August was another great sales month for the Toronto Real Estate Board with 6549 units sold. While not quite as spectacular as July, residential sales were up 21% over August of last year and on a year-to-date basis are now running 6% ahead of 2002. Condo sales in August also were up by 25% over the same month last year. Downtown, condo sales were up by 37% and on the Etobicoke Waterfront sales were up by 50% over the same month last year. Looking forward, we expect that higher priced condo units will be more active this fall.
Sales of condos over $300,000 (145 units) were more than 59% higher than the total recorded for August in 2002. Economists keep telling us what we already know - there are record numbers for new housing starts and in particular new condos in the Downtown market. This building boom will lead to a glut of condos and we will experience a market crash. They have been warning us for the last twelve months. But remember most of these units were presold before construction can start. The real question, which the economists don't have, the answer to is: what happens to these units once they are registered? What is the absorption rate as investors either sell or rent their units? To answer this question we looked at sales at City Place - the biggest project Downtown and one where the percentage of investors is probably the largest. We examined sales in one building - 381 Front Street that was registered in 2003. Of the 39 sales, 29 are one bedroom, the standard investor unit. Three identical 605 sq.ft. units with parking sold for $196,000 in April, $195,000 in May and $205,000 in July. The unit in the last sale had a slightly larger balcony of 35sq.ft. - hence the premium!
There were three sales of a 636 sq.ft. one bedroom unit with parking - two in May at $188,000 and $195,000 and another in September for $191,000. Why did the larger units sell for less? They faced north while the smaller units faced south. But the most important lesson to be learned is that the market absorbed all these sales without any noticeable decline in prices!! This is not what the economists would like us to believe but the reality is that the market is active and prices are flat - the best of markets for buyers and sellers.
The rental market is also active. This is a very popular time for renters but there is ample supply from which to choose. Furnished rentals are numerous - a sign that the corporate rental market is not fully recovered.
You can rent a nicely furnished one bedroom for $1600. There is plenty to choose from in the $2000 area for two bedrooms.