SEPT/OCT 2006

SALES COMMENTARY:
Residential sales on the Toronto Real Estate Board were 7% lower in August of this year as compared to 2005. On a year-to-date basis, sales in 2006 are unchanged from 2005. Condo sales continue to outperform the overall market. In August condo sales matched those from last year. Downtown condo sales also equaled last year?s numbers for August but on a year-to-date basis, they are still running 15% ahead of 2005!
More experts are now calling for a market correction in light of softer markets in the U.S. and observing that our own market is slowing down. But in Toronto, this is more a seasonal factor than a change in market direction. Historically, sales are 20-25% lower in the Fall than the Spring market. So what are the factors that people in this market should be looking for? A spike in sales, a spike in prices, and an oversupply of listings! Now look at the Toronto market. Sales have been on a plateau since 2003. In 2003, sales were 79,000 units, in 2004 83,500 units, in 2005 84,100 units, and the same number is forecast for this year. Experts tend to rely on average prices (that?s because they don?t have access to prices on specific properties over time and when the mix of sales changes ? and this has been happening with renovations and the desire for more expensive properties by consumers, which creates an upward bias to the numbers). The average price increase in Toronto over this period is just under 5% per year! Finally where is the surplus in listings? In August of 2003, the ?average days on market? was 34 and the average sale to list price ratio was 98%. In August of 2006, the numbers are 33 days on market and 98% sale to list price. So what is there to suggest a market correction? What we do know is that as the market levels off, the Downtown market always OUTPERFORMS the suburban markets and we are already seeing that trend!
This month we looked at sales at 12 Sudbury, a popular stacked townhouse project in the King West area. Townhouses are popular because prices per esq. are lower than for condo apartments due to savings in common areas such as elevators, constructions costs, etc. and hence buyers get more bang for the buck! In our 2005 market forecast, we said that townhouses would outperform the market! So let?s look at a couple of model units for which we tracked prices. First we looked at the biggest unit in the project ? 3 bedrooms with 2 baths, roof top deck, and parking. The unit sold first in May of 2002 for $277,000 and the same unit sold again this year for $398,500. That?s a 43% increase over 4 years. That?s better appreciation than most condo units downtown. At 1325 sq.ft., the price is still $300 per.sq.ft. Compare that to new developments at $400+ per sq.ft., and the value is still there. The second unit we looked at sold first in 2005 for $300,000. The owners spent under $20,000 on renovations, and sold it for $360,000 twelve months later! At just over 1100 sq.ft., the selling price is $325 per sq.ft.


RENTAL COMMENTARY:
August was the biggest month of the year for rentals. Downtown over 200 one-bedroom and 91 two-bedroom units were leased. That?s almost twice the monthly average. One-bedrooms with parking went for $1500 on average. The average unit lasted 15 days on market. Two-bedroom units with parking averaged $2140. There were even 9 two-bedroom units without parking that averaged $1800. Days on market for two-bedroom units averaged 17 days. Finally we compared one-bedroom units with two washrooms versus one washroom. The difference? $1600 versus $1450. So now you know the price of an extra washroom in terms of rent ? the same as a parking spot!

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