Everyone, except our Company, has been forecasting that the market peaked in 2005 and that while strong sales will continue; they will be lower in 2006. On the other hand, we forecast sales to be about 3% higher than last year in our markets! The first numbers are in from the Toronto Real Estate Board. January sales are 10% higher than January of '05 and for condo sales the numbers are even more impressive - a 20% increase in January over the same month last year. Preliminary numbers for February suggest that sales increases will be even higher this month. But before one gets too optimistic, we should remember that last year started out slowly and it was not until the later stages of '05 that sales numbers exceeded those of 2004. We are predicting that these year over year increases will diminish over the second half of 2006. Many buyers are trying to purchase in advance of an expected variable rate increase of 1/2% in the next few months. (Note fixed mortgage rates in the 4 and 5-year range are forecast to be stable throughout the year.) While listings are up slightly from the same period in '05, the sale-to-ask ratio is strongly in favour of sellers. In the condo market, there is a lack of good (read larger and market priced) listings. Many buyers of new condos are not putting their units into the market when they are registered - which is contrary to all the experts except our Company! What many owners are doing is renting them out instead. The rational is that investors who lease their new unit for one year before selling, can apply for a rebate of a portion of the GST - the same benefit as owners who occupy their units receive. The end result is more rental units are sitting on the market for longer periods and there is downward pressure on rentals.
For those who thought that the market was cooling, look no further than the sales at Maple Leaf Square. This new project sold out in just a week after opening to the public. The reality was that many brokers, including ourselves, were able to buy units in advance for our clients. A project that ties into the subway and Union Station, and also links to the ACC with the Maple Leaf mystique was too much for testosterone-fuelled males. The units sold at over $450 per sq.ft.
This month we examined sales at 909 Bay Street - part of the Allegro. The building was completed in 2001 and its great location and facilities make it a popular choice for both occupants and investors. The first unit we examined was a one bedroom with parking on a lower floor. It sold in March of '03 for $195,000 and the identical unit sold 28 months later for $210,000 - just a 7% increase. A similar unit, also on a lower floor, sold for $232,000 in February of '06. Prices have been stable but are now starting to move up. Still prices are only $330 per sq.ft. The last sale of a larger two-bedroom unit in the same building took place at the end of 2005. It was listed at $309,000 and sold for $325,000 - a price of $335 per sq.ft. Bigger units are starting to command higher prices per sq.ft. than smaller ones - just like we forecast!
The Toronto Real Estate Board has just released its year-end report on the rental market. Rental transactions in total were up 14% in 2005 over 2004. Condo apartments made up 88% of these rentals. And the downtown market south of Bloor accounted for 27% of all condo apartment rentals in the City. Average rents downtown were $1511 for the one- bedroom, $2258 for the two-bedroom and $3525 for the three-bedroom. The interesting fact is that only 12 three-bedroom units were leased last year!