Has the Toronto Residential Market peaked? According to Toronto Real Estate Board sales were 5.3% lower in June of this year than June of 2011. This was the first month in 2012 that sales were not higher than the same month of 2011. But what is more telling is that at the midpoint in June, sales were equal to those of midpoint June 2011. In other words, over the last half of June, sales were actually 10% lower. It seems to suggest that June 15 was the changeover date.
On the other hand, the condo market has been flat to down since the start of the year. June just put an explanation point to that trend: overall condo sales in June vs. June of last year were down 18%, 416 condo sales were also down 18%, and Downtown condos took the biggest hit - down 30%. That brings Downtown condo sales on a year-to-date basis 9% lower than for 2011.
The mid-July numbers from TREB show that residential sales were 5% higher than mid-July of 2011. Gains were all in the freehold sector while condo sales were lower by only 6%. This is better than June numbers. So is this a bounce back? My view is no.
Going forward, condo sellers need to realize that they will be fortunate to get the same prices that they would have received at the start of the year. Condo buyers should be in a position to negotiate prices - probably 5% lower - but don't expect to see 'fire sale' prices. The good news for buyers is that this buying opportunity should last to the end of the year.
People always want to know how you can tell if it is a 'sellers' or 'buyers' market? For the past four years it has been a 'sellers' market - the sale-to-active listings ratio has been 40% and higher. A 'balanced market is when the ratio is 25 to 35%. A 'buyers' market occurs when the ratio is less than 25%. For the total market, the number is still at 45% because of the demand for freehold properties and the limited supply. Not so for condos, and particularly Downtown condos where the ratio is 26% - last year at this time it was 45%! For the Etobicoke Waterfront the number is 22%. What does this mean for sellers and buyers? For the most part prices will go sideways. But with more condo listings hitting the market, this ratio could drop further.
In this Report, we tracked sales at the Voyageur Condo by Monarch at 2119 Lake Shore Blvd. on the Etobicoke Waterfront. This newer building offers numerous amenities including gym, pool, theater and 24 hr. concierge. The first unit we examined was a one bedroom plus den, at 805 sf, with parking, locker, and large balcony. It sold in May of 2012 for $335,000 or $416/sf. The same unit sold 26 months earlier for $314,000 - an increase of 6.6% over the period or 3% on an annual basis. The second unit we looked at was fully upgraded, with two bedrooms, two bath, den, two parking spots and locker. The unit was 1015 sf with a balcony of almost 200 sf. It sold in March of this year for $455,000. When you adjust for the second parking spot, the price was $428/sf. The same unit also was sold in May of 2006 for $310,000 but with only one parking spot. The increase in price was 40% over six years or 5.5% compounded annually, with most of the increase occurring in 2007 and 2008. The price increases in this condo are certainly not 'bubble' like but are consistent with historical real estate appreciation rates.
The media and the Federal Government seem to feel that it is better to rent than to own. That's good news for investors who have long been waiting for rent increases to catch up to prices and maintenance costs. There is zero vacancy in condo units and multiple offers going over list price are quite common. There were more rentals in the Downtown Market than sales in June - 27% more in fact! Studios became more popular with an average rent of $1400 in June. The entry level for a one bedroom without parking is now $1550.The high end one bedroom units with den and parking are averaging between $1800 and $1850. Two bedroom units start at $2,000 per month without parking and the top end averages $2550. A previous Blog on rents stated that rental rates still need to move higher by another $300 per month to bring them more in line with the price/rent ratios of other major cities in North America.