May was another strong sales month on the Toronto Real Estate Board. Sales were 11% higher than in May of last year. More encouraging for buyers, new listings in May were 20% higher than last year. However ‘active’ listings in total represent only about a two month supply. (In comparison, the U.S. supply is seven to eight months.)
While there is no such thing as a ‘national’ real estate market, we are fast coming to a conclusion that there is no such thing as a ’Toronto’ market either. Our market focus, just on condos shows that there are big differences there too. Sales in the 905 area increased by 12% over May a year ago; whereas in 416 the increase was only 5%; and in the downtown market it was just 2%! We have the biggest number of ‘active’ condo listings downtown - ever – yet it is just a three month supply. Condos priced under $350,000 are moving quickly. Two bedroom units at $500,000 are sitting on the market. We have condos selling in a single day and others sitting for 60 days.
With the media so negative about the condo market, it is not surprising that many buyers are pausing and trying to ‘time the market’. We know that timing the market does not work for the stock market so why would it work for real estate? We can tell you that prices have been flat over the past six months but they will be significantly higher in five years’ time. The fundamentals for living downtown have never been stronger and it’s not about to change. More and more people want to live downtown and the only affordable option is condominium living. Companies are also moving back downtown to be closer to a younger work force and there are new office buildings planned and under construction to meet this demand which only strengthens the process.
In terms of specific pricing, we looked at the Chocolate Company Lofts at 955 Queen St. W. This is a loft building in trendy Queen West. The first unit we looked at was a one plus one with two washrooms and no parking. The selling feature is the 13+ ft ceilings and big windows. At 795 sf, it sold in April of 2012 for $432,000 ($3,000 over list price) at $540/sf. The very same unit was sold first by the developer in 2005 for $298,000 and resold in 2010 for $384,000. Over this period, the average annual increase was 6%. The second unit we tracked was a two bedroom,/two bath loft, with a den but again no parking. It is a corner unit with wrap around balcony and five walk outs! It sold a year ago for $499,000 (at 100% of list). At 1066 sf, the unit sold for $470/sf. The same unit previously sold in late 2005 for $413,000 - that’s only a growth rate of 3.5% per year – hardly bubble territory! And currently out of 144 units, there is only one for sale – that is hardly the sign of a possible price correction in the near future.
The hottest sector of the condo market is rentals!! Multiple offers and bids over list price are not uncommon. Prime studios are now renting for $1400 per month. Over 350 one-bedroom units were leased in May. The entry point for the basic one bedroom without parking remained at $1550. One bedroom units with a den and parking are now getting just over $1800 per month on average. The market is now telling us that tenants will pay as much for a den as they will for a parking spot - $125 per month. The two-bedroom market is really becoming popular. Almost 200 units were leased in May. The entry point is now just over $2100 without parking. Average rates for a two bedroom with den and parking are now in the $2700 range. It is extremely rare to find three bedroom units for lease, but seven units were rented last month at an average of $5,000 per month. The average sale or rent to listing price was 100% last month across all rental types! This is another indication of a tight market that will only intensify over the summer as we head to the September peak.