August 3rd, 2010
When I first entered real estate sales, the market was certainly cyclical. It started mid-February and finished by the end of June. Everyone either worked part time over the summer or took the summer off. The market then resumed for the first of September and ended November 30th! Everyone then enjoyed another two month holiday.
Over the last few years, RE/MAX Condos Plus’ busiest months have been July and October! Where the first six months of the year accounted for 55-60% of annual sales, now the number is 50-52%.
The experts predicted a big drop off in July with the HST introduction and the fact that supposedly all the Fall sales moved forward into the Spring market. So Realtors were already for our summer break – we had not experienced one in the last seven years. Surprise! We are still busy. Yes a lot of inquiries are about renting condos but our market remains active. Our guess is that the condo market will remain active for the balance of the year. NO MAJOR PRICE CORRECTION. Prices in some condo buildings will decrease (buyers have more choice) and an oversupply of listings will occur in some neighbourhoods. But at the same time, prices will actually continue to increase in the most popular condo buildings and neighbourhoods where new condo buildings are not being completed this year.
So it looks like Toronto Realtors will not be getting an extended summer holiday again this year!!
Tags: seasonality of condo sales, toronto condo market
Posted in Toronto Condos Update | No Comments »
July 26th, 2010
SALES COMMENTARY:
June was the third consecutive month where sales were lower than the same month last year (down 23%) with 8442 residential sales on TREB. At the half way point of the year, sales are still 23% higher than for the first six months of 2009. While the second half of the year will be much slower than a year ago, we are forecasting 85-90,000 sales which will be the second best year on TREB and just shy of the all time record of 93,000 sales in 2007. Historically, 55% of all sales occur in the first six months of a year. This year we expect the number to be closer to 60%. When buyers realizes that HST DOES NOT APPLY TO RESIDENTIAL RESALES, which should be by September, then we should experience a more normal fall market.
The condo market performed better than the overall market in June. Sales were down by 13% over June of ’09. Downtown, condo sales were lower by just 10%. In terms of sales volume, we expect the condo market to outperform the overall market. But in terms of prices, we expect some softening because of new projects coming to market which will increase supply. Again the real challenge is in pricing the property to sell. In June of 2009 it took 30 days for a downtown condo property to sell. This June it took only 25 days!! Pricing is everything.
In this issue, we examined sales at 410 Queens Quay, a condo at Spadina by Monarch. We looked at 4 units, all sold in 2010. The first unit, sold in February, was a one bedroom at just over 600 sf with no parking, locker, but a city view which sold for $284,000. It previously sold for $241,000, 18 months earlier, for a gain of 18%. The second unit, sold in May, was also a one bedroom at 505sf but it had both a locker and parking but on a lower floor with no view. It sold for $262,000. If you adjust for the floor and size differences, this buyer got the parking and locker for only $15,000! The next two units examined were both one bedroom plus dens with parking and locker. The first unit with a lake view at 800 sf sold in June of this year for $415,000. It sold in October of ’09 for $432,000 (see how fast the market turns) and in 2003 for $306,000. The total increase in less than 7 years was 36%. We cannot emphasize enough that you will always come out ahead if you hold a property for several years – there are no guarantees for one year holds! The second unit with a city view at 750 sf sold for $340,000 in May. It also sold in 2003 for $245,000 for a price gain of 38%. The same increase as the previous unit. However the interesting fact is that the first of these units sold for $520 per sf and the second one sold for $450 per sf. The difference is the view – about $55,000 when you adjust for the difference in unit size!
RENTAL COMMENTARY:
June was the busiest month of the year for rentals. Forty studios were leased at an average price of $1250. There were 207 one bedroom units in total leased in June. One bedroom units without parking start at $1300 and they max out at $1600 for a den plus parking. Parking is about $150 a month and a den is worth $150 per month. More two bedroom units are being rented. In June the number was 164. Two bedroom units start at $1850 without parking and average $2200 when parking and a den are included. Very few three bedroom units reach the rental market. Only four were rented at an average of $3600 in June. The rental market turns over quickly. Days-on-market for good suites is less than 15 days. Bigger units stay on the market longer 20-30 days, so renters need to act quickly when they see a unit they like!
Tags: downtown condos, HST, QUEENS QUAY, RESIDENTIAL RESALES, TREB
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July 18th, 2010
Everyone thought that when HST hit July 1st along with other negative views that the Toronto condo market would hit the wall – at least over the summer! And I was one of those doubters.
But people are starting to realize very quickly that the world has not ended and that HST DOES NOT APPLY TO RESALE RESIDENTIAL PROPERTIES! Sure the downtown market was hit by the G20 – in fact that week did more to slow the market than any other factor. Even the Indy Weekend and the Lake Shore closing have only put a minor damper on sales. Why??
The other fear, of rising interest rates choking off the market has largely subsided. Yes, short term rates will creep up by another half per cent before year end but it is uncertain whether fixed rates (determined by the bond market will follow suit). Our rates cannot afford to get too far ahead of U.S. rates. At the same time, our rates have moved up in response to an improved economy – better job market and incomes – read more people can afford condos – and hence an offset.
Finally the long term fundamentals are very positive for the downtown condo market. More and more people want to live here – not just through immigration but a changing lifestyle among younger adults who value free time over gardening and household chores. And when investors look at the Toronto market, they still see cheap real estate when compared to other major cities around the world – even after price corrections in those other markets.
Tags: Downtown Toronto condos, HST not on resales
Posted in Toronto Condos Update, Uncategorized | No Comments »
June 18th, 2010
SALES COMMENTARY
The Toronto real estate market has peaked in terms of sales and prices! That’s not necessarily bad news. We are going to see a more balanced market going forward – not a major correction as doomsayers keep predicting. The economy is not heading into a recession but coming out of one. The fear of the HST and rising interest rates are probably overblown. The biggest factor impacting our market will be the supply of listings!
In May, TREB residential sales were down 1% from May of last year and were lower than in April. For the overall condo market, sales were 2% higher than a year ago. But when you look at downtown condos, sales were even better – 12% higher than the same month last year. As we have said previously, the condo market tends to lag the overall market by a month or two on a seasonal basis. In 2009, June was the largest sales month on TREB. Expect sales in June 2010 to be lower than May – about 9,300 units and almost 15% lower than June of last year. On a positive note, at the half year mark, year-to-date sales for 2010 will be 52,000 units as compared to 42,000 last year. Timing is everything.
That being said, there are many things to like about this market and particularly our downtown condo market. There are still lots of buyers but they now have more product to choose from. For condos that sold, days-on-market were just 18 and they sold at 99% of list price. On the other side, the sale-to-list ratio has dropped to just over 30%. Sellers take note. Pricing your property at market is critical. And prices today will be higher than what you will receive later this year. As we forecast at the start of the year, new condo projects being registered from now to year end at Concord City Place, Maple Leaf Square, and West Harbour City will bring even more condo listings to this market. And there are small projects too!
This month we looked at sales at 35 Mariner Terrace, part of the Concord City Place Development. The building includes 30,000 sf of recreational facilities shared with 5 Mariner Terrace. The first unit we tracked was a one bedroom plus den with parking, locker, and balcony. At 665 sf, it sold in September of 2008 for $290,000 (the previous market peak) and then again in January of this year for $337,000. This was a 16% increase, after taking into account the drop in prices from late fall of 2008 into the first half of 2009. The second unit we looked at was also a one bedroom plus den with parking, locker, and balcony on a higher floor. This corner unit was slightly larger at 733 sf. It sold in December of 2008 for $309,000 and then again in February of this year for $356,000 – an increase of 15% in 15 months! Prices for both units are in the $500 per sf range (with parking) which has become the norm for newer resale condo buildings. What is attractive about this building are the condo fees. They are about 50 cents per sf per month and that includes all utilities except cable. Going forward, condo fees will become even more important in the pricing of properties. Bigger developments with more units tend to have lower fees. Most new projects are now being built with condo fees that do not include utilities. Generally speaking higher condo fees tend to reduce prices in specific buildings and buyers need to factor this into their buying decisions.
RENTAL COMMENTARY
The rental market has also been inundated with new listings over the past few months. Expect that trend to continue even though we are entering the busiest rental period of the year. Rental rates are anywhere from $50-100 lower per month from the start of the year. There have even been some sightings of small one bedroom units without parking going for $1150. Investors renewing tenants this year should not be increasing rents but simply maintaining them at current levels.
Tags: 35 Mariner Terrace, Concord City Place, Condos Registered, downtown condos, TREB
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June 14th, 2010
All I keep reading about is letting the public onto MLS and now there are new brokerage companies being formed and some lawyers that will let you list for free or just pennies. While some consumers may think this is Shangri la, there is a real downside for the whole economy!
Currently realtors are responsible and liable for the integrity of the data. Who will be responsible and who will take the time going forward? What do lenders – banks and all financial institutions rely on for making mortgage loans? Where do appraisers get their data for valuations, and for even things like divorces (that could affect up to 40% of us) where the matrimonial home is involved? Think about your line of credit – it is always secured and usually against real estate. Without accurate data no one including CMHC (our Government insurer) would be able to grant high ratio loans.
At the end of the day this country needs this information just to function. Someone has to do it. And someone has to pay for it. In the end it will be the consumer – either through more taxes with the Government adding another Land Transfer tax – the first two just go to General Revenues or we can leave Realtors to pay millions of dollars for the MLS system and maintain data integrity which is recovered through commissions. It seems obvious to me but I’m just a Realtor.
Tags: commissions, impact of competiton bureau, MLS System
Posted in Canadian Condo Market, Competition Burea | No Comments »
June 7th, 2010
This market is a hard one to read. What we do know is that there are a lot of listings on the Toronto Real Estate Board and the biggest surplus sits in the downtown condo market! We also know that there are a lot of buyers sitting on the sidelines – waiting for the good deals to appear. Who will blink first?
Will sellers, who have already made good returns from a run up in prices over the past few years, sell into a falling market (our best guess is that prices will come off about 5% from the peak reached in early April of this year? Will buyers hold out for even lower prices? Some economists think a 20% drop is possible.
One thing I do know is that a quarter point increase in the Bank Rate is not going to have any effect. With a continuing weak U.S. economy and the European financial crisis, it seems that any significant interest rate increases will be put off to 2011 at the earliest. What does seem to catch investor eyes is the poor stock market performance. Buying real estate is a much better and less volatile option for many investors.
The coming HST has upset most people in Ontario. However it does not impact the resale market and when the smoke clears, I am sure that most developers will bury it in new residential sales. My view is that this will be less of an issue than first feared.
My best guess is that the real estate market will remain fairly active, but of course at lower sales volumes than the first five months of this year. What do you think? Are there any further market surprises yet to be factored into this market?
Tags: condo market in Toronto, Condo Prices, toronto condo prices
Posted in Toronto Condos Update | No Comments »
May 25th, 2010
SALES COMMENTARY:
Our last Report focused on how Government has done its best to slow down the real estate market, even though the real estate industry in total was responsible for about 50% of the economic recovery from the recession of late 2008 into 2009. In this report we will return to analyzing statistics and trying to make sense of where the market is headed. In April sales on the Toronto Real Estate Board reached 10,898 units which was an April record and the third biggest month all time. However clouds are starting to appear. TREB also recorded 20,683 new listings in April. When you look at early returns for May, sales will be lower than in April and will be about the same as in 2009 – best guess 9,700 units. At the same time, new listings are continuing to accelerate. Our last Report predicted that the market would peak in late April and it looks like we were right, in terms of sales activity. Prices are a different story. Prices tend to lag sales volumes and we are now seeing prices levelling off. Our best guess is that sales will begin to soften by the fall. Not the 20% that doomsayers predict but more like 2-5%. At the same time, we are already having a sizable number of buyers and investors who are looking to move into the market this fall. Should be interesting times.
On TREB, detached housing now makes up less than 50% of all residential sales (ten years ago it was 65%)! Not surprisingly condo sales are running ahead of the overall market. Downtown condo sales were 37% higher than a year ago in April and the sale-to-list ratio ended the month at 42%. On the Etobicoke waterfront, sales were up by 24% and the sale-to-list ratio settled at 35%. (Remember we were once at 80% and balance is a sale-to-list ratio of 25-35%.) A final observation is that the $300,000 to $400,000 condo market which was the hottest segment has cooled. The primary reason is the increase in mortgage rates and the raised qualification rates impacting younger buyers. The strongest segment of the condo market is over $500,000 – and in the newer buildings!
In this Report, we looked at sales at 50 Lynn Williams in Liberty Village. This is a newer building with just a three year sales history. All three units we examined were sold in March of this year. Two of them were in multiple offers. The first, a small penthouse with one bedroom, locker, and balcony but with no parking sold for $290,000. Two years earlier it sold for $255,000 or an increase of 14%. The second unit is slightly larger – still a one bedroom but with parking. It sold for $314,000. The same unit sold in 2007 for $198,000 which represents a 72% increase. The largest one-bedroom unit, with 2 washrooms, and at just under 700 sf with parking sold for $340,000. It sold 2 ½ years earlier for $281,000 – a 21% increase. Prices in this building are about $550 per sf which seems a little high for the overall market but this is Liberty Village.
RENTAL COMMENTARY:
Rental activity Downtown picked up in April with 23 studios, 260 one-bedrooms, 136 two-bedrooms, and 6 three-bedroom units being leased – a 50+% increase from the start of the year. The rental market is strongest beginning in May and running through September. The most popular rental unit is now the one-bedroom + den and parking which rents for $1650 per month. The basic one-bedroom without parking averages $1350 which is lower than earlier this year. The two-bedroom market was also a little softer with rates ranging from a low of $1900 to $2300 on average with den and parking. Three-bedroom units average $5000 this month due to a couple of high end rentals. Rental supply has increased significantly of late and we would expect to see some downward pressure on rents – particularly in older buildings with units that need to be renovated.
Tags: downtown condos, Etobicoke Condos, Listings, toronto condos, Toronto Real Estate Board, Toronto Rentals, Waterfront Condos
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May 19th, 2010
The Scotiabank Group has just released a study on housing markets around the world for the First Quarter of 2010. While I personally hate average prices and price changes by country (I am a much more of a micro type – condos in particular), these country comparisons do provide some insights and put our real estate market in a global perspective.
Australia leads the way with an annualized increase of 17.1% for Q1 over Q1 of 2009. Canada was second at 16.6%. But Canada’s percentage was lower than Q4 of 2009 which was 19.4%. Yes price increases are slowing in Canada and for the 2010 year the number will probably average closer to 10%.
The U.K. market also moved back into the black with Q1 prices up 4.2% versus a drop of 1.6% in Q4 of 2009. The U.S. market is also showing some improvement. In Q1 of 2010 the price decline was just 1.1% compared with a drop of 4.6% in Q4. Has the U.S. market reached a bottom? That’s the problem with wide averages like this. We can tell you that those few U.S. markets that still have to work their way through more foreclosures will experience further price declines. On the other hand, prices are now moving up in many parts of the country – hence the neutral number ‘on average’!!
The interesting point for me in this Report is the performance of Australia. Did you know that their Central Bank Rate – the equivalent of our Bank of Canada Rate – is 4.5% (the low in 2009 was 3.0%). Compare that to our Rate of a quarter of 1% (.25%) and we are afraid of it moving up too fast? Mortgage Rates in Australia range from 6.3% for variable up to 7.9% for five year fixed! What does that tell you about the impact of higher rates on real estate and condo or housing prices? That too is a topic for another blog. What do you think will be the impact of rising mortgage rates on our real estate and condo markets?
Tags: Condo Prices, real estate, world real estate markets
Posted in Worldwide Condo Market | No Comments »
May 11th, 2010
Everyone thinks the condo and Toronto real estate markets will end come July 1st. Not so! The market is already changing now – ahead of July 1st. The other point to note is that the market will not end come July 1st.
First there are a significant number of buyers who are waiting for the fall – with less competition and better deals. Secondly HST will not impact the resale market – only new construction!
But right now the feeding frenzy is abating. There are still a lot of deals to be written over the next couple of months. But there are considerably less multiple offer scenarios and people are being realistic about going over by just $5-10,000 as opposed to $50,000.
Also the hottest market earlier this year, $300-400,000 units, is slowing. Is that because of rising mortgage rates? On the other hand, condos over $500,000 are becoming the hottest market segment and there are still multiple offers taking place. While record sale volumes continue, have we reached the peak of the market in terms of prices? From past experience, one never knows where the peaks and bottoms of markets are reached until about two months after the fact.
Let me know what you are seeing in the market. What is still hot? Have we reached the peak?
Tags: multiple offers, real estate, toronto condos, Toronto Real Estate
Posted in Toronto Condos Update | 2 Comments »
May 2nd, 2010
Pensions are becoming a hot item as baby boomers start to retire and soon figure out that they have not saved or accumulated enough assets to retire. The real problem is that people cannot save enough to retire and if you do not have a defined benefit plan – read government and teachers – you are screwed!! I had a friend who maxed out his RRSP for 30 years – accumulated over a million bucks – and figures that will pay him out about $55,000 per year. Not even close to a teacher whose pension is also indexed for inflation. Now most of us never max out our RRSP and that is the problem.
What to do? Banks and other wealth managers want to increase the limits for RRSP contributions but that won’t solve anything. My solution is to get a SELF DIRECTED RRSP. Save $75,000 and then buy a $300,000 condo (probably the cheapest and easiest form of real estate investment for the average person). In 25 years, the condo will be paid off through renting it out and with just 4% annual appreciation; you will have an asset worth $800,000! Do it twice and you can retire!!
Even real estate agents have trouble figuring this out! We have a couple of agents who borrowed big to invest in the stock market and guess what? The returns from their investments cannot pay off their loans! If only they had stuck to what they know best. Most people can accumulate three properties in their working life besides their principal residence, and they can retire. Seems simple to me but what do I know??
Tags: condo investment, RRSP, self directed pension
Posted in Canadian Condo Market | 2 Comments »
April 24th, 2010
Just read the article in the Saturday Star where an economist predicted that prices could fall by up to 20% later this year. I am embarrassed to admit that I am also an economist by training but a Realtor by profession. It goes to show you how little economists really understand about the real estate market.
Economist all rely on ‘demand and supply’ and the ‘law of substition’ to explain most economic markets. Unfortunately residential real estate does not work that way.
Let’s start with demand and supply. Sure more listings are coming on the market and if supply exceeds demand prices usually fall. But not so in residential real estate. People need a place to live and in my 30 years in the business, if sellers don’t get their price, they just take their property off the market. The only time you have falling prices is when there are forced sales such as foreclosures and power of sales whereby lenders are in control. That is what happened in several states in the U.S. Talking about mortgage arrears, it is currently at .3%. Back in the early nineties it peaked in Canada at .6%. In comparison the U.S. rate is 20 times higher. That’s right TWENTY times. So it is unlikely that we will approach those numbers in Canada. Sitting on the fortieth floor looking out this economist notes that interest rates are rising. Unfortunately he needs to be on street level to appreciate what most buyers are doing. Most first time buyers have been locking in the five year rate for the past two years. My observations with actual buyers is that they are being cautious when it comes to qualifying for mortgages and banks have been building in a cushion too over the last few years.
Finally we need to address the law of substition which says that if a product is too expensive, you just look for a cheaper alternative. The problem is that housing is not interchangeable – who can move from a 4 bedroom house with kids to a studio condo because it is cheaper? Also an excess supply of housing in one area is very difficult to move to an area with a shortage – the last time I looked real estate had not grown any legs!
So let’s just summarize the debate in a less than sensational fashion. With higher interest rates and the HST coming, we do expect a slowing in this hectic market. In fact the signs have already appeared. With more listings, prices will level off this fall. There will be no panic selling and hence forecasting any significant price drops makes no economic sense (there’s that word again).
Tags: condo forcast, real estate bubble, toronto condos, TREB
Posted in Toronto Condos Update | 2 Comments »
April 13th, 2010
SALES COMMENTARY:
It seems that discussion on the market itself has been supplanted by Government involvement in trying to slow down a real estate market that is leading the general economy out of a recession. First, the Feds announced changes to CMHC lending policies in an attempt to slow down buyers. For home buyers, qualifying at the five year posted rate or the five year fixed contract rate will have minimal impact, except that it will force buyers to accept a five year fixed rate mortgage. Now the banks have jumped the gun knowing that buyers have no other option. They bumped these five year rates by 60BP even though these rates are tied to bond yields which have not moved up as yet! While most expect some increases in these yields later this year, the move by banks is simply greed with the knowledge that the Feds will do nothing.
The biggest CMHC change is with investors. After April 19, investors will need to have a 20% down payment for rental properties – read condos in our market. But how many developers have sold pre-construction condos to investors with only 10 or 15% down, two and three years ago? Now these investors won’t be able to get a mortgage unless they come up with more money down on closing. Watch as more investors try to off load their units during the Assignment window or worse, give them back to developers. The impact will be for prices to back off and actually decline for some types of units, and in some condo buildings. This could make the second half of the year far more active than many of us thought at the start of the year.
The second road block was the ruling of the Competition Bureau that consumers need more choice in selling their properties. The ruling was further complicated by poor reporting of the facts. First the public can not list their property for sale by themselves on MLS – they still need a Realtor. Imagine having a car to sell privately and you go to the GM dealer, park it on their lot, and ask them to refer you all the buyers that come by the dealership. You see the stupidity. The Competition Bureau also asked that Realtors ‘just post’ the property on MLS and do nothing more for a fee. Currently there are a number of brokerages that already do this, however the Bureau wants us to incorporate this option into our By-Laws to which we agreed. As the Industry attempted to point out, real estate is regulated on a provincial basis, and in Ontario our regulations require us to provide a certain level of agency obligations. It’s hard to serve two masters! In the end, consumers and the market place will determine the real outcome.
What is best for the market, and for buyers and sellers of properties is a reasonable level of certainty in being able to plan future transactions without having Government continually introducing new rules with new uncertainties.
That being said, the Toronto real estate market continues to move towards balance. While we continue to report record sales for March – over 10,000 units which are closer to May’s record sales numbers, the end is in sight. And it will come before July1! Our best guess is that the market will peak in late April. Multiple sales are starting to drop. And those in multiple offer situations are not bidding way over list price. In fact our Company experienced one multiple sale with four offers, only one above list price, and it was just by $4,000. Need we say more? Listings continue to accelerate, now over 19,000 on TREB and 1100 for downtown condos. The sale-to-list ratio (sales to active listings in a month) that was at one time over 80% is now down to 50% and will soon approach the 25-35% range of a balanced market. Our point is that the market would have slowed itself without the added ‘help’ of big Government.
Tags: Canadian Mortgage Policies, Canadian Mortgage Rates, CMHC, Condo Investments, MLS, Real Estate Investors, Toronto Real Estate, TREB
Posted in Market Report | 4 Comments »
April 1st, 2010
While most people place the blame, or credit, for CMHC changes to lending practices scheduled for April 19 with the Finance Dept., it was really the banks who lobbied for tighter rules. Making buyers qualify at the posted five year mortgage rate seemed straight forward (buyers were already being qualified at the three year rate previously), the kicker was that buyers who opted for a five year or longer term could then be qualified at the contract rate – usually a lower discounted rate. The net effect is that buyers will be channelled into a five year mortgage.
Then the banks all announced an increase of 60 Basis Points in their five year rates – at about the same time and with about the same increase – sounds like a job for the Competition Bureau. But wait, their hands are full dealing with the real estate industry and its association – CREA.
At the same time the CMHC rules for investors – remember the first press release which called these people speculators – requires 20% down and provides for less credit assigned to rental income offsets. Again this will remove a significant number of smaller Canadian property investors.
So why do banks want to take the ‘steam’ out of the real estate market? Remember that their growth business going forward is ‘wealth management’ and brokerages. That is selling stocks, bonds, and mutual funds to average Canadians for their retirement. But past portfolio performance has more and more average Canadians looking at alternative investments such as real estate. So how to compete? Just kill the real estate market and drive everyone back to stocks and mutual funds.
The criticism levelled against people such as me who comment on the real estate market is that we have a vested interest and we could never be unbiased in our analysis and forecasting of real estate markets. But what about all these bank economists and banking personnel? They also have a vested interest in getting the average Canadian out of real estate and back into their products. Sound a little farfetched? While the rest of the economy struggles, banks are making record profits. And yes they will succeed in putting a damper on this real estate market. Let’s hope people are smart enough to realize that long term, real estate is a better investment with more personal control of one’s affairs.
Posted in Canadian Condo Market | 2 Comments »
March 21st, 2010
Whenever a market is performing well, there are always people ready to downplay the results. Last weekend the Toronto Star ran an article showing how cheap Florida real estate was in comparison to the Toronto market. They showed a condo for $81,000 and then said a comparable unit would sell for $300,000 in downtown Toronto. Very interesting but that is only half the story!
Did you know you can buy a condo in Ontario for less than $50,000? There are lots of towns in Northern and even Southern Ontario that have these types of condos for sale.
At the other end of the spectrum, there are 550 sf condos in Miami Beach and South Beach for sale and that sold at over $800,000. That works out to over 1400/sf!!
Now look at the downtown Toronto condo market. You can still get into lower end buildings for 400-450/sf. Expect to pay $500 as the norm. Superior locations and finishes are now selling at $600 and the new projects (being delivered in 3 years) will run you $650 -800 ( for the relaunch of One Bloor).
My point is that these current prices are sustainable. My concerrn is really over how much higher can they go? The strong Canadian dollare will dampen non-resident buyers. Remember when our dollar was 70 cents? Also a market canot sustain price increases that average more than 5% per year on a consistent basis. We had a 15% increase in the last 12 months, so there must be at least a pause in the market as incomes need to catch up. Still our prices are lower than Vancouver (but the gap is narrowing) and other International cities. Condo owners should not get too smug in thinking that prices will keep rising at these rates. The fundamentals suggest that we are in for a levelling off of prices starting in the Fall. With mortgage rates probably moving up, we will need to wait for personal incomes to increase to handle higher prices and to qualify for slightly higher rates. The only argument to suggest that prices would actually decline is that we are somehow at the top of the market and prices can only go down. When you realize that we are coming out of a recession, not entering one, it seems absurd to think prices will then begin to decline when there are still more people waiting to buy condos in the downtown market.
Tags: Condo Prices, downtown condos, real estate bubble, toronto condos
Posted in Toronto Condos Update | No Comments »
March 19th, 2010
SALES COMMENTARY:
The Spring Market has arrived – about one month early. As reported by the Toronto Real Estate Board, sales in February were 7300 units – a 77% increase over February of ’09. Sales were higher than those in ’07 and ’08 and were in fact a record. Already March sales are tracking at 9,800 units which will easily surpass those of previous years and will be approaching April numbers. While a lack of snow is certainly a factor, it is apparent that everyone is in a rush to beat the self imposed HST deadline of July 1st!
Our 2010 Forecast called for a strong first half in sales and a slower second half due to three factors – the introduction of the HST (which will NOT impact prices in the resale market but will increase the cost of services and new properties over $400,000). Secondly, we are expecting a bump in Bank of Canada interest rates; and thirdly more listings are coming to market (particularly in the condo segment). Even CMHC is now forecasting the same! Are we flattered?
While sales are increasing, listings are accelerating at an even faster pace. At the end of February, active listings stood at 14,514 units. At the end of January it was just 12,000 and already we are at 17,000 listings and climbing in March! If you track condo listings the same trend is evident. And then there is the Assignment Market which will just add to the supply of condos for sale. The house market usually peaks in June and condos peak a month later. Our best guess for this year is that this market will peak in May or maybe April if the new Fed. Regulations on mortgage lending scheduled for April 19 take a real bite. (See http://www.remaxcondosplus.com/blog/?p=143 for our take on the mortgage market).
Let’s focus on the real world and look at condo sales at One Palace Pier Court on the Etobicoke Waterfront. One Palace Pier Court, an older but well maintained building, sits on a great piece of property with superb views. The first unit we compared sold for $490,000 in 2010. This is a two bedroom with two parking spots and lake views at 1228 sf. The same unit sold previously in 2006 for $420,000 and in 2001 for $312,000. The current price is $400/sf. What scares some buyers is that condo fees are 67 cents/sf which is high for most condos, but all utilities are included. Prices for this unit appreciated at 6% per year over the period which is at the lower end of the condo market. The second unit we looked at was a one bedroom plus one, with parking and lake views. It was fully renovated and sold for $350,000 at the end of 2009.The same unit sold for $288,000 in 2007 (before renovations) and $263,000 in 2004. The current price for this unit is $443/sf. Even with the renovations, appreciation was just 6% per year too.
RENTAL COMMENTARY:
Condo rentals downtown dropped in February from January – not unexpected as people focus on the May, September, and January months to start their lease. There were 167 one-bedroom units rented from an average low of $1450 without parking to $1650 with den and parking. This was unchanged from last month. For two-bedroom units, the range was again the same as last month $2000 to $2500 for a den and parking. Only 2 three-bedroom units were leased for an average price of $3500. Condos are still leasing for 100% of list price. One-bedroom units are leasing up in just under 20 days while two-bedrooms take longer to lease at 30 days approx.
Tags: CMHC, HST, Spring Market, toronto condos, TREB
Posted in Market Report | No Comments »
March 8th, 2010
My last rant – I mean blog on mortgages pointed out the fact that the Federal Government had introduced new rules for CMHC Mortgages. One of the new rules coming into force for April 19 was that borrowers had to qualify at the five year mortgage rate, regardless of the term of the mortgage for which they were applying. But no one knew which five year rate to use. Of course we all surmised that this was just another make work project and that the Government would soon establish a ‘posted’ rate for everyone.
Now the Government has established the ‘posted’ rate and it will be announced each Monday. It starts at 5.39%. But the Government rule now states that you may qualify at either the posted rate OR the contract rate if you get a mortgage for a term of five years or more. You can get a five year rate from some lenders at 3.75%. Guess what everyone will do? They will just apply for the five year discounted rate.
Now there will only be a single mortgage term going forward for all buyers with less than 20% down – five years!! In the long run, only lenders with five year money will be able to compete – read banks! We will soon have fewer lenders, fewer choices, and the consumer will get screwed. But at least we know that the Government is looking after our best interests.
Posted in Canadian Condo Market | No Comments »
March 3rd, 2010
The Government of Canada announced that GNP grew by 5% in the 4th Quarter of 2009. That’s good news. The problem is that we found out about it in March of 2010! Compounding the problem is that the Government will refine or restate this number for the next several months. Then you can compound the problem further because this figure represents only the ‘recorded’ economy. What about the ‘unreported’ economy? You know all those people who work for cash and conveniently forget to report their sales – think of contractors, small store owners, and a host of other businesses. When times are tough, does the ‘unreported’ economy’ grow faster than the ‘reported’? With our tax levels and the pending HST, it is estimated that this market could be as big as 15%. In Italy, some estimate the unreported market at 30%!
So what to do? In my business, I talk to other small business owners – car dealers, stores, manufacturing, etc. How are sales? Is your market up or is it all due to increasing market share? People are alwasy willing to share. You can even ask people what they think of the job market. When we advertise for part time or full time staff, the response numbers and the quality of responses will tell you whether a lot of people are looking or whether people have a lot of choice and don’t find your job offer enticing enough to apply.
In real estate just ask people. Everyone knows an agent. Ask how they are doing and how busy is their brokerage. Talk to people who are listing their property or who are thinking about buying and have been testing the market. Or you can read blogs and search the Internet. The answers there tend to be months ahead of any report that a Government Agency can produce. We reported to our clients and followers that the real estate market had bottomed in February and turned up at the beginning of March. We reported that at the start of April. It was amazing, Generation X andr Y were right on top of this change. The baby boomers did not figure it out until the summer time when old fashion media and Government reports started rolling in !! Unfortunately, they were just 3-4 months late to the party.
Tags: Economy, GNP, real estate, Tax
Posted in Canadian Condo Market | No Comments »
February 23rd, 2010
I have just read another article by so called economists who present themselves as real estate experts. Now they are telling us that ‘seasonally adjusted’ real estate sales were lower in January across Canada. That’s when actual sales were up!!
So how did they seasonally adjust? Did they take historical data from the past 20 years? That is a sure recipe for disaster. Today’s market is nothing like the markets of even 10 years ago. For me, looking at any data more than 5 years old is irrelevant. All I know is that real estate sales in Toronto for January were up by 87% and condos were even stronger – up 115% over January 2009. Of more relevance is the fact that sales were about the same as in 2008 when everyone was trying to beat the second City Land Transfer Tax. Since I do not consider myself an expert on the rest of Canada, I will make no comments on sales in those markets.
So if the so called experts are right, then February sales should be declining even faster. Of course that information will not be available until sometime in March or April for these experts to analyze.
However, I can tell you that February sales in Toronto will be at an ‘all time’ high for this month – better than 2008 and the record setting 2007. How do I know? Being a member of a real estate board does have some advantages, as we can access information on a daily basis. Plus I can talk to my agents and observe how just about every condo property for sale under $500,000 is in multiple offers!!
Tags: February Sales, Land Transfer Tax, multiple offers, Seasonally Adjusted
Posted in Canadian Condo Market | 2 Comments »
IF YOU WANT TO LOSE MONEY IN REAL ESTATE THEN FOLLOW BABY BOOMER MEDIA
August 18th, 2010On Monday we were saturated in the newspapers and on TV by forecasts of a 10% decline in real estate values which would then be followed by a stagnant real estate market for the next few years. This delivered from the mouths of bank economists. When I listened closely to how all this had happened – rising interest rates, impact of HST, and sales moving forward from second half of the year into the first – I suddenly realized that this bank economist was talking about my 2010 Market Forecast which we released in January and now it is August! He went on to say that the market had now peaked. Our Market Report stated that the market had peaked back in April and now it is August.
Baby boomers are now trying to sell their properties and they are too late. They also missed the upturn in the market in early 2009. That’s because they rely on the old media. And the old media, fed by the banks, relies on statistics that are always several months behind. On the other hand, younger people, (Generation X and Y) don’t get their information from this old media. When I asked some of my young agents if they had read the papers or magazines this week, they just looked at me as if I was crazy. They get all their information through the Internet and social media such as blogs. Young people jumped into the real estate market way before baby boomers in 2009 and those that wanted to sell did so this spring.
As a side note, buried in all this newspaper gloom was a note that said 91% of Canadians think real estate is a good investment. That’s not what banks want to hear or want the public to believe. Banks have done a good job of convincing baby boomers to keep their investments with them. Younger people believe in real estate, so too do non-residents. That’s another reason why new condo projects continue to sell out – much to the consternation of banks.
And oh yes, I am a baby boomer too who is trying to not act my age!!
Tags: real estate bubble, real estate values, timing the real estate market
Posted in Canadian Condo Market, Canadian Real Estate Commentary | No Comments »