BLOGGING FOR CONDOS

Sales Commentary
Everyone knows this is a record setting year for the Toronto Real Estate Board. July sales were up 26% over the same month last year. Condo apartment sales were up by 30% for July. Downtown, condo sales were running 29% ahead of July ‘06. Partial results for August indicate another double-digit increase in sales for the month over last year. Year-to-date, sales are now running 13% ahead of ‘06; and for the Downtown market sales are up by 21%.
But the real question is when will this run end? Not soon! While sales are up from last year, ‘active listings’ are 8% lower than same time a year ago. Downtown, ‘active condo listings’ are 24% lower. Trying to predict the peak or bottom of a market is a fool’s game. Smart people ride the trend and change when underlying factors change. Right now people are pointing to the weak U.S. real estate market (its over supply of listings) are saying that it surely will surface here, like some sort of virus. The reality is that properties for sale are not easily moved from the U.S. to Canada. The last time we checked, they were still sitting there!! The real concern for our real estate market is whether the weakness in the U.S. housing market and the sub prime mortgage market will impact the overall U.S. economy to any great degree. If it does, then because of Canada’s trading relationship with the U.S., it will impact our own economy. And the loss of jobs will then impact our real estate market. However the National Association of Realtors statistics from the U.S. suggest that the bottom of the market may have already been reached in the fourth quarter of 2006. In the second quarter of 2007, home sale prices were up in 97 of the 149 metropolitan areas surveyed from the same period a year ago – that’s price gains in 65% of the areas; as opposed to less than 50% of the areas who recorded price increases (as opposed to price declines) in the fourth quarter of 2006. So not all U.S. markets are a disaster.
But back to the Toronto market. This month we looked at sales at 5 Marine Parade Drive on the Etobicoke Waterfront. The Etobicoke condo market has lagged most markets until recently. In the last two months we have seen increased sales activity – up 50% in July over July of ‘06, and even some multiple offers. Prices over the last few years have been stable until this year. The first unit we looked at was a one-bedroom with parking and a view of the lake. It sold in June of this year for $255,000. The very same unit sold for $225,00 in June of ‘03 – just a 13% increase in four years. Last year, an identical unit, with less upgrades, sold for $220,000. At 697 sq.ft., the most recent sale was at $365 per sq.f.t. An identical unit also sold this year for $271,000 but it had two parking spots – it appears that the market is about $16,000 for parking. The second unit we looked at was a two-bedroom, two-bath unit with parking and also a view of the lake. It sold in April of this year for 100% of list price at $329,000. At just over 900 sq.ft., that’s $365 per sq.f.t. again. The very same unit was sold in August of ‘05 for $295,000. That’s only an 11% increase in 21 months, which is fairly modest in the Toronto market.

Rental Commentary
The multiple offer scenario has spilled into the rental market. Rents are starting to creep up. July was the busiest rental month of the year. There were 226 one-bedroom units rented. Furnished one-bedroom units averaged $1800 and unfurnished units went for $1500. 107 two-bedroom units were rented at an average price of just over $2100. Days- on-market for all rentals was just 12 days! We can predict that August will be even tighter for people looking for rental accommodation for September 1st.

Sales Commentary
The Toronto Real Estate Board had another record month for June with sales of 10,451 residential units – 20% higher than June of last year and 600 units off from the all time record set last month. We are currently running 11% higher than 2006 on a year-to-date basis. July will be another month that will run well ahead of last year’s numbers. A number of factors have contributed to this strong run. The rise in the bank prime interest rate, with the expectation of a second quarter point increase to come, has pushed people into the market that were procrastinating.
A second factor might have been the proposed Toronto Land Transfer Tax. That has now been postponed for review in October. What made the discussion ludicrous from Mayor Miller was the fact that he claimed Toronto property taxes were already too high and hence the Municipality needed alternative tax revenues. What is a Land Transfer Tax if not another form of property taxation? If people move every 4-7 years then people will be simply paying in lump sums as opposed to annually. The real problem is that Toronto residential property taxes at .852% of assessed value are the lowest in the GTA! In comparison, Richmond Hill is 1.023%, Mississauga is 1.003% and Pickering is 1.352%. Even if property taxes are increased by 6-7% as the Budget Chief is threatening, they will still be the lowest in the GTA!! And Torontonians receive more services than other municipalities in the GTA. So let’s bring some sense to the debate. We don’t disagree that Toronto could use a 1% sales tax, provided that the other two levels of government would reduce their take by a half a percentage each.
Back to the market. Yes condos will continue to outperform the overall market. Sales were ahead by 23% in June versus same month a year ago. Downtown the market was even hotter with sales ahead by 29% and a sales-to-listing ratio over 75%. That means over 75% of the condos available for sale in the month sold within the month! A normal market is 25-35%.
And with prices for condos rising by 15% this year, it means assessment levels will be going up by the same amount; and there Mr. Miller is your revenue increase!
Rather than tracking prices for a particular condo building this month, we focused on the cost of condos on a per sq.ft. basis. When we first started tracking prices in 1999, resale condos could be purchased for $225-250 per sq.ft. and new developments were being sold for less than $300. Today, some 8 years later, resale prices are $325-350 and new developments are $400 -450 with premium projects selling for more than $500. The average increase over this period is about 50%, but 15% of it has come in the last six months! What does the future hold? You can bet there will be no slow down for the balance of this year! And with a tight supply of product, look for another strong market next year and further price increases.

Rental Commentary
This is a busy time of year for rentals. In June 186 one-bedroom and 109 two-bedroom units were rented out Downtown. One-bedroom units with parking averaged $1550 versus $1400 without. One-bedroom with two washrooms (usually know as a one plus den) averaged $1700 versus $1550 for a smaller one-bath unit with parking. On average you pay $150 per month for parking or you can pay $150 for an extra bath and den per month! Two-bedroom units averaged $2200. In case you were wondering in this market, the actual rental price to list price was 100% for both two and one-bedroom units.