Sales continue to track back to levels of 2011 and 2010 according to Toronto Rea Estate Board statistics. That is the real story - not that sales are running 20% higher this year than for the corresponding month in 2012. In October overall sales were 19% higher than for October of 2012. For the first two weeks of November, sales were up by 21% over the same period in 2012.
So why is Mr. Flaherty so concerned about real estate in Toronto? Since the Toronto real estate market peaked in sales in 2007, the GTA has added another 600,000 people. Regardless of what economists think, most people change/sell their primary residence for non - economic reasons. People move jobs; they retire, have children, and even die. A bigger population means more sales.
Obviously then, the focus must be on prices and not sales. The primary culprit is freehold properties in the 416 area code. The explanation is simple. There is a trend in all major cities that people want to live downtown. In Toronto, our municipal government has decided to add a second land transfer tax. The impact has not slowed down buyers but it has impacted sellers. When they do the math, it will cost on average $24,000 in taxes to move. So they stay put instead and renovate, meaning less properties for sale. The other significant impact is that CMHC no longer insures mortgages on properties over one million dollars, meaning buyers need to have a 20% down payment for this market. People who have not saved a quarter of a million dollars are now forced into chasing a reduced inventory of freehold properties under a million creating price increases approaching 10% - all thanks to Government intervention in the market.
Looking at the condo market, sales have rebounded as well. But the big concern is all about supply and particularly downtown. However active Listings on TREB in the downtown condo market are 11% lower than this time last year. Condo prices are flat to marginally up. In fact downtown condo prices for new units are now at the same price per sf as freehold properties that are in need of upgrading. A sure sign that there is a floor price to the condo market.
Looking further into condo prices, we tracked sales figures at the recently completed Beyond the Sea, South Tower at 2240 Lake Shore Blvd. West on the Etobicoke Waterfront. This is a three tower project with over 20,000 sf in recreational amenities for owners. The first unit we tracked was a one bedroom with parking, locker and balcony. It measures 584 sf and sold in 2012 for $272,000. The same unit sold this year for $287,000 (62 days on market). The sale represents a one year gain of 5% at a price of $525/sf which includes parking. The second property we looked at was a two bedroom, one bath unit, also with parking and locker. It is located on a high floor with water views and has two balconies. It measures 746 sf. This unit sold in 2012 for $380,000 and sold again twelve months later for the same $380,000 (47 days on market). The price is $509/sf including parking. Currently there are 17 units for sale out of a total of 281 units. This is a high number. Prices range from $298,000 for a one plus one up to $600,000 for a PH.
October through December represents the slowest rental period of the year. In fact rental numbers are down about 25% from the peak in September. This is also when rents tend to soften as landlords try to ensure their units are occupied over the winter. The smallest rental market, studios, saw a decline in average rents of about $20/mo to just under $1400. The entry level to the one bedroom market (no parking and no den) is just under $1600/mo. The most popular unit, the one bedroom plus den with parking has an average of just under $1900/mo. There is now as many one bedroom units rented without parking as there is with parking, which confirms the trend that more people would rather live downtown without a car, than live in the 'burbs with a car. A recent study also showed that this was actually a cheaper option! The entry level for a two bedroom unit without parking or locker remained at $2200 per month. Only a handful of three bedroom units were rented at an average price of $4,000 per month. While the average vacancy rate for condos is just over 1%, the days to rent is about 15; which is less than half the days on market for sales.