AUGUST/SEPTEMBER MARKET REPORT 2013

SALES COMMENTARY: July was the breakthrough month for Toronto real estate sales. As reported by the Toronto Real Estate Board, overall sales were up 16% in July over July of last year. Overall condo sales were up by 10%. These results were exactly what we predicted would happen back in April. Sales are now expected to run ahead of last year for the balance of 2013. By year end, we are forecasting sales to be greater than 2012 and will match those of 2011. While these numbers will undoubtedly mystify our so-called experts, it is exactly what one would expect if one lived in the market. Over the past year, employment growth for Toronto is up 5% versus just .2% last year and mortgage rates have barely moved from this time last year. All signs of a strengthening market. The Downtown condo market has not fared as well. Sales are up just 5% over July of 2012. The positive news is that ‘new’ listings for the month are 9% lower than July of last year, and ‘active’ listings are now 4% lower than a year ago at this time. The Etobicoke waterfront actually saw sales decline by 20% from July of 2012 – one of the few markets in Toronto to experience an actual decline. The only consolation for an improved market is that ‘new’ listings declined by 14% and ‘actual’ listings are down 3% from last year. How do you explain this market weakness? The number of people who want to live downtown continues to rise, but somehow they are convinced by the same experts who cannot forecast this market that it is better to rent than to buy. They continue to call for prices to fall by 10%, yet condo prices continue to rise annually in the 3-5% range. We would argue that the prices of freehold properties, increasing in the range of 7-10% annually are more susceptible to a price correction. Sales from the first two weeks of August just confirm our analysis of July results. Overall sales are up by 22%; condo sales also up by 22% and condos in 416 (the smallest break down available) are up 25%.  We believe that downtown condo sales will again under perform the overall market in terms of sales growth. This month, we looked at sales at Kings Court – 230 King St. East. It is located half way between the St. Lawrence Market and the Distillery District with great walk scores. Amenities include a rooftop terrace with BBQ’s, concierge, gym and spa. The first unit we looked at was located on a high floor with great views. It is a one bedroom with parking, locker, and balcony. It sold at the end of 2012 for $340,000. At 585 sf, that works out to $580/sf. The same unit previously sold in mid-2008 for $303,000 which converts to an appreciation rate of just 3% annually. We also looked at a two bedroom, two bath unit, with parking, locker and 350 sf terrace. It also sold at the end of 2012 for $465,000. At 840 sf, the price is $555/sf.  The very same unit also sold in late 2007 for $385,000. Over five years, that is an annual increase of 3.7%. Currently there are only three units for sale in this building out of 332 units. A one bedroom is asking almost $600/sf and probably won’t sell. There are two, two bedrooms units for sale asking $525/sf. These are good buys. RENTAL COMMENTARY: July is usually the busiest rental month of the year. Studio rents held firm at $1400 per month. Downtown almost 600 one bedroom units were rented. The basic one bedroom without parking rents for $1600 (unchanged from a year ago). The one bedroom plus den but without parking now averages $1750 – the same as a one bedroom with parking. The one plus one with parking is now $1900 per month or $50 higher than a year ago. Rental rates for two bedroom units have increased the most over the past year due to less supply and because renters want bigger spaces. The basic two bedroom, without parking now averages $2225 per month or $125 more than last year. At the high end, two bedrooms with den and parking is now averaging $2700 or $100 more than a year ago. Over 300 two bedroom units were rented. Just twelve three bedroom units were rented at an average price of $3500. Rentals are staying on market for 10-15 days on average before being rented. In this market, renters need to get their references together (the Rental Application, Letter of Employment, and a Credit Bureau) BEFORE they view any listings!

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