Toronto Condo Market Report - July/August 2015

Published 07 August 15 07:39 AM | Jeff Johnston 

Sales Summary

We usually refrain from talking about all-time records but June was a record on the Toronto Real Estate Board as it produced almost 12,000 sales. This was 18% higher than June of last year. More importantly to us, June sales were slightly higher than May which is usually the peak sales month of the year. We said that if June was the peak month, then this would be a record year. Another way to look at the numbers is that year-to-date sales at the mid-year point usually represent between 52-55% of the year’s sales. Based on a year to date sales of 54,453, we are projecting a final sales number of 100,000 units which would be a new annual record for TREB.

Looking behind the numbers, ‘new’ listings were also up by 6.7% but ‘active listings’ were still 13% lower than last year. That is the driving force behind rising real estate prices. In terms of the downtown condo market, sales were up by 26% while ‘active’ listings were only 1% higher than a year ago. For the Humber Bay (Etobicoke Waterfront) market, sales were up by 38% while ‘active’ listings were up by just 3%. These numbers suggest that the condo market is not softening but actually strengthening in terms of sales to listing ratio.

A primary reason for the strong condo market is the rising price gap between prices for detached housing versus condos in the City of Toronto. The average price of a detached house is increasing at an annual rate of 8.4% versus 3.6% for condos according to TREB’s House Price Index for June.

A quick look at mid-July numbers show sales up by 12% compared to June of last year. However final July sales will be lower than for both May and June of this year. More importantly people are asking us the impact of the Bank of Canada ¼% interest reduction on mortgage rates. We can tell you that it will be negligible. The challenge in the mortgage market is not rate but that lenders are tightening their lending requirements and we have a lot more turn downs. But what the lower rate has done is weaken the Canadian dollar and that has made our real estate more attractive to foreign buyers – something that the Canadian Government did not want!

The other issue is the impact of the Pan Am Village condos after the Games are over. People remember Vancouver and the fact that the condos remained empty after the Games. The developers bailed, and the City of Vancouver was stuck with the losses. Not so in Toronto. Of the six building in the Village, one is dedicated to George Brown students, two are for low income housing, a fourth is for a YMCA hostel and only two buildings remain for the resale market. That is just 437 units which were sold for between $500 -600/sf. Absorption will not be a problem and no one will be stuck with a bill. 

Pure Spirit Condos: 33 Mill Street

Speaking of the Pan Am Games, we looked at Pure Spirit Condos at 33 Mill Street in the Distillery District. Built in 2009 it is becoming a prime location for people who want to live in a community within the City. The first unit we tracked was a one bedroom with parking, balcony, and no locker. On a high floor, it sold in 2010 for $327,000. The same unit sold in 2015 for $357,000. At 530 sf, the price was $670/sf with parking or $620 without. Over the five year period, the annual price appreciation was only 1.8%! The second unit we looked at was a two bedroom, two bath condo with parking, locker, and balcony. Also on a high floor, it sold in 2010 for $434,000. The same unit sold again in December of 2014 for $471,000. The unit measured 758 sf which translates to $621/sf. Over the four plus years, the annual appreciation was just 2.1%. This is a popular building and yet the appreciation has barely matched inflation. This supports what we have been saying that the price gap between freehold and condos continues to widen and people who want to live downtown will have to adapt to the condo lifestyle.

Rental Commentary

We are now in the peak season for rentals. The studio unit now averages $1400 per month and around University of Toronto, the number approaches $1500. The biggest market is for one bedroom units. The entry point remains at $1600 without parking. The most popular unit is the one plus den with parking at $1900 per month. More and more renters are trying to convert the den into a second bedroom to reduce costs.

The two bedroom market continues to be most in demand. The entry level without parking is now $2300 per month. The most popular unit, with parking but no den, averages almost $2500. Adding a den will push the average price to almost $2800 per month. The three bedroom market is growing and 22 units were leased in this segment at an average price of $3900.

What potential tenants need to know: days on market for rentals are averaging less than 20 days for all types, the best ones rent within two days; and the list to rent price is 99-100%!

In June almost 1300 units were leased in the downtown market which is almost double the number of resale transactions. Ten years ago the markets were reversed with sales dominating. As we have said before, the downtown market is becoming more and more like the Manhattan market where rentals dominate. 

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