JULY/AUGUST 2005

SALES COMMENTARY:
June was another excellent sales month, as reported by the Toronto Real Estate Board. Sales at 9,275 residential units were 1% lower than the all-time record month of June '04. Condo apartment sales were ahead by 1% this June over June of last year. On a year-to-date basis, we are tracking exactly as predicted - the overall market to be approximately 5% lower than last year's record level and condo sales to match last year's number. What is also emerging is that the suburban markets are reporting significantly lower sales volumes from last year, whereas the central areas are still reporting rising sales! This is another sign that the market is reaching a mature phase. Historically, the suburbs do better in the early stages of a boom or rising market and the central core tends to be more consistent throughout the cycle.
Downtown condo sales were up 16% in June of '05 versus June of '04 and year-to-date sales are now 2% higher than last year's record numbers. At the same time, the number of new condo listings for 2005 has actually dropped 6% from the same time period a year ago! The sale-to-active-listing ratio is running at just over 50%, a clear indication that this is still a sellers market (if properties are priced correctly). A balanced market is in a 25-35% range! Sellers beware! Several thousand new condo units will be registered by year-end and some of these units will hit the resale market, which will change the market dynamics. In Etobicoke, condo sale were up by over 20% June over June last year. This is a result of more units for sale and not from a surge in buyers. The sale-to-active list ratio here is 24% this year versus 22% a year ago - indicating a market that still favours buyers.
A comment on interest rates: yes they are going to rise but this is not a bad thing. Rising rates are a sign that the economy is doing well - that means more jobs and higher incomes for many people. As well, it is a sign of rising inflation, and believe it or not, inflation has always been good to the real estate market and investors. If you have 10% inflation that means everything including real estate is rising by that amount. If your equity is 20%, a 10% increase in prices produces a 50% return on your equity. Yes, there will be some people who will get caught because their debt levels are too high but the majority will do just fine.
This month we tracked prices at the Renaissance Plaza, 175 Cumberland. This is an older building at Bloor and Avenue Road in Yorkville. This is a trendy part of the City and generally has the highest real estate prices. We looked at two sizes of units. The first is a two-bedroom, two bath unit - just under 1700 sq.ft. This unit first sold in 1998 for $500,000. The same unit sold again in 2002 for $551,000. An identical unit, on a lower floor, then sold for $560,000 in 2005. The same trend is evident with a one- bedroom unit with the two washrooms. This unit, 1260 sq.ft., sold in 1998 for $300,000. In 2000, an identical unit sold for $360,000. In 2003 this unit peaked at $418,000 and then the final sale of this type of unit dropped back to $365,000 in 2005. All but one sale took over 100 days. The major problem with this building is that parking has to be rented and this has had an impact on values. The two-bedroom unit experienced an increase of just 12% over 7 years, or less than 2% per year! The one-bedroom was better - about 30% over 7 years, or 4% per year. And with prices at $300 per sq.ft., this is hardly what one would consider a real estate bubble in the making!


RENTAL COMMENTARY:
Rental move-in dates peak for May and September each year. In June 166 one-bedroom and 63 two-bedroom units were leased - up 32% from last month. The number of available units for lease dropped slightly from last month. We expect market activity to increase over the summer. And there have even been multiple offer scenarios for some units! Rental prices may have come off from their peak from two years ago but they are now renting for close to full list price.


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