This real estate market is not 'hot'! We would describe it as returning to more normal levels. Last year the market was decidedly weak. To prove our point, September sales on the Toronto Real Estate Board were 30% higher than September of 2012 but they were the same as September of 2011. The condo market was 25% higher this September over September of last year. Downtown condos were up by 19% and on the Etobicoke waterfront, the increase was 37%!
But what is more important to downtown condo watchers is that 'active' listings are 9% lower than for this time last year and 'new' listings in September were down 13% from September of 2012 which certainly suggests a stable market going forward. The Etobicoke waterfront which has suffered from an oversupply of listings also reported a decline in 'active' listings of 7% and in 'new' listings of 11%.
The mix of downtown condo transactions (rentals versus sales) for the Third Quarter of the year continued the surprise from the Second Quarter. Rental transactions outpaced sales transactions by a ratio of two to one! The allure of living downtown has not subsided, so those worried about vacant condos can relax. The real challenge is convincing young people to get into the real estate market sooner rather than later. If the secret to building an RRSP is to start contributing early, it is even more advantageous in building real estate equity!
Looking ahead, the first two weeks of October produced a sales increase of 21% as compared to the same period in 2012. Condos were also ahead by the same number. Again all those experts who do not live in Toronto predicted that sales would drop off in the fall. They argued the August/September up tick was simply buyers using up their pre-approved lower interest rate guaranty. My comment: wrong!
In this Report, we looked at sales at the Hudson, a popular condo with high end finishes and great amenities, at the corner of King and Spadina. We first looked at a two bedroom, two bath unit with two balconies, parking and locker on a high floor. It had sold three times: the first in 2008 for $572,000; the second in 2009 for $580,000 and the last time in 2012 for $610,000. That is a price appreciation of just 7% over four years! At 1042 sf, the price is $585 per sf. A slightly smaller two bedroom unit on the same floor but with a better view has sold conditional in six days and was listed at $639,000 for a price just over $600 per sf. We also looked at a one bedroom without locker and parking on a lower floor. It also sold in 2008, 2009, and 2012. The first sale was $260,000; the second was $290,000 and the third was $355,000. That's about a 7% appreciation over the last three years. At 540 sf, the final sale was at $650 per sf. Currently there are only two units for sale - both are one bedroom plus den out of 281 units in the building. The asking prices are in the $640-650/sf range. It is apparent that prices have levelled off in this building but are not falling. As we have stated in the past, the resale market, depending on the building, runs from $500 to over $600 per sf. There is however a real price compression happening with prices over $700.
As we stated above, rental numbers are exceeding sales numbers in the downtown condo market. (This also is the case for the Manhattan market too.) Rental prices were unchanged from the previous month. Studio units averaged $1400. Basic one bedroom units start at $1600 per month and increase to over $1,900 for a den plus parking. Two bedroom units start at $2300 without parking and average up to $2800. The number of rentals was about 20% lower in September than in August. While many are concerned about the mix of condo units: the current rental pool is about 5% studios or bachelor units, 62% one bedroom units of all types, 32% two bedroom units, and only 1% three bedroom units. We understand why developers build smaller units for investors but they need to come up with a plan whereby side by side units can be combined to provide larger family size units in the long term.