Toronto real estate sales continued their 2008 trend – downwards by 22% in August over last year and 15% on a year-to-date basis. Downtown Condo sales are also down on a monthly basis by 13% and 12% on a year-to-date basis. In most commodity markets, lower sales means falling prices. But not necessarily in real estate! If sellers do not get their price, they simply do not sell or they take their property off the market. So how are U.S. real estate prices falling? First many owners have defaulted on their mortgages and banks have to put these properties into the market to sell at any price. Secondly, builders constructed a lot of housing on ‘spec’ and they have it to sell it. In the U.S. there is a ten month supply of housing inventory. This scenario does not exist in Canada – minimal foreclosures and very little ‘spec’ construction. On the Toronto Board, even with active listings up by 31% over last year we have an inventory of only 3.5 months. The Downtown Condo market is in even tighter supply – just over 60 days. A balanced market is closer to 90 days!
Negative economic news from around the world is putting a drag on our market but the underlying fundamentals for condos are favorable going forward. Those people who elect to rent rather than buy are not coming out ahead as demand for downtown living remains strong and the rental market is getting tighter (see below).
In this Report we tracked sales at 230 King Street East. While the East side is not as popular as west of Yonge, it is edgier and this is a great building. The first unit we looked at was a one bedroom loft, without parking at 550 sqft. One unit sold in late 2006 for $189,000 and the same unit again in June for $218,000. An identical unit on a higher floor also sold for $189,000 in late 2006 and then again in July this year for $242,000! One month later for an extra $24,000? The average sales price without parking is $420 per sq.ft. The price appreciation was just over 21% in twenty months. Let’s look at sales of two bedroom units in 2008. We looked at three units, all with parking and ranging from 755 sqft. up to 850. The price per sq.ft was $450 to $475 but two of them have sizable terraces and when you deduct the cost of parking - $30,000 and a terrace from $30,000 to $50,000 – the price per sqft. comes back to the $410 to $440 range. The market can certainly support these types of prices.
Predictably, rental volumes dropped in August as demand for October and November occupancy is approaching the slowest months of the year. The number of one bedroom units leased was just over 130 versus 200 per month over the summer. The most popular unit is a one plus one with parking. The average rent is now $1650. Very few bachelor units reach the market and they are renting for $1250! Just over 100 two bedroom units were rented – the most popular included parking and the rent averaged $2150. Those with a den are now going for $2325. It is obvious that people are using the den as a third bedroom as it is almost impossible to find a three bedroom condo to rent – and if lucky, expect to pay just under $4000 for rent. Days on market to rent has dropped to just under ten! Experts advising people to rent rather than buy a condo have made the rental market extremely tight at this time.