Most forecasters are predicting that the market has peaked in terms of sales and we should expect a small down turn. That is what they also said in 2005 and 2004. It's funny how people always want to predict the 'peak' of the market. While detached house resales will probably level off, we expect condo resales to be slightly higher in 2006! In the Downtown market, there are more condo units and more people than ever before. So unless there is a fundamental economic change, how could anyone predict anything else but an increase in sales!!
What economists are forecasting is a rise in interest rates. Interest rates are only going to increase if the Bank of Canada feels that the economy is growing too quickly - read job growth and income growth - two factors that positively impact the housing market. So in other words, any increase in rates will be cancelled out by economic growth.
SO LET'S SUMMARIZE THE MARKET FOR 2006:
1) Expect interest rates to rise by one-half to three quarters of one percent. For buyers the message is simple. Buy early because a rate increase of this amount means that real estate prices would have to fall by 10% - just to maintain your same monthly mortgage payments. That is not going to happen in 2006.
2) Last year we forecast condo sales downtown to increase by 5+% for 2005. Guess what - sales were up 5%. So continuing our fearless predictions, we again expect sales to increase but only by 3% in 2006. Believe it or not, what is dragging the market is not buyers - they are getting even more choosey, but a shortage of good listing product!!
3) Prices will again continue to move up. As we always preach, the average price increase means nothing. There are some condos that will appreciate by over 10% next year - and others that might even fall in price. Which one do you buy? That's where a condo specialist earns their keep.
4) Many Investors are not selling their condos once registered but are renting them out. This strategy has reduced the number of listings on MLS while helping to move prices higher. This also has had no negative impact on the rental market.
WHAT ARE THE HOT CONDO PROPERTIES IN 2006?
1) Bigger will always be better. You can always renovate a condo; you can never expand the four walls. In Toronto, smaller units have always sold for more per square foot than larger ones. In New York, larger units sell for more per square foot than smaller ones. New York is a more mature condo market, so get ahead of the curve now! While everyone wants a 1,000 sq.ft. - 2,000+ will be the hot property in two years when the baby boomers start to enter the condo market in big numbers.
2) True lofts (not soft lofts which are new construction with higher ceilings and big windows) are in demand. With fewer factory/warehouse buildings left to convert, and demand for this type of property growing, look for loft prices to out perform the market going forward.
3) Low-rise not high-rise will be better. Again, a lack of product, coupled with growing demand from baby boomers and condo owners looking to upgrade and raise a family downtown will make these projects hot.