As Toronto’s population grows, density and congestion increases making access to public transport even more valuable. Although we love to complain about our subway system, it’s the fastest way to move around the city if you’re lucky enough to live within walking distance. The main compaint I usually hear is that we want a larger system like Paris or New York has. As time goes on, being walking distance to a subway stop will become more and more desirable.
Some neighbourhoods in Toronto have become very valuable because of the width of the lots which allows for large detached homes. Some neighbourhoods have become valuable because they back on to the lake. Many others have become valuable because of the Subway or Go Train access. There’s no cheap property along Yonge St all the way from downtown to the 401 and now even beyond. Bloor St has thrived and is lined with some of the best shopping and family neighbourhoods. Where our two subway lines meet near Bay and Bloor has some of the highest commercial and residential property values including Yorkville.
Investing along the subway line is a safe bet. Most homes in good condition along the Yonge St line are $1M plus. Condos are a bit of a mixed bag… you don’t want to be on a lower floor in a building directly above the subway line because sometimes you will hear it and even feel a slight vibration. I’ve felt this many times in buildings right on Yonge St as well as Bloor St. Best bet is to be a very short walk to a subway entrance. There are a few Condos with Direct Subway Access.
One excellent example of a prime building with a short walk to a subway entrance is the 88 Broadway Ave condo near Yonge and Eglinton. Not only is this one of my favourite buildings in the city, it’s neighbourhood feel and short walk to the subway make it a rare find. Only a couple years old, it has quality finishes and amenities such as an indoor pool and exercise room. Here’s a video of a 2 bedroom, 2 washroom suite just under $500k at 88 Broadway.
The median price for a condo in February was up to $378,800 from $368,000. The average days on market was down to 32 days. A bit surprised to see the prices up despite being closer to a Buyer’s Market. Seller’s not happy with prices offered for their suites elect to rent their suites and are getting top dollar.
When many new construction buildings were launching downtown in 2009, I couldn’t believe the prices they were asking. Many developers were asking $625 per sq ft and up, when typical resale was around $500 per sq ft and the new construction was selling very well. When I talked with the Developers representatives, their common phrase was “the building will be ready in 2013 so these are 2013 prices”. That never made sense to me from an investment point of view. Buying from a floorplan, putting down such a large downpayment and waiting 3-4 years for your suite to be ready… shouldn’t you expect to have some profit for all you’re giving? Looking back, the Developer’s agent was absolutely right and being very honest. You’re buying the suite at the future value of $625 per sq ft… so there likely might not be much if any profit for the Buyer. If you wanted to sell it right away, then you would very likely be losing money after all selling and closing expenses.
So that’s what we’re seeing today, some Buyer’s are stunned to realize the suites they bought in 2009 have no profit after all expenses considered. If you want to have a profit when buying new construction, you should be paying today’s market value for the suite, not “what it should be worth in 3-4 years”. 1 Bloor has new construction suites available at $900 per sq ft, or you can buy a very nice suite just around the corner resale in the luxury building Crystal Blue at $675 per sq ft. Which do you think will be a better long term investment?
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Toronto condo buyers looking to downsize can become frustrated with the limited options available. For years, developers have been catering to first time buyers and condo investors with their shoe box condos. There’s a coming wave of empty nesters looking to downsize from their big homes and they’ve banked a considerable amount of equity in their homes. Downsizer’s have a number of routes to consider if they’re considering a condo for their retirement:
1. Older downtown condominium buildings
These condos are larger and offer spacious rooms, premium locations, but require significant updating. The lobby, hallways and amenities are usually dated and the maintenance fees may be higher. The ceilings are likely only 8 feet but the price per square foot is attractive, considerably lower than their newer neighbouring condos. The St Lawrence Market is a popular neighbourhood with a couple of strong options such as The Bentley and Market Square. Waterfront condo options include the Harbour Square buildings. 66 Collier St is one of our favourites if you want to be close to Yorkville without the hefty price
tag.
2. Luxury Condos
For the downsizer’s that aren’t looking for a smaller condo and want to transition to a spacious condo that is similar in size to their house, there is wide variety of options in Toronto. These buyers aren’t looking to sacrifice the space they had, they ‘re looking for ample room to entertain, a third bedroom for a grandchild to sleep over, high end finishes, 9 or 10 foot ceilings, spectacular views and white glove service amenities. This group of buyers are downsizing from blue chip neighbourhoods such as Rosedale and Forrest Hill. They want like minded neighbours in premium neighbourhoods within steps to the city’s best shops and restaurants. At Shangri La, suites range from 800 sq ft to 3,500sq ft and prices up to 9 million. Trump, Four Seasons and the Ritz Calrton also fall into this group. Although we feel these won’t be good long term investments, some empty nesters don’t mind spoiling themselves for all their years of hard work.
3. Suburban Condos
For a more affordable price range and if you prefer to free up some equity from selling your home, suburban condos may be the right option. ie. Essex by Tridel in Etobicoke is an example but there are also some buildings further West into Mississauga and Oakville. Usually this means Downsizer’s won’t stay in the neighbourhood that they’re accustomed to but choose to make that change to fund vacations and living costs. Many developers are recognizing this emerging demand and new construction projects are becoming increasingly popular in the suburbs.
4. New(er) Downtown Condos
Few good value options available but Plazacorp got it right with West Harbour City located at 628 Fleet St and 21 Grand Magazine. Those buildings have above par finishes that include hardwood floors throughout, 9 foot ceilings, extended kitchen cabinetry by Paris Kitchens, marble countertops in the bathroom, dens that can double as third bedrooms, large living rooms and dining rooms, terraces or spectacular views of the lake. Prices for a north facing suite around 1400 sq ft start in the low 600k’s, maintenance fees are very reasonable and typically lower than most other condo comparables.
5. Coops and Co-ownerships
These are older buildings located in well established neighbourhoods, require higher down payments (most cases 30% is the minimum) but have a low purchae cost per square foot. These options appeal to value minded retirees who want to be able to sell their home, stay downtown and free up some cash as well. Sounds like the best of both worlds but, of course, there’s a catch. Most often these buildings are more than 50 years old with suites that need to be completely renovated. They don’t have as good air circulation in the hallways, basic or no amenities and many don’t have air conditioning. Even with these drawbacks, I do believe they are a realistic solution for someone wanting to stay downtown long term and willing to do some renovations. A couple examples of these include 21 Dale, 16 Rosedale Rd, 40 Glen rd and 120 Rosedale Valley Rd.
The median price for a condo in January 2013 slighty down to $368,000 from $370,000. I don’t expect condo prices to change much this year in either direction. There’s a lot of supply coming to the market but if the purchase demand isn’t there to absorb it… the rental market will.
I believe new construction prices are too high. I can’t justify paying more than $600 per sq ft for just about any condo. Despite how nice the luxury buildings may be, I consider the luxury elements all to be depreciating assets… and poor investments. I understand the sizzle of a namebrand and how impressive nice finishes can be but 20 years from now, the lobby and amenities will seem old, worn and out of style. The suites will all need to be renovated to maintain their appeal. This adds extraordinary cost which counteracts market appreciation. Higher carrying costs are also usually part of the package with luxury buildings. I suppose I’m biased in that I feel a wise purchase is all about good value but there are many affluent whose focus is enjoying the best the city has to offer. As impressive as the luxury buildings are today, I just don’t think they’re good long term investments.
We dropped back in to buyer’s market territory which I don’t expect to have much of an impact on prices as January’s are always slow months. Interest rates will likely be a little higher by the end of 2014 than this year. I believe most people want to live in the nicest place they can comfortably afford. Higher interest rates means buyer’s will qualify for smaller mortgages. Even with the supply/demand ratio staying the same, we have to consider that the demand will have fewer pennies to spend. Rising interest rates will put some pressure on prices but so will the demand of first time buyers who insist on living downtown, the investor pool and the 55,000 new immigrants to the City of Toronto. In all, I think it will be a wash and condo prices will be flat for quite a while. Investors will prosper as their tenants pay their mortgages, downtown businesses will thrive, commercial leases and values will continue to increase.
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The median price for a condo in February 2011 was $373,000 and last month it was $370,000. For almost 2 years, the median price has hovered pretty consistently at this price so I think we can say we’ve had 2 years with no price growth. Every year, about 17,000 new construction condos hit the market in Toronto. Since prices have been stable for 2 years, we can conclude that the supply and demand have been in balance for that time. The supply of 17,000 new units per year is not limited by how fast the sales sites are selling but by how many buildings our construction companies can physically build per year. So what can we expect for 2013? We can expect 17,000 new suites completed and another 17,000 committed to complete in 2014. The demand has been equally as staggering and is expected to continue. If Seller’s aren’t happy with prices they’re being offered, they simply choose to rent their suites and they’re getting higher rents than ever right now.
We’re back in balanced market territory which I would expect to be the story for 2013. I think we’ll see prices continue to be quite stable with condos averaging around 35 days to sell. Some Buyers have delayed their purchase with the expectation of a ‘condo crash’ and have elected to rent instead. This has devoured the rental market inventory and prices for renting has increased as much as 15% in some circumstances. There are no empty condos, they’re either owner occupied or tenanted. Despite all the new buildings going up and completing, the demand is there and the buildings are full. In a balanced market, we shouldn’t see too many bidding wars but both Buyer’s and Seller’s having equal negotiating strength for fair values. If you can’t find a fair price in this market, the problem is not the market.
This month I wanted to look back at the last 7 Octobers and see how they compare to this year. Since many people predicted 2012 would be different from what we’ve come to expect… let’s see how this October stacked up.
November and December are typically very slow with inventory shrinking and much fewer sales. There were actually quite a lot of condos sold this October so this shows us the Buyer demand is ‘business as usual’. Having said that, the condo inventory for sale is the highest it’s ever been which seems to be the story for 2012. Despite normal demand and high inventory, the following graph tells how this has impacted the market demand.
We’re hovering in Buyer’s market territory which is putting downward pressure on prices. Seller’s have been reluctant to sell at less than the market peaks. Most are deciding they would rather rent their suites than accept more than peak prices which is keeping prices steady as you can see in the below graph .
The median price for October was up to $375,500 from the previous month’s $369,000. That’s 2 months in a row we’ve seen prices actually rising despite the high inventory. We haven’t really seen much change in prices since January 2011. Many buyer’s are opting to rent instead for now in hopes of getting a better price in the coming year but when considering many are paying $1800 per month for a 1 bdrm or $2400 for a 2 bdrm, I think waiting will only end up costing more in the end.
The number of condos for sale is still untypically high, is this the new normal for Toronto? With about 17,000 new suites completing construction in the GTA each year, we have to expect this inventory to rise. Most important is that no condos are unitentionally empty, either owner or tenant occupied, the demand is more than filling all the buildings… don’t believe me? Try finding a condo for rent at a good price right now. Last year my client rented his suite at Neptune (Lakeshore and Bathurst) for $2100 per month, this year he got $2495 and so did many of his neighbours.
Fewer Buyers out there than normal, I believe many have opted to rent instead of buy. I can’t understand their math unless they’re confident they’ll be able to buy the same suite for about 7-8% less next year than this year, pretty big gamble which makes taking the plunge even harder in the long run if prices go up… or even stay the same.
We’re in a Buyer’s market for the first time since the stock market crash of 2009. Buyer’s have more selection, lower prices and more negotiating power. This is temporary, how long it may last, nobody knows. Over time, prices will go up even higher than they were before. We’re getting close to the very slow period of November and December, I think it’s likely that those two months may be the best buying oppourtunity we’ve seen in a long time. Mid January has always brought the Buyers back out so I think we may see some good prices between now and then.
The median price for September was up to $369,000 from the previous month’s $360,000. I was surprised to see prices actually up about 2.5% with such a slow market. I would just chalk this up as typical monthly statistical deviation, my personal experience is downward pressure on prices, at least flat. I would be surprised if this changed before January. If you are renting or living with your parents and you’re in a position to buy, don’t put your life on hold waiting for a big condo crash, it’s extremely unlikely. I would advise starting your search now with the goal of buying before January.
You can’t get a good understanding of a real estate market without analyzing graphs. It’s easy to come up with a catchy title to turn heads but it’s misleading. When the market is more volatile, we need to review historical data to keep things in perspective. The number of condos available for sale fell by 12.4% from July to August.
The level of demand also lowered from July to August which kept the supply/demand ratio about the same. Many potential Buyer’s are deciding to rent instead of buy. At this time of year, that’s making the already slim rental inventory all but extinct. For example, as I write this, if you’re looking for any condo to rent under $1500 in all of the C01 district there are 4 suites available on mls… and I bet by the time you could visit a suite and prepare a lease they’d likely be taken or you’d be competing with someone else.
We’re just entering a Buyer’s market and prices dropped 3.9% in one month. Not to sugar coat it, that is a lot… but it’s also hardly unusual when looking at the last 7 years. We have our up and down periods but there’s few stretches where prices remained low for long other than the impact of the US financial crisis. Nonetheless, this change in demand lowers confidence and causes Buyer’s to delay their purchase. We’ve all heard the saying “You can’t time the market” and although that’s true, most people believe they’re smart enough to predict the future. The truth is that over time, real estate becomes more expensive and trying to delay your purchase most likely only means that you will end up paying more. Predicting what will happen in the Toronto condo market in the next 6 months is a fool’s errand. Just like the odds are against you in a Casino, the odds are against you in Real Estate if you choose to wait. When you gamble, you’re more likely to lose than win. Sure it’s possible to have a bit of luck in the short term, but luck has nothing to do with making an educated decision based on facts. Just like in a Casino, the longer you play, the more you will lose… the longer you wait to buy Real Estate, the more you’ll likely have to pay.
The median price for August was $360,000 from the previous month’s $374,500. The average number of days on market for the month was down to 31 from 32 days. I had a very nice 1 bedroom condo for sale in a good location a short streetcar ride from UofT. Would have been perfect for a first time buyer or investor. We weren’t receiving offers so we were lowering our price trying to find market value. We didn’t receive any acceptable offers of our $280,000 asking price so my client rightly chose to keep the condo and find a tenant. Upon putting the condo up for rent on the internet, he received about 35 inquiries from people wanting to rent his suite for $1500 per month, significantly more than he received last year. That tenant is going to pay $18,000 per year or if it’s a student on a 4 year program they’ll pay $72,000 in total. I understand it’s human nature to want to play it safe, but what’s hard for many to accept is that playing it safe doesn’t mean renting…
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When the Stock Market Crash was at it’s worst in the Spring of 2009, the lack of confidence and fear similarly impacted the Real Estate market in Toronto. The banks were lending as per usual, the inventory of condos available was typical but the Buyer’s disappeared. Right now the reverse has happened as the Buyer’s are out there but the condo inventory is twice what it has typically been. The result is the same… about 1 in 5 condos available for sale sell per month. This will bring us a more sustainable market and Buyer’s are not needing to get involved in bidding wars and pay over asking price. The selection is good, prices have some negotiability and finally Buyer’s don’t need to feel rushed to make a choice.
I don’t think renting is a good financial choice if you plan on living in the city for 3 years or more. Renting a 1 bdrm apartment at $1700 per month for 3 years comes out to $61,200. If you owned for that time period, it’s extremely likely you’ll make a profit… even breaking even would put you significantly ahead of the loss of renting.
A good example for a first time buyer is this Cityplace Condo for Sale. At $279,900, to be in a 1 bdrm with a nice view in a good location near Front St W and Spadina is very tough to beat. You can walk to the subway in about 15 minutes, streetcar just around the corner to take you up Spadina and best amenities in the city.
If you’ve been on the fence, this might be the right investment to get in the market.
This month I wanted to start off with reviewing the level of inventory we saw in July. This is the highest it’s ever been. With all the new projects completing, we should expect to see the supply increase. We shouldn’t find this surprising and it’s impact on the supply demand ratio is a good for the long term health of the condo market.
The above graph shows us the demand side of the equation which was typical for July. So we have steady demand and increased supply which lowers the ratio and takes some pressure off the prices. Instead of seeing prices increase, they’re quite balanced and came down about 1% from June to July which is a smaller than normal deviation from month to month.
I think we’re right on the border of a balanced/Buyer’s market. Prices are relatively stable so I can’t say we’re in a Buyer’s market right now. My definition of a Buyer’s market would have to see prices dropping more than typical monthly deviations. I wouldn’t be surprised to see next months statistics showing lower prices and a Buyer’s market and that would be fine. We’ve had quite the run in appreciation and having some time with prices flat or even a little lower is best for the long term health of the market. You can be confident prices will be higher in 3-4 years time but a slower period for the condo market would be good in the long run.
The median price for July was $374,500 from the previous month’s $377,000. The average number of days on market for the month was up at 32 days.
