OCT./NOV. 2005

SALES COMMENTARY:
September sales were a one-month record for the month of September, as reported by the Toronto Real Estate Board. Residential sales were up 11% for September ?05 versus ?04. Condos were even stronger ? up 18% in September over the same month last year. Downtown the numbers were much the same ? condo sales were 19% higher than a year ago. So what does that mean? Not much!! Year-to-date sales are now almost equal to 2004 for the overall market, while condos are ahead by 4%. But to put this in perspective, September sales were 20% less than the peak month of May this year. That?s because this market is also seasonal. What people and especially the media experts fail to recognize is that residential real estate is not just another commodity that can be traded at a whim. People need a place to live and that is what drives the market. With a population increasing every year in Toronto, annual residential sales have only dropped from the previous year 8 times in the last 35 years. The most significant drop was in the 1988 to 1990 period. That was caused by a heavy influx of speculators. The other drops were relatively minor. Looking specifically at the condo market, major condo projects today are not being built without significant presales. Hence there are no developers or bankers to flood the market with empty units. The most recent CMHC study of the condo market showed that 80% of new condo sales are to people who will be living in their units, and not to investors who are putting them up for rent. All these factors should put owners at ease when looking at the market over the next few years. And remember, the growth of the downtown condo market was supposed to be driven by baby boomers downsizing from their detached homes ? and this group has not been a factor as yet!
To prove our point, we examined prices at One Palace Pier, on the Etobicoke Waterfront. This is an older building sitting on a large waterfront property. It has five star hotel amenities and mostly larger condo units, with spectacular city and water views. This lifestyle coupled with big units makes it ideal for baby boomers that want to down size from detached homes. The first unit we looked at was a two bedroom with two solariums, three baths, and two parking spots at just over 2,000 sq.ft. The unit sold first in 1999 for $520,000. It sold a year later for $610,000 after it was totally renovated. The same unit came on the market again in 2005 and sold for $706,000. Price appreciation was just 16% over five years ? considerably less than for newer, smaller units in other buildings. Another condo of approximately the same size sold for $545,00 in 2002. The same unit actually sold for less in 2004 and then was sold again in 2005 for $575,000. One of the drawbacks to these units is the high condo fees of over $1,000 per month. All utilities are included. However on a per sq.ft. basis, this works out to 55 cents, which is in line with other buildings. What we do know for sure is that when the baby boomers enter the condo market, the premium will shift to bigger units because newer condo buildings have nothing available over 1400 sq.ft. Our guess is that bigger units will outperform the market over the next five years!


RENTAL COMMENTARY:
The rental market is starting to slow as September recorded 119 leases for one bedroom and 60 leases of two bedroom units downtown ? down approximately 20% from the August, which is consistent with the seasonality of this market. Rental rates remained unchanged at $1500 on average for a one-bedroom unit, while two- bedroom units were up to $2200 on average. During September, average days on market for leased properties were less than 20 days.

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