% on the Etobicoke Waterfront. A normal market is between 25 and 35%. Days-on-market has dropped to 23 days from a normal of 45 days. The Media does not have access to these facts and has even more trouble in the interpretation. Multiple Offers are still common place. Instead of asking the so-called Experts, why doesn’t the Media just ask Buyers trying to find a condo how frustrating the search can be!

This past week the weather was better – above zero all week. And guess what, we booked over 800 confirmed appointments on our listings! This is an ALL TIME record for our Company.

You tell me – is this a start of a market turn down or is the Spring Market about one month late in kicking off?

MARKET COMMENTARY - MARCH / APRIL 2008

Sales Commentary:

February was the first month where sales were actually lower than the same month last year in the past twelve months. The Toronto Real Estate Board reported that residential sales were down by 11%. For condos, sales were off by only 3% but Downtown condo sales were lower by 15%! Already the so-called experts are saying the market has turned. The only problem is that they don't have all the facts! Believe it or not weather and snow had a big impact. Real estate sales are not 'date sensitive'. People don't have to buy on a particular date. If the weather is bad, they just stay home. And the snow storm on the first weekend in March will impact March numbers as well! How many people remember SARS five years ago? For two months people would not leave their property except to go to work. As a Company, we even talked about buying masks for people to wear when we showed properties. Sales were that bad. But the market fundamentals had not changed and the market resumed its upward trend after the SARS scare.

So where are we today? Market fundamentals have not changed. In fact we think the market is stronger today than at the end of last year. Forecasts for the Ontario economy suggest that growth may reach 2% this year as opposed to earlier forecasts of less than 1%. We can tell you that parts of Ontario will actually shrink which means that the GTA economy will probably grow by at least by 3%. Incomes are rising, and with a half percentage drop in variable mortgage rates, there are lots of buyers! How do we know? All our agents have qualified buyers lined up. The problem is that there are not a lot of listings to show them yet! The sales-to-listing ratio is currently 45% - a normal market is in the 25-35% range. The first sign of a changing market is when listings swamp the market. The second is when affordability is eroded. Neither exists in this market!! We are not naïve enough to believe that this market will go up forever. However the time for a slump is not this year.

In this issue, we looked at sales in Marina Del Rey - 2261 Lake Shore on the Etobicoke waterfront. There are three buildings on a great piece of property with a stand alone recreational facility. Units are larger and while the buildings are older, they are well-maintained and represent good value. While other condo markets increased in value, the Etobicoke market was flat for a number of years and only in 2007 did prices begin to increase. The first unit we tracked was a one-bedroom loft, just under 900 sq.ft. with parking. The unit has been renovated and sold for $247,000 in December. The very same unit sold twenty one months earlier for $245,000. A similar unit, not renovated, sold for $196,000 in 2004. It was renovated and was resold in February of this year for $255,000. When you back out the renovation costs, the appreciation was only 10% over three years! Prices are $280 per sq.ft. The second unit we examined was a two-bedroom, two storey loft at 1040 sq.ft. It was partially renovated and sold in January for $290,000. We tracked similar units that sold for $240,000 in 2004; and $275,000 in late 2007 that were not renovated. Again this unit is selling for $280 per sq.ft.

Rental Commentary:

Over 100 one-bedroom unfurnished units were leased Downtown in February. The average price was $1525. Only 17 furnished suites were leased at an average of $1775. There were 62 unfurnished two-bedroom units leased for $2100 on average. Eight furnished two-bedroom units averaged $2500. The differential between furnished and unfurnished is $250-500 per month. Compare this to the monthly cost to rent furniture which is quoted at $300 for a basic one-bedroom. Days-on-market to rent out units has increased from the 15 day range to 20+ days. The rental market usually begins to heat up in May through September. Again the weather has slowed the start of the rental season.

REAL ESTATE MARKETS ARE NOT NATIONAL - THEY ARE LOCAL

Why is it that experts have to talk about real estate as one big market when it is not! Not all of the U.S. market is under siege. The high end (over $5 million) has had seven and thirteen percent increases in sales for the past two years and is up again this year. Of the 150 metro markets in the U.S., median prices were falling in 77 (what the press is reporting) but were increasing in 73 (what the press forgets to talk about)!!

Another trend in the U.S. is that the urban markets are outperforming the suburban markets. Unlikely cities such as Pittsburgh, Columbus Ohio (one of the states devastated by the market down turn) and Atlanta have rising sales in their  downtown markets. And in metro markets that report separate condo sales, 41 out of 59 markets report rising condo prices!!! How is this possible if the U.S. real estate market is as bad as we are told?? Let me quote Garth Turner from his latest real estate book on doom and gloom: "an anti-real estate mood has swept America. Within months it will be here". No facts but it is good for book sales. 

So let's look at the Canadian market again. Prices and sales are slowing in the West and we are told it is coming to Toronto - just like a bad cold. When prices increase by 51% in a single year in Saskatoon, what do you expect? A correction. We have never had that type of sales hysteria in Toronto. Just a steady market with good fundamentals. Let me just leave you with the latest story from our Company. We listed a condo at $799,000 and sold it in a week for $890,000 with multiple offers. That's a price of over over $800 per sq.ft.  Is this a sign of a market correction this year? Not likely! The point is that Turner is right, there is always a market correction or slow down coming. Turner claims he called the last one - only he was 4 years too early! My guess is that Turner is early again - maybe not 4 but at least by 3 years. Do you want to be out of the market that long with prices rising! Turner's  hysteria makes for good book sales but lousy economics for home owners and investors. 

CONDOS SALES LOWER IN FEBRUARY

Initial numbers from the Toronto Real Estate Board show that overall sales were 11% lower this February than in February of 2007. Condo sales were also off by by 8%. Already the naysayers - read bank economists - are saying the market has turned!

But people in the market every day are seeing something quite different. The real estate market changes when there is a surplus of listings versus buyers. Buying and selling property is not date sensitive. What we mean by that is: people don't have to do something on a specific date. When it snows, people just stay home rather than go out and look at properties. And we have had record snows!

Anyone remember SARS five years ago? Buyers were talking about wearing masks and people and properties owned by those from the Far East were to be avoided. For two months markets were slow because of the hysteria - not because of any economic reasons. And then it was behind us and real estate markets resumed their upward climb.

Again today, the economic factors have not changed. We can tell you that there are still lots of buyers - more than the supply of good listings. And the fundamentals remain in place - job growth, income growth, and now lower interest rates. Those factors tell us that the market this Spring - when it arrives - will again be strong - lots of sales and rising prices!

If you want to be smart - beat the market. Start the buying process now - before others get into the market. If you have a property to sell act now and have the market to yourself. And for buyers, making an offer now will improve your chances of avoiding the dreaded 'multiple offer' scenario.

February/March 2008 Market Commentary

Sales Commentary:
January started off the year like most of us predicted - residential sales in total were down 2% from the record January of last year. At the same time, active listings were 11% lower than last year. What does that mean? It is still a Sellers' market and the New City Land Transfer Tax has had minimal impact. On the condo front, overall condo sales were up by 13%. Downtown, condo sales were running 14% ahead of last year for January. Sales-to-active-listings for the Downtown condo market were still at 50% versus 40% a year ago - and remember that a balanced market is when the ratio is in the 25-35% range. While the overall market may have leveled off, the condo market continues to grow - again affordability and lifestyle choices are driving this market.

If potential condo buyers are looking for a market pause to jump into the market, it won't happen in 2008. Market timing may work for the stock market; it's never a good strategy for a primary residence. If you continue to rent and prices keep going up - you lose. If you buy, and even if prices fall initially, then you can be sure that the property you want to buy next has also fallen in price. So you never lose but instead you insure your ability to make the next move.

This month we looked at prices in Downtown's hottest market - Yorkville, and the most affordable new building there - 18 Yorkville. While 18 Yorkville is not really in Yorkville, it is really closer to Yonge; the building name itself has probably added another $50,000 to sale prices. The building was registered in late 2005 and so we have just over two years of sales to examine. The first unit we looked at was 1200 sq.ft. - two-bedroom/2 bath with parking. It first sold in January of 2006 for $729,000. The very same unit sold again in November of '07 for $777,000. The increase was only 6.5% over 21 months. Remember my previous commentaries that condo prices only began to escalate in 2007. The second unit we tracked was 500 sq.ft. one- bedroom, without parking. It sold in early 2006 for $246,000, and an identical unit sold in 2007 for $262,000 (an increase of 6.5%). In 2008, another identical unit sold for $320,000! That's 22% in just the last year, but to be fair, this unit was on a higher floor. Both the one and two-bedroom units are now selling at $640-650 per sq.ft. You can find current buildings in Yorkville that sell for more and you can find other new buildings Downtown that sell for $450 per sq.ft.!

Rental Commentary:
There were just over 100 one-bedroom units leased in January. Days-on-market to lease out increased from a summer time average of 15 to 25 days currently. However rental prices stayed firm - averaging $1550-1600 for those with parking, versus $1450 for one-bedrooms without parking. Furnished one-bedroom units averaged $1800. Two-bedroom units took about the same time to lease up. They averaged about $2200. A three-bedroom condo, if you can find one, will cost about $4000 as they tend to be over 2,000 sq.ft.