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• 3,000 sq. ft. of Luxury Finishes + Finished Basement, 4 Bedrooms, 4 Bathrooms, Backs onto Greenspace - MLS® $859,900 or Rent @ $4,200/mth

Joshua Creek, Oakville

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Here you have it, our predictions for the Toronto Condo Market in 2012. Overall, we expect real estate condo sales to go up and prices to remain flat. Our rationale behind this forecast is detailed below. Have a read and send us your thoughts!

Just remember - last year we predicted sales and prices to go up despite most everyone else predicting the exact opposite...and we were right!

2011 IN REVIEW:

At this time last year, we were predicting that Toronto would experience the same sales volumes as 2010 with price increases averaging 5%. We were wrong! Sales increased by 5% and prices were up by 7%. We also forecast that rental rates would increase by $100 per month and we were right. Everyone else, from the Bank of Canada to The Economist Magazine, was forecasting lower sales and lower prices. Those who heeded the experts, in an attempt to ‘time the market’ were the big losers once again. Timing the market is the absolute worst strategy! If you sit on the sidelines and the market keeps rising, you lose significantly. If you are in the market and prices go flat or fall, then all real estate declines (more expensive properties tend to fall further in absolute terms), and it becomes even cheaper for those people in the market who want to upgrade to a more expensive property over time. Too many experts – read economists – try to make residential real estate far more complicated than it needs to be. Residential real estate is all about having a roof over one’s head. You either own the roof or someone else owns the roof and you are a renter. The challenge with this year’s Forecast is to look at both the Pre-construction and Resale Condo Markets and to understand their interdependency.

2012 FACTORS TO CONSIDER:

Interest rates are not going anywhere. Fear mongers keep talking about a rise in interest rates which could lead to problems. What you need to know is that if rates rise, it means the economy is stronger and we have higher inflation. That translates into higher personal income too, which will act as an offset. For those old enough to remember, inflation has always been a friend to real estate.

While the so-called experts worry about the supply of new condos coming to market, they seem unwilling to forecast future demand. For condos, the impact of ‘baby boomers’ moving to condos is still just a trickle. In five years, it will be significant. The next biggest demographic group is the ‘echo’ generation – the children of baby boomers. They are just now entering the real estate market and this segment is focused on condos. Finally immigration to Toronto is not going to slow (80,000 per year) and many of these people will be living down town too.

For the Pre-Construction Market, almost 100% of sales are to investors. No one buys a property to live in that won’t be ready for four or five years. Investors buy condo units either to rent them out (about 40% of the units) or to sell them as ‘Assignments’ (during the occupancy phase and before the units are registered) to end users to live in. So investors look at rental rates and try to anticipate future price appreciation. Currently our market is dominated by investors from Asia, the Middle East, and East Asia looking for capital preservation. American and European investors who are rate of return driven show less interest in our market. Canada will remain a safe haven for the foreseeable future.

There are no new apartment buildings in Toronto. The rental market is being served through new condo construction. The `echo’ generation or Gen X and Y are also the primary renters in this market, and again, they only will rent new – read hardwood floors, granite counters, stainless steel appliances found in condos.

2012 FORECAST BY THE NUMBERS:

For the Toronto resale market we expect sales to remain at the 90,000 level (unlike most other forecasters). Remember that the all-time sales record was achieved in 2007 and Toronto is a much bigger market, in terms of people and incomes than five years ago. So why would sales drop? With a lack of new detached housing, prices in this sector – particularly in Central Toronto will continue to appreciate.

For the Resale Condo Market, sales will be 10% higher than for 2011. We have 18,000 condo units that were completed in 2011 and half of them will be added to the resale market. This extra supply will mean that prices will be flat in 2012, staying in the $500-550 per sf range.

For the Pre-Construction Market, we expect a number of projects that were announced will not be built. By the end of 2011, pre-construction sales downtown were averaging $800 per sf which we believe is unsustainable. The price gap between the resale and pre-construction markets is too big and fewer investors believe that resale prices will rise that fast over the next four years to overcome this difference. Look for prices to fall by $50-75 per sf over the year. Projects selling at over $1,000 per sf (with the exception of Yorkville) will run into severe price problems in 2012.

Bigger sized condo units in the pre-construction market now sell for more per sf than smaller units. This trend will spill over into the resale market. We previously predicted that this would happen. This price differential will only increase as our market matures – just like New York.

Rental rates will increase by another $75 per month. That means the basic one bedroom without parking will increase to $1600 per month. Vacancy rates will remain below 1%.

SALES COMMENTARY:

Most Realtors were excited to report that sales on the Toronto Real Estate Board in October were 17.5% ahead of October in 2010. My take is that October is the busiest month of the Fall Market and sales were ahead by only 2% compared to September of this year. Last year, the September to October increase was 6%!  Last month we stated that preliminary October sales may well indicate a slowing of this market and final October results seemed to confirm our views. Looking forward, we are expecting November sales of 7400 units which would only be a 3% drop off from October. Our guess is for a fairly consistent market over the winter.

Currently the downtown condo market frenzy is centred on pre-construction sales. While there are too many launches to count (every downtown parking lot has a sign), the most important factor is to track the `price gap’ between this market and the resale condo market. The resale market is at about $500-550 per sq.ft. The pre-construction market is $700 per sq.ft. and higher in premium projects. In buying, Investors are betting that in four years time, the resale market will rise to pre-construction price levels. When the price gap is below $100, investors are much more confident. However with the size of the current gap, we believe that some investors will start to pull back and there will be a number of new condo projects that will not be built. Pre -construction prices should begin to level off and in some projects might actually be reduced!  Rental rates, which have moved higher by over a $100 a month this year cannot support these pre-construction prices unless rental rates move higher by another $250 per month over the next four years. Is this realistic?

This month, we looked at sales in Palace Pier – 2045 Lake Shore Blvd. on the Etobicoke Waterfront. This is a premium building with great city and water views. While older, it is well maintained. The building represents tremendous value here but the problem is the high condo fees.  The first sale we looked at was a one bedroom with parking, locker, balcony and lake view. At 920 sf, it sold for $280,000 in September or just $305 per sf. The same unit sold in 2005 – 6 years ago for $245,000 for a price increase of 2% per year. An identical unit on a lower floor sold for $273,000 in October. Condo fees, which include all utilities, valet parking and shuttle bus to downtown, are almost 90 cents per month. Most condo buildings with all utilities included are in the 65 cent range. The second unit we looked at was a two bedroom – two bath unit with solarium, parking and locker which sold for $342,000 in August of this year. It was 1550 sf. and sold for just $220 per sf. Again condo fees are 83 cents per sf per month. The same unit sold previously in 2007 for $318,000 and in 2002 for $264,000. The price appreciation for this unit was just under 3% per year. While high condo fees are certainly a drag on prices in this building, the primary reason for it’s being out of favour is that the condo market is being driven by younger buyers who want newer, smaller, more affordable units. However, over the longer term, we believe that when baby boomers sell their million dollar plus houses, they will need bigger sized condo units (there will be a severe shortage of these in the future) and boomers will appreciate valet parking, regardless of the cost.

RENTAL COMMENTARY:

The rental market continued to be very active, even though this is usually the slowest period of the year. Studios continue to be in short supply with only 20 units being leased for $1350 on average. Over 220 one bedroom units were leased downtown in October with rents ranging from $1500 for the basic without parking to $1750 for a one bedroom plus den and parking. Over 100 two bedroom units were also leased from a low of $1950 to a high of $2500 with den and parking. As mentioned previously, there is a shortage of three bedroom units. Only two were leased in older buildings at an average rent of $2500. Tenants are paying, on average, a 100% of list price so there is little room to negotiate in this type of market.  Landlords are also being more selective with tenants and are demanding good credit scores.

• 818 sq. ft., 2 Bathroom, 2 Bedroom Condo - MLS® $1,450 CAD Monthly - Great Value!

Churchill Meadows, Mississauga  -  New Daniels Low Rise 2 Bedroom Condo In Churchill Meadows - Mississauga. Features 2 Full Baths, 9 Foot Ceilings, & a Modern Kitchen with Stainless Steel Appliances.Great Split Bedroom Layout with 2 Large Balconies & a Quiet Courtyard Exposure. Superb Location!  Close To Erin Mills Town Centre, Tim Hortons, HWY 403/407/QEW,Transit, Shops & Parks

Extras: Stainless Steel Fridge, Stove, Built-In Dishwasher, Washer, Dryer, All Window Coverings, Electric Light Fixtures & 1 Underground Parking Space. Ultra Convenient Local!

Credit Check, Employment Letter, References & Cert. Deposit Required.

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• 1,819 sq. ft., 3 Bathroom, 2 Bedroom Condo - MLS® $3,695 CAD Monthly

Port Credit, Mississauga  -  Gorgeous Executive Rental In Port Credit's Newest Luxury Condo, Northshore. 1819 Square feet Plus 2 Balconies -206 Sf. Enjoy 9 Ft Ceilings, Gleaming Hardwood Floors, Granite Counters, 2 Bedrooms Plus Den with 3 Bathrooms (Den is a Separate Room and could be a 3rd Bedroom). Stunning Lake & City Views, Steps To Go, Waterfront Trails, Restaurants & Shops. 15 Mins to Downtwn Toronto & Airport

Extras: Stainless Steel Fridge, Stove, Microwave, Built-In Dishwasher, Washer & Dryer, Central Vacuum & Accessories, 1 Locker & 1 Underground Parking. Fantastic Amenities: Concierge, Exercise Room, 2 Party Rooms, Visitor Parking & Rooftop Terrace. Brand New Kitchen Appliances Have Be Ordered! Custom Closet Organizers & Upgrades Galore.

Credit Check, Employment Letter, References & Cert. Deposit Required

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Here's the latest and greatest synopsis of the Toronto Condo Market.  All indications are that 2011 will mark another strong year in Toronto condo sales. As we get into the fall and winter months, we expect the market to begin to slow - typical for this time of year. 

SALES COMMENTARY:

September followed August as another in the string of excellent sales results for the Toronto Real Estate Board with 7,600 sales taking place. This was 25% higher than September of 2010. On a year-to-date basis (for nine months), sales are ahead by 2.6% over last year and we should end the year at just under 90,000 sales – the second best year since 2007. The condo market continued to mirror the overall market for sales.

Looking to October, we expect sales to be only slightly higher than September, which would be the first sign of a slowing market. While active listings are still lower than a year ago (a sign that prices are not about to fall), there are less active buyers over the last few weeks. Mortgage restrictions introduced by the Federal Government in stages are now starting to impact demand. Sellers trying to maximize their price may have missed the peak for now and may have to wait to test the spring market.

Most pessimistic views tend to focus on the downtown condo market. Naysayers look at all those cranes in anticipation of a market correction. But at the end of September, active condo listings were 4% lower than the same time last year (all those new units were either bought by end users or were rented out). The downtown condo sale-to-list ratio now stands at 37% versus 29% last year and compares very favourably to the overall market at 40%.  And trends going forward such high gas prices, traffic congestion and higher utility costs can only favour the downtown condo market.

In this Report we looked at the Bay Street condo market which is popular with both investors and end users who work in the downtown core. One of the newer, taller and perhaps most popular buildings are College Park. We looked at sales in both 761 and 763 Bay. The hottest unit, a one bedroom plus den with parking and locker sold in May of this year for $525,000 at 761 Bay. It occupied 755 sf on a mid level floor (the twenties) and sold for $695 per sf. Previously, the same unit sold in February of 2009 (the bottom of the real estate dip) for $365,000. That is a 43 % increase in 28 months! The second unit we tracked was at 763 Bay, a two bedroom plus den with parking and locker. It sold in April of 2008 (before the market dip) for $510,000 and then again in June of this year for $621,000. At 975 sf, that is a price of $637 per sf and a price appreciation of 22% over 38 months, or about 7% per year, which is consistent with our market. We also checked another sale of a small one bedroom with parking at 763 Bay and the price per sf was $750 on a sale that took place just last month. It is safe to say that condo prices on Bay Street are the highest in Toronto outside of Yorkville.

RENTAL COMMENTARY:

The rental market downtown is extremely tight. Multiple offers on rentals are not uncommon. In September 25 Studio were leased at an average price of $1350 per month, but the average list price was only $1320. Go figure! Over 215 one bedroom units were also rented from a low of $1550 without parking to a high of $1800 for a den plus parking. These are the highest rental prices we have seen this year. The market for two bedroom units, with over 125 units being rented, ranged from a low of $1900 without parking to a high of $2500 on average for a unit that included a den and parking.  Days on market ranged from 3 to 10 days on average, depending on the unit. That is the shortest period we have seen. Tenants get your running shoes on. Don’t start shopping without a filled out Rental Application and an Employment Letter.

  • 1,268 sq.ft. Condo,  60 sq.ft  Balcony,  2 Bedrooms + Den,  2 Bathrooms (1x5, 1x4), 1 Parking Spot     

  • $485,000 - Amazing Value, MLS C2227495    

Spadina/Bremner, Toronto  -  Stunning 2 Bedroom Plus Den Condo In Harbourview Estates. 1268 Sf + 60 Sf Balcony & Parking. Exceptional Value. Only $382 Per. Sf. New Laminate Wood Floors(2010), Granite, Designer Light Fix & More!

Enjoy Some of the Best Amenities in the City at the Exclusive 30,000 Square Foot State of the Art Superclub! 24Hr Concierge, 25-metre Swimming Pool, Bowling, Squash, Tennis Court, Full-size Gymnasium, Jogging Track, Whirlpool, Cardio, Weight & Conditioning Rooms & Billiards Room. For the Passive Athlete Enjoy the Outdoor Tanning Platform, 20 person Theatre, Indoor Golf Simulator, Karaoke Room, Internet Cafe & Juice Bar.

Extras: Stainless Steel Gas Stove, Stainless Steel Fridge with Ice Maker, Built-In Stainless Steel Dishwasher, Built-In Range Microwave, Washer, Dryer, All Designer Electric Light Fixtures & Window Coverings, Custom TV Wall-Mount Bracket, & 1 Premium Parking Spot

Fantastic Location! Steps To Toronto's Harbourfront & Yacht Clubs. Walking Distance To Theatres, Shops, Dining, The Financial & Entertainment Districts.

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The BANK OF CANADA announced today that it was maintaining its target for the overnight rate at 1%. The Bank Rate is correspondingly one and a quarter per cent and the deposit rate is three quarters of a per cent. Economists do not predict an increase in the overnight rate until the middle of next year. 

The outlook for the Canadian economy has weakened since July, with the significantly less favourable external environment affecting Canada through financial, confidence and trade channels. Although Canadian growth rebounded in the third quarter with the unwinding of temporary factors, underlying economic momentum has slowed and is expected to remain modest through the middle of next year. Domestic demand is expected to remain the principal driver of growth over the projection horizon, though at a more subdued pace than previously anticipated. Household expenditures are now projected to grow relatively modestly as lower commodity prices and heightened volatility in financial markets weigh on the incomes, wealth and confidence of Canadian households. Business fixed investment is still expected to grow solidly in response to very stimulative financial conditions and heightened competitive pressures, although it will be dampened by the weaker and more uncertain global economic environment. Net exports are expected to remain a source of weakness, owing to sluggish foreign demand and ongoing competitiveness challenges, including the persistent strength of the Canadian dollar. 

The financial institutions will also keep their Prime Lending rate at 3%. Fixed rates have remained steady at record low rates of 3.49% for a 5 year fixed term while variable rates have risen rates to 2.90% or Prime. 

The next Bank of Canada Rate Announcement will be on December 6, 2011. 

Streetsville Glen Gem!

• 2,400 sq. ft., 3 bath, 4 bdrm 2 story - MLS® $729,000 - Great Value!

Streetsville Glen Estates, Brampton  -  Streetsville Glen Gem! Enjoy this Spectacular 2 Storey, 4 Bedroom plus Den, 2 ½ Bath Home Situated on a Wide, Premium 60 Foot Lot. Extensively Upgraded with Top Quality Materials! Gorgeous, American Walnut Floors Throughout, Polished Marble Floors in the Foyer and Elegant Porcelain Tiles. Rod Iron Spindles & Solid Wood Staircase, Devine, Plaster Mouldings, 9' Ceilings on the Main Floor & California Shutters Complete this Masterpiece. The Kitchen is Equipped with High-End Stainless Steel Appliances, Granite Counters with a Large Breakfast Bar, Glass Tiled Backsplash and room for an Eat-In Breakfast Area with a Walk-out to the Backyard Gardens. As If all this wasn’t enough, over $25K Has Been Spent in Professional Landscaping, Exterior Lighting, Large Deck, Extensive Stonework and Beautiful Perennial Gardens.
Streetsville Glen is conveniently located close to the Meadowvale and Streetsville Go stations with Quick Access to the 407 and 401. For those looking to enjoy the outdoors, there are numerous parks and recreation facilities in the area including the extensive Meadowvale Conservation lands, Churchill Village, Meadowvale Sports Park, Streetsville Glen and Lionhead Golf and Country Club.

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Port Credit, Mississauga  -  Announcing a price reduction on 1 Hurontario Street #504, 1,324 sq.ft., 2 Bathrooms, 2 Bedroom Condo, Wrap Around Terrace - MLS® $619,990

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This summer we experienced year-over-year increases in real estate sales for Toronto.  We're hoping this momentum continues into the fall as we start to see prices level off a bit and move towards a more balanced market..............

SALES COMMENTARY:

August was another strong sales month in Toronto. The Toronto Real Estate Board (TREB) reported 7,500 in sales – 24% higher than for August last year. In the total condo market, sales were ahead by the same percentage. However, Downtown condo sales were 30% higher. What is more impressive is that the sale-to-listing ratio went up from 34% a year ago to 42% this August in spite of more product. A balanced market – between buyers and sellers – is usually 25-35%.

The real question for many is: how will this market perform going forward? We are expecting about 7,000 sales in September.  While this will be down from August, it is consistent with the seasonality of real estate sales.  October is usually the largest sales month in the fall. If you want an early indication of the market for 2012, just watch the numbers for October and November for a clue.

But for most people it is all about the prices. While we hate talking in generalities about prices per sq. ft. for the overall market, our feeling is that prices are about to level off.  In the condo market, there are really two markets. The pre-construction or new condo market is fuelled by investors who then rent or resell their units into the resale market for end-users which gets reported as TREB sales. Investors are only concerned with prices and our new projects are now approaching the $600-700 per sq. ft. range. Only ten years ago we were talking $300. On the other hand, New York prices have been at the $1,000+ range for several years and are not moving much. We all like to compare ourselves to New York but we are not New York in terms of either money or appeal. Resale prices are always lower – today about $500-600 per sq.ft. Investors only buy if they believe they can sell for more later and the price difference with New York is now quite small. And if pre-construction does not move higher, then neither will resale.

So let’s look at actual prices in the Distillery District. – just east of Downtown. We selected a building that appeals to people who like the soft loft feel and has minimal amenities, which keeps condo maintenance fees low. The building is 80 Mill Street and with 1965 units, has a good sales history. The first unit we tracked was a one bedroom plus den with balcony and no parking. At 640 sq. ft., it sold for $303,000 in June of this year. That’s $473 per sq. ft. The same unit sold in 2007 for $237,000 and in 2006 for $223,000. The price gain is 36% over five years. The second unit was bigger at 974 sq. ft. It is two bedrooms two baths, with den and parking. It sold in August of this year for $435,000 or $446 per sq. ft. The same unit sold the year before for $395,000 which represents a 10% increase. So why are these units selling below the $500 per sq. ft number? First the east side of Yonge St. has historically sold for about $50 per sq. ft. less than the more popular west side of Yonge. The building is also ten years old and has limited amenities which eliminate a lot of first time buyers.

RENTAL COMMENTARY:

People renting in August are now looking to the fall market. The lead time from renting to occupancy is about 45 days on average. In August the downtown condo market leased out 19 studios, 256 one bedroom units and 174 two bedroom units. This was about 20% lower than in July. Studios were renting for $1275 per month. The entry level for a one bedroom unit without parking is now $1500. The most popular unit is a one bedroom plus den with parking which now rents for about $1725 on average. Two bedroom units start at $2,000 per month and rise to over $2500 on average for two bedrooms plus den and parking. If you can find a three bedroom unit (three were leased in August), you can expect to pay over $4,000 per month.

Most Expensive Condo Ever to Sell in the Square One Area.

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Announcing a price reduction on 319N-1169 Queen St. W., a 880 sq. ft., 2 Bath, 2 Bedroom Condo. Now MLS® $499,900

Ossington/Queen, Toronto  -  Stunning NEW 2 Bedroom Corner Terrace Suite at Bohemian Embassy Lofts. Great 880 SF Layout with a 610 SF Sunny, South-facing Terrace. Great Value. Includes 1 Parking Space & Locker. Over $10K in Upgrades, Including Gorgeous, Dark Hardwood Floors Throughout, Upgraded Bathroom Fixtures, Quartz Conuters & More!

S/S Fridge, Stove, B/I DW, B/I Microwave, Washer/Dryer. Includes 1 Parking Spot & 1 Locker. Fab. Hip Location! Discover All Queen West has to Offer. Steps from The Gladstone, Drake Hotel, Shops, Dining & TTC @ Your Doorstep!

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