NEW YORK VERSUS TORONTO CONDOS

In previous blogs we have talked about prices and market in big European cities - London and Paris to name a couple.

When we think of the U.S. market, all we hear is falling sales and falling prices. But real estate markets are not national, they aren't even city based - they are really about neighbourhoods. Look at New York. Prices there are not going down. According to a Toronto Star article on January 19, newer condo buildings are offering Penthouse units at $6,000 per sq.ft. At that price a 3,000 sq.ft. Penthouse would go for $18 million - normal for New York but never seen in Toronto, although a couple of condos have been sold for that price from plans but have yet to be built and occupied.

In New York, the latest trend in Penthouses sales means that you can buy a smaller unit for your servants on the first couple of floors in the same building. What are servant quarters going for? Try a minimum of $875,000 for 350 sq.f.t or $2500 per sq.ft. Why you can buy a Penthouse in Toronto with all the upgrades for $1,000 per sq.ft. And you could find servant quarters - read a regular condo for about $400 per.sq.ft.

Toronto prices look pretty good. While we are not New York, or London for that matter, our prices don't seem to be at a point where any price correction is in the foreseeable future. My guess is that prices can move to $600 per sq.ft. in the next three years without any problems!

Anyone want to challenge that assertion?

IMPACT OF NEW CITY LAND TRANSFER TAX

The shouting and complaining over the new city land transfer tax has subsided. But what has been the impact on the sales side?

First, we can tell you that there are a lot more closings in January than normal. A number of people have made arrangements to avoid the tax by closing before January 31. And at least for our Company, December was an all time record December for sales - 30% ahead of 2006.

On the other hand, sales in the first ten days of January are already up 13% over the first ten days of January 2007. It seems most buyers are not that concerned with the new tax! Either they never new about this tax, or they are just accepting it in the standard 'Canadian fashion' - of what do you expect from our governments.

Anyone else seeing these same trends?

2008 CONDO MARKET FORECAST

We have always been known as the most aggressive forecaster of the Toronto Condo Market. We have also been the most accurate. Most economists rely on macro statistics and techniques used to forecast other commodities. They have constantly predicted a market down turn. If you have been keeping score, the down turn started in 2004. On the other hand, Our Ten Year forecast last year said that condo prices would double!

As a real estate brokerage, we have access to stats at a micro level and also more current than other forecasters. The knock against us is that we are just 'salespeople' and we have to hype the market to make sales. So let us share with you a couple of secrets. First, over 80% of our agents have university degrees - and our brokerage actually has economists and MBA's! Secondly, people tend to buy condos for today's needs - without much thought for changing lifestyle or extra space in the future! Younger and older buyers (who either expire or move to retirement residences) make buying and selling decisions that do not reflect any economic cycle. A young couple, living in a one-bedroom condo that is expecting a child will move whether interest rates are 2% or 12%. If the unit they own has gone down in price, then the unit they want to move to has also gone down, so the impact is neutral.

What will impact the condo market from an economic sense is the investor portion, which is less than 30% in total. Economics will also impact the rate of price appreciation for condos but not the volume of sales in the resale market. Economics has the most significant impact on buyers and sellers who can postpone the moving decision - read detached houses! Our Forecast is all about the condo market in Toronto, NOT the Canadian real estate market.

WHAT YOU NEED TO KNOW ABOUT TODAY'S CONDO MARKET:
1)There is still a shortage of good condo listings. The first sign of a market correction will be when we have more listings than buyers - no signs yet.
2)'Owner occupiers' are the major buyers in this resale market - in 2007 investors all moved to new projects, which are completing in 2010/2111. That is when you will see the market change - and remember you read it here first.
3)The impact of the new City Land Transfer Tax will be minimal. The Ontario Government's decision to extend the first time buyer rebate for the Provincial Land Transfer Tax from new units to resale as well will encourage sales downtown and this will mitigate the new City tax. The new tax will however impact expensive properties that are on the 416/905 boundaries, but not downtown.
4)Interest rates are not a factor. Employment also remains strong.
5)More people/buyers still want to live downtown - not just those who work in 416 but also those who work in 905! And then you still have significant immigration.

HOW THE CONDO MARKET WILL PERFORM IN 2008:
1)2008 will be a record year for condo resales downtown - at least 8% higher.
2)Condo prices will increase by 10% (last year was the first year of double digit increases in condos and most markets can absorb three years of double digit increases before a correction)
3)Look for the Etobicoke Waterfront to increase in popularity as more buyers over 50 enter the condo market. It is lower priced than either Downtown or Port Credit.
4)One-bedroom condos are second choice. Buyers want a minimum of one plus a den.
5)While parking spots at $30,000 are quickly becoming the norm downtown, buyers are learning to live without a car or a parking spot!