Paris Apartments

I was in Paris this week and had a chance to look at their real estate market. Condos are called apartments here and most of the stock is old. Prices are at least a $1000 per sq.ft. Canadian, without parking! People in Toronto complain about condos that are 20 years old and need renovating. Here they are 50 years and more. In Paris, downtown means five subway or metro stops from the centre of the city. In Toronto we would call that Etobicoke! Finally more than one bathroom is a million dollar property.
All in all, Toronto condos represent great values in the world market. Tomorrow I will comment on the London (UK) market.

Market Report - May/June 2007

Sales Commentary:
April was a record sales month for the Toronto Real Estate Board. May is also tracking for a record. There is little to gain in reporting the numbers. What is important is whether this burst of activity represents the peak to this market with a coming correction, or a new leg up to a longer market run. This frenzy has seen the Downtown Condo Market join the Detached Market, with multiple offers the norm, and selling prices 5-10% over list as the norm.

What are the signs of a market correction? First is a run up in prices (historically double digit increases over three consecutive years) which reduces affordability for buyers. Then there is a buildup of inventory – too many listings coming to market – many from investors. Now what do we have in today’s condo market? A shortage of listings – the sale-to-listing ratio should be under 35% in a normal market and for April it was over 50%. In the area east of Yonge Street, where there is very little new product, the number was 75%! No wonder prices are up over 10% this year compared to price increases over the last few years that have averaged just under 5%.

To demonstrate this point, we looked at three sales of small units (first time buyers) in 2007. A one-bedroom without parking sold at 230 King St. E. for $220,000 in March. A year ago the same unit sold for $193,500. Another unit at 361 Front sold for $241,000 in March and the same unit went for $227,000 10 months earlier. Finally, a 600 sq.ft. unit at 77 Harbour Square sold in May for $281,000 and the same unit sold last September for $241,000.

So where are investors? Not in the resale market because renting right now is not attractive if you believe that condo prices are going to jump significantly. Investors are driving the new project market. They can buy units now with 15-20% down (as opposed to 25%), have no landlord issues, and wait as new developers from other markets enter Toronto on the belief that we are ‘cheap’ at prices of $400 per sq.ft. New projects, starting with the Shangri La, are going to range from $500 at the bottom to $1,000 per sq.ft.

What to do? There is NO market correction coming in the next two/three years. Prices are only going to go up. If you want a condo to live in, then buy now. If you are thinking about selling, you will get top dollar and have the chance to transition into what you really want. For investors, the future will be a lot more complicated than before, when you could buy anything and watch it appreciate. Now selectivity will be the key.

Rental Commentary:
April is the start of the rental season. 194 one-bedroom units were rented at an average of $1500. The range was from a low of $1150 without parking to $2800. Two-bedroom units averaged $2000, with a range of $1450 to $3800. There were 99 units leased - a big month. We continue to get requests for three-bedroom units. Only three leased in April – all townhouses from $1900 to $2400. With three-bedroom condos selling for about $600,000, there is little economic rational in renting them, as there are few buyers at $4000 per month.

Multiple Offers for Condos

While multiple offers have been common in the detached house market for several years, this is the first spring market where they are happening on just about every condo offer!

Don't think real agents like this type of market. They hate it more than buyers! First they often have to prepare three or four offers on different properties, get involved in bidding and counters, then lose the sale! With little decent product to show, buyers get discouraged and they think about leaving the market.

What we need is better communication between buyers and their agents. First when a hot new property comes on the market, buyers must be prepared to jump on it. If a property comes on the market and you like it, don't start with an offer $10,000 below list price. The seller is expecting full list, so he will either ignore your offer or counter it a full price! As a buyer, you want to close the sale fast - before the seller gets any other offers. So go at full list price or only a couple of thousand less. Make sure you have your financing and eliminate the financing clause. Give a big deposit to show you are a player.

As a buyer, don't get hung up on past sale prices in this market. They mean nothing. Look at the new property coming on the market and compare its list price to others offered for sale at this time. You need to look at value in comparing what your choices are today - not what you could have bought last year!

Finally, when you find a new property that you like - either go in with a strong offer or sit on the sidelines. If you think the property is over priced, it will still be on the market in 30 days and then you can start the slower negotiation process of offering 95-97% of list price. And if it has already sold, then you were wrong and you can move to the next property.

Outlook remains strong for condos

Outlook remains strong for condos
Calgary, Vancouver lead in price appreciation, TD report says

May 18, 2007 04:30 AM
Tony Wong Business Reporter

Despite a record supply coming to market, the Canadian condominium sector should remain strong into 2008, says a report by TD Bank Financial Group.
A robust labour market, low interest rates, strong immigration and an aging population are some of the factors that will help prop the market over the next two years.
"There is fundamental support for condos from structural economic trends including the aging population and the continued urbanization of the country," said author Craig Alexander, deputy chief economist for TD Bank.
From 2001 to 2005, condo starts posted an annual average increase of 16 per cent. Condos have climbed from nearly one fifth to nearly one third of all new construction in Canada.
Price appreciation for condos will remain strong in western provinces, with a forecast average annual growth of 15 per cent in 2007 and 2008 in Calgary and 10.5 per cent in Vancouver.
Toronto is forecast to see a 4.2 per cent annual appreciation in resale condo prices.
The average Toronto condo is expected to cost $249,888 by the end of this year, compared to $239,816 in 2006.
Still, Alexander cautioned there are risks in the Toronto market.
"There is significant additional supply in the pipeline for Toronto from projects that are underway, but are not yet completed," he said. "This could impact price growth."
There were 16,631 condos completed in 2006, up 20 per cent from the year before in the Toronto area. Well over 10,000 completions annually are also expected over the next several years, adding significantly to the current stock.
Other analysts have also warned repeatedly that there is too much speculative buying in the Toronto condo market, which could impact price appreciation or possibly result in a correction in the future.
However, Alexander said as long as "employment remains solid and interest rates do not rise significantly from current levels" it should not be a problem absorbing the thousands of new units.
Affordability issues have also driven potential homeowners to condos, which cost about one-third less than the average bungalow in Toronto, the bank said.
"Condos may be the only option for some homeowners, especially first time buyers," Alexander said.
Lower maintenance costs and greater affordability were the top two reasons for buying a condo cited by respondents in a TD Bank survey in March.
Immigration is also expected to play a major role in the condo market, especially in cities. Seven out of 10 arrivals settle in Toronto, Montreal or Vancouver.

House Prices Will Not Fall !

Here's a recent article about the Toronto Real Estate Market and projected value. Sounds promising!