The market that just keeps chugging along continued its upward momentum in September and into the first two weeks of October. Sales continue to run ahead of last year – in September by 10% and for the first two weeks of October by 22% over last year. Now before anyone starts to call this market a housing boom/bubble let’s keep a couple of points in mind. The market last fall was weak. We are now getting more new listings (up 11% in October) and people are now thinking that 2014 may be the biggest sales year ever. The previous high was in 2007, seven years ago (when we had a million less people in the GTA), so we would hardly consider the market over extended (although bubble forecasters – wrong since 2004, think otherwise). Name me one other industry whose peak sales year was in 2007 – not automakers, not food producers, or any other industry you can think of.
Prices also continued their upward trend. The low rise or freehold market is now experiencing price increases in the 10+% range. We know that increases of this magnitude over a three year period will undoubtedly produce a flat lining or a softening in prices. The condo market has shown increases in in the 4% range which is more sustainable, but over the last few months it too has moved higher. Of course all these numbers are average prices, and you know how we feel about average prices. A change in the mix of sales can radically change the average price so that it becomes meaningless. Why are average prices always higher in the spring than the fall every year? Is it because prices are really falling? We all know the answer to that. The only measure is to track a similar or identical property over a period of time to get the actual price increase of a property.
In this issue, we tracked sales at 2121 Lake Shore Blvd. on the Etobicoke Waterfront. The Voyager 1 built by Monarch has great facilities and almost all units have a locker and parking. This area has also experienced a lower rate of appreciation than for condos in the downtown market. Why? Probably because the condo market is currently being fueled by investors and young people – both of whom prefer downtown to the Etobicoke Waterfront, which has less night life but better access to outdoor activities. The first unit we tracked was a two bedroom, two bath unit with a 90 sf balcony, along with parking and locker. It is a south east corner unit with 9 ft. ceilings and lake views. It sold in June of this year for $380,000 or just $465/sf. The same unit sold in 2009 for $333,000. That is a price increase of just 2.7% per year! We also looked at a one bedroom unit that also included parking, locker and a 90 sf balcony. It sold first in 2005 on registration for just $156,000. The same unit sold again in 2006 for $166,000 and then in 2011 for $250,000. A similar unit, 480 sf, is listed today for $274,000. It will probably sell in the $260,000 range. That would be $540/sf. The total price increase over the nine year period for this unit averages 6.2%. But if you look at the period from 2011 until today, the increase per year would only be 2%. These prices and increases hardly suggest a price bubble is about to appear in this market. Currently there are six units offered for sale out 327 units in the building. A normal turnover for a condo building of this size is 20% per year which would suggest that we should have 10-12 units for sale in a normal market.
September is usually the last month of the peak rental period which starts in May. Over 800 rentals were recorded versus 500 sales for the same downtown condo market. Compare these numbers to August where there were over 1,000 rentals and 450 sales. Most September rentals have October 1st occupancy. Even in a slowing market, rents remained fixed for studios at $1450. The entry level one bedroom without parking now averages over $1600. The top of the one bedroom market with a den and parking pushed up over $1900. The starting point for the two bedroom market without parking remained at $2200.The high end with a den and parking also was unchanged at almost $2900. We continue to see a slightly bigger market for three bedroom units and they are in the $3500 to $4,000 per month range. Investors and renters need to price in the ‘extras’ in the rental market. Parking will command a premium of $125-$175/mo. depending on the building. A den has less value, in the range of $75/mo. A second washroom also adds about $100/mo.