CONDO MARKET REPORT
The Toronto real estate market continued to outperform what most experts were predicting. TREB sales in February were up by 21% over February of last year. The mild weather certainly played a part. But ask those in the market and they will tell you that more and more buyers want to live downtown and yet available product is limited. It used to be that one sold their property first and then bought. Not today, as people will only list their property for sale when they have purchased first. This has created a log jam of potential buyers with prices rising too fast and with a market that will run well into the summer.
The condo market was intended to be the safety value – supposed overbuilding would result in vacancies and falling prices. But condo sales overall are ahead by 26%. Downtown the increase is closer to 40% and Humber Bay (Etobicoke) is 16%. But the most important statistic to track is the listing supply. New listings (for February) are up by 12% over last year but the pool of active listings is actually down by 6% over the same time last year. This listing inventory number is under three months which is unheard of at this time of year. Compare that to U.S. markets where anything under six months is considered a hot market.
The other trend to note is that the mix of sales has shifted significantly to the 905 or suburban markets. In February, sales in the 905 were 63% of the total market. Five years ago it was 50/50. It is not that people prefer the suburbs; it is just that there is little to buy as the City Land Transfer Tax has discouraged owners from selling and moving to a bigger property in Toronto. How we explain this tax to buyers moving into Toronto is that this second land transfer tax is really just a way to collect money for the city coffers so they can keep the property taxes “lower”. The tax rates in Toronto for the same value of property are 17-40% less than for a property of equal value in the suburbs. What the City of Toronto should do is scrap the Land Transfer Tax (penalizing only buyers) and raise property taxes on all owners. This would create a much more balanced real estate market with more properties for sale and less price appreciation. But that would make too much sense.
Toronto MLS Sales Monthly with Three Previous Years for Comparison
This chart plots monthly MLS sales for the current year and the previous three years. The recurring seasonal trend can be examined along with comparisons to previous years for each month.
Source: Toronto Real Estate Board
THE HUDSON: 428 King St West
This month we looked at sales at The Hudson, 438 King West at Spadina. This is a popular location with a Walkscore of 100! The first unit we tracked was a one bedroom plus den with two baths, balcony, locker, but no parking. It sold in 2008 for $317,000 and again in 2015 for $400,000. This represents an annual increase of 3.5%. At 677 sf, the price is $590/sf. The two bedroom unit we followed included two baths, parking, locker, and a huge terrace of 673 sf. It has sold three times: first for $570,000 in 2009; next in 2011 for $684,000; and for $760,000 in 2015. Over six years the annual increase in price was 5%. Most of this increase was between 2009 and 2011. Over the last few years, these increases have averaged about 3%. The price per sf for this unit is over $700 because of the oversized terrace which adds about $40,000 to the value. Besides the location, the amenities are excellent and it is reflected in the condo fees which are about 65 cents per sf per month. Currently out of 280 units, there are none available for sale. This not only attests to the building’s popularity but also to today’s market.
In February, over 900 units were leased out downtown. This represents a 13% increase over January. To set the tone for the rental market, we listed a 610 sf condo in early March on TREB at 9:00 a.m. By 3 we had 8 showings; by 4 we had 3 offers; and by 5 it was leased. It went for $1695 – no parking and no locker!
In terms of rental prices, the market remained flat. The studio market held firm at $1400+ per month on average. This month, the most popular rental was a one bedroom without parking. It averaged $1630. The top end of the one bedroom market – a den and parking – averaged $1950. The entry point for the two bedroom market – no parking or den - was $2250. The top end is $3,000 per month. These prices are about $50 per month higher than February of last year.
While some would argue that operating costs for investors rose by more than $50/mo; we would point out that the rental market is seasonal and rents are always cheaper over the winter months. They peak in the summer and September. We would expect another increase in the area of $50/mo this year.