CONDO MARKET REPORT

November/December 2015

 

Sales Summary:

 

Sales were unusually strong in October according to the Toronto Real Estate Board. The pre-occupation with the Blue Jays was more than offset by the good weather in October. Sales were ahead by 3% over October of last year. Our commentary from last month remains unchanged in that 2015 sales are now close to those of 2014 on a monthly basis since the summer. Remember, weather only impacts the timing of sales, not the total number of sales over a lengthy period of time such as a year. Buying real estate is not time sensitive for most – unlike buying groceries each week. Let’s look at last year. Normally the Spring Market starts at the end of February and into March. Record cold temperatures in February delayed the start until April, yet we experienced a strong, record breaking sales market throughout the balance of the year.

 

Another market factor which gets way too much attention is changes in interest rates. The naysayers believe that our market will end with the U.S. Fed Bank Rate forecast to increase rates in December. The rate is expected to rise by ¼% to ½% in total. This is the same rate as the Bank of Canada rate right now – ½%. The previous record for sales on the Toronto Real Estate Board was in 2007. During that period our Bank of Canada Rate was 3.25% to 4.75%. The point to be made is that moderately increasing rates will have no impact on sales. They will however slow down the increase in real estate prices and that is not a bad thing.

 

In Toronto (called the new 6 which is the 416 and 647 area codes) condo sales were ahead by 9% over October of 2014. Conversely detached house sales were lower by the same 9%. In terms of condo sales downtown, the monthly increase was 19% (in September sales were actually 1% lower than last year - and we were concerned). The Humber Bay condo market was even stronger – up 23% this October over October of last year. With all those construction cranes causing anxiety among economists, increased sales are to be expected, but the real focus should be on supply – units available for sale. In the downtown condo market, ‘active’ listings were up by just 1% over last year which means the absorption rate is actually rising. In Humber Bay, ‘active listings’ were up by 4% which shows an increasing absorption rate in this market. While low rise/freehold properties in the 6 remain in tight supply, the condo market is in better balance. While we see prices in the condo market increasing marginally, the price gap will to continue to widen with low rise and soon more buyers who desire to live in Toronto will have to adopt the condo lifestyle.

 

The Murano: 38 Grenville St:

 

We examined price trends in the condo market with a focus on 38 Grenville this month. The Murano is a newer Bay St. corridor building completed in 2010. The first unit we tracked is a one bedroom with den and parking. It has 9 ft ceilings and open balcony on a high floor. It sold in 2015 for $499,000. At 657 sq ft, that translates into a price of $880/sf. The same unit originally sold in 2010 for $399,000. That was $700/sf. Even with a high initial sale price, the unit increased at a rate of 4.6% per year. The second unit we looked at was a two bedroom/two bath with den, balcony, parking and on a high floor with a view. It sold in 2015 for $648,000. At 857 sf, that represents a sale price of $760/sf. The very same unit also sold in 2010 for a price of $506,000. The annual increase for this unit was 5.1% over the same five year period. These prices are very close to those in College Park and represent the highest prices in the downtown condo market. Bay Street has always been the primary rental market in Toronto and its proximity to both U of T and Ryerson has made it very attractive to Asian buyers who value location. Currently there are only two units for sale in a building of 397 units. This is a very tight market and while prices are high, there is little likelihood that prices will decline from current levels; even if we compare these prices to last month’s Market Report, where we saw prices in the City Place market under $600/sf and not appreciating as quickly as Bay Street.

 

 

Rental Commentary:

 

October is usually the start of the slowest season which runs through January, for rentals in Toronto. Prices tend to be lower as investors are anxious to get their units rented rather than let them sit empty. Nonetheless, over 600 one bedroom units and 250 two bedroom units were leased in the downtown condo market in October. That is almost twice the number of transactions that took place in the resale market. And yes, we are still having multiple offers for rentals, particularly in the two bedroom segment.

 

Over 40 studios were leased in October at an average rent of over $1400. The entry point for the one bedroom market – no den or parking – is $1625 per month. The one bedroom with parking now averages just under $1800. The top end of this market – a den and parking – now averages over $1900. One bedroom units without parking made up 55% of the units leased this past month.

 

The entry level for the two bedroom market remained at $2300 per month. The high end – parking plus a den – is now over $3100 per month. Bigger units are increasingly popular and the days-on-market to lease have decreased to the 20 day range for investors.

 

The three bedroom market, although small, is much in demand and rents remain in the $3500 per month range.

 

  

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