OCTOBER/NOVEMBER 2010 MARKET REPORT

Condo Market ReportSALES COMMENTARY: September sales on TREB were 6300 units – up slightly from August but down 23% from September a year ago. It appears that sales have reached a plateau at just over 6,000 units per month. Usually October sales are higher than September. This year, preliminary October numbers are tracking for a 5% increase, which confirms that market activity bottomed out in August. We would describe this as a ‘normal’ fall market. Looking at the downtown condo market, sales were off by just 15% from September of last year, suggesting that the condo market is outperforming the overall market. While sales are steady, it is the oversupply of condo listings which has held prices down. While interest rates for fixed rate mortgages are being lowered, this will have little impact on the market. Looking forward, we do not see any significant drop in prices. Some buildings have experienced price corrections of as much as 10% and others have had no drop in prices from the peak of the market in April. (Ignore reported year over year average price changes which are irrelevant and which are technically meaningless). Overall, the condo market is down 5%. In terms of new condo developments, we believe that prices will not go much higher than $600 per sf. The problem is not with costs but with rental rates that are too low! In Chicago, for example, two bedroom units rent for $3000 versus $2100 in Toronto. You can buy condo units in Chicago at $350 per sf – down from $500 at the peak. While we have always maintained that condos don’t move across borders, investors do! The new condo market is now dominated by investors. Need we say more? This month we looked at sales on the Etobicoke waterfront which has the lowest waterfront prices – yes lower than Port Credit and Oakville. The building we selected was Grenadier Landing, more than 8 years old with very reasonable condo fees – about 55 cents per sf per month which includes all utilities except cable. The three units we tracked all had lake views. The first unit was a one bedroom plus den with parking, locker, and large balcony. It sold in May of this year for $315,000 and in September of ’09 for $310,000. The second unit, also a one bedroom plus den with parking, locker and balcony sold in February of this year for $310,000 and a year earlier (at the bottom of the last price correction) for $272,000. Going from trough to price peak produced an annual increase of 14%. The third unit, slightly smaller, was a one bedroom with parking, locker, and balcony but classified as a Penthouse. It sold for $305,000 also in February of this year. These sales confirm an average price of $450 per sf (including parking) and that prices are basically unchanged in the last twelve months. RENTAL COMMENTARY: As expected, the number of rental units leased downtown was lower in September: 26 studios, 273 one bedroom units, 144 two bedroom units, and 6 three bedroom units. This is a 15% drop from August due to seasonality. At the same time, rental prices increased slightly. Studios moved to $1300; whereas one bedroom units ranged from $1400 without parking to $1650 with a den and parking. Two bedroom units ranged from $2000 to $2250 for a den and parking. Six three bedroom units were leased at an average of $4000 per month. The most telling sign that the rental market is tightening is the ‘days on market’ to lease. For studios, it was 11 days; for one and two bedroom units it was 15. In fact units without parking rent 5 days faster!

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