No surprise, July sales on TREB were 23% higher than July of 2010. That marks the third month in a row where sales exceeded the same month last year. Even the most conservative experts have now conceded that 2011 will surpass sales of 2010. The all time sales record is still 2007 – some four years ago – so this market is still not behaving like the gold market!
Condo apartment sales were also ahead by 28% over July of 2010. Downtown, condo sales were 33% higher and even the Etobicoke Waterfront had its best month of the year with sales 60% higher than July of ’10. The fact that condo sale increases are running ahead of the overall market is a reflection of a change in lifestyles and also an increasing supply of condos.
So called experts keep calling for a market correction some time when interest rates rise. Given the Euro and the U.S. debt problems, we now know that rates will remain low for at least another year. But even when rates increase, our market will still be in solid. Consider someone who buys with 5% down and takes a 5 year fixed rate mortgage at 3% amortized over 25 years. After 5 years, that person will have built up a minimum 20% equity in the property, without any price appreciation! Does that sound like a future problem for our market? In the days of 9% mortgages, an owner would only have paid off 7% in the first 5 years. So low interest rates not only mean lower monthly payments for buyers but also a faster build up of equity. What causes market/price corrections is when owners are forced to sell at any price – when they have little equity in their property.
This month we examined sales in one of the most popular buildings for Generation X and Y: the Hudson at King West and Spadina. The first unit we looked at was a one bed – one bath with no parking and no locker. At 509 sf, it sold for $328,000 in March of this year. That’s $642/sf! It previously sold in 2009 for $294,000 and in January of 2007 for $211,000. That is a 55% price increase in 51 months – 1% per month. This is a hot building! The second unit we tracked was a two bed- two bath with parking and locker. At 902 sf, it sold in April for $550,000 for a price of $600/sf. The same unit sold in 2010 for $500,000 and in 2007 for $395,000. That works out to a 40% over 48 months. As a matter of interest, another two bedroom unit sold in May of this year for $684,000. It was slightly larger but the primary difference was a 600+ sf terrace. When we adjust for size, the premium paid for the terrace was $50,000!
Activity in the rental market continues to pick up as we head to September – the seasonal peak of the market. In July 34 studios, 383 one bedroom units and 193 two bedroom units were leased in the Downtown market. During the past couple of months, several new condo buildings have entered the market and it is amazing how quickly these new units have been absorbed. Studios can still be had from just under $1300. One bedroom units have increased in price about $50; starting with the basic without parking at $1450. The one bedroom plus den and parking is now renting for almost $1700 on average. Two bedroom units average $2100 without parking up $2400 with a den and parking. These prices are on average $75 per month higher than the start of the year. But what is just as telling is that the average days-on-market for rentals is 10 days for the one bedroom and 15 days for the two bedroom units.