Market Report August-September 2015
Market Report August-September 2015
Sales in July on the Toronto Real Estate Board were a record for the month at 9900 units – up 8% from July of last year. These numbers were achieved with the Pan Am Games occupying two of the weeks, which is even more remarkable. But before we get too carried away, we need to remember that these sales numbers were down by 17% from June; a clear indication that this business is seasonal. August numbers are usually lower than July’s before we experience a pick up for September and October. That is our expectation for the balance of what will be a record sales year.
Turning to the condo market, sales across the GTA were ahead by 14% over July of last year because of more product being available. Looking at the downtown condo market, sales were up by 23%! But the number of active listings was actually down by 8% from this time a year ago. A similar trend happened in the Humber Bay condo market. Sales for July were 25% higher, while active listings only increased by 4%. The condo market continues to attract more buyers over time which has kept this market in balance. So called experts claimed that people would vacate condos and move to the suburbs over the next few years. But just the opposite is occurring. People are moving from the suburbs into the downtown market. TREB’s House Price Index for the City Of Toronto shows detached housing increasing by 9% over the last twelve months while condos increased by less than 4%. This price gap is forcing more and more buyers into the condo market and that is the real story moving forward.
Record low mortgage rates should be viewed as a good thing – not used to scare people into thinking that rates will sky rocket at some time in the future. The truth is that we are in a period of low interest rates and there is no sign that they will increase significantly in the near future. It would not surprise us if we entered a period of low rates not unlike that experienced in Japan and now Europe due to the changing age structure of our population.
Pure Spirit Condos: 33 Mill Street
Looking at specific condo sales, we focus on Casa I, located at 33 Charles St. E; just steps from Yonge St and walk scores approaching 100. This building was first registered in 2011. One of the early resales was a two bedroom, one bath unit with parking and a 250 sf balcony on a high floor. It sold for $575,000 after over 100 days on the market. The same unit sold again in late 2014 for $595,000. The sale price was $730/sf but when you remove parking, the price is $680/sf. Now consider a one bedroom unit without parking on a slightly lower floor, but also with a 200+sf balcony. It sold first in 2012 for $416,000. The same unit sold for just $405,000 in 2015. That is a price of just under $600/sf. So why was there a price drop on the one bedroom and virtually no increase with the two bedroom? Two reasons: one the developer sold the building at pre-construction for prices above the resale market at that time and the market is just now catching up; and secondly additional buildings under construction or planned will significantly reduce the views for both units at Casa. The lesson to be learned here is that buying into any pre-construction condo is not a guaranty that your property will automatically appreciate in value. Rather, just like picking stocks, you need someone who knows the condo market, and who can pick the right buildings to invest in for maximum appreciation and returns. Trying to do it on your own comes with risks.