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Absorption Rates

I wanted to dig a little deeper for today’s blog post and take a look at absorption rates in various condos. Looking at Festival Tower got me thinking about this subject. Festival Tower has a plethora of units available for sale, but hardly anything is actually selling. The building is stunning. The amenities are amazing, and the film festival that just finished put this tower in the international spotlight for a full 2 weeks. The building has been fully registered and finished for a few months now. I am at a loss as to why units are not moving here. There was so much hype about this building for the last 5 years, and now that it is finally finished, no one is buying?

Let’s compare Festival Tower with other buildings downtown. I took a random sample of various buildings, all completed in the last 12 months. I tried to pick a few buildings to somewhat represent the whole spectrum of the downtown market from the lowest end to the highest end. Take a look at what I found:

Only 3 units have sold in the last 60 days at Festival Tower, and there are currently 42 units available for sale. At this rate, it would take 28 months to sell all available units! Similar story at The Ritz Carlton, where only 2 units have sold in the last 60 days and there are 30 units on the market (actually more since the developer has a few unsold that are not on MLS).

Compare this to a building like Parade in Cityplace, a known area for heavily investor-owned buildings. While there are a lot of units on the market in the building (36 currently), they are moving fast (18 sold in last 60 days)!

Obviously price point has a lot to do with this. There are far more buyers looking for condos in the $300K range than the $800K range. However, I am really starting to rethink the high-end of the market and wondering if there really is a market in this town for condos in the $800 per square foot and above price point.

You could possibly point to a building like Crystal Blu where the absorption rate is quite good and say there is a market but only in one area: Yorkville. One theory I have is people with money to burn on a condo will live in Yorkville, but anywhere else it’s not worth the premium to get a high-end unit.

The point of this blog post is really not to say I have an answer to this question about where are all the high-end buyers, but rather I would like to start a conversation with my readers and clients on the matter. So let me know your thoughts. Contact me or leave a comment.

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Condo Sales and Prices Up in June

June’s sales figures were just released and wow, what a difference from the last two months! When comparing June 2011 with June 2010, sales are up BIG downtown and prices are up too. Remember that June 2010 was the last month before the HST kicked in, and many buyers and sellers were still scrambling to get in under the wire of July 1, 2010.

My commentary:

• The market is still a seller’s market. There are those who want to tell you that the market has been softening of late, but anyone who is ‘on the ground’ working the market will tell you it is not. 60% sale: list ratio on the east side (C08) is discouraging if you are a buyer.
• Inventory is still a problem. Downtown east had a big drop from last year in terms of units available for sale, just like the month of May showed. Why is no one selling in this town?
• Interesting the the median and average prices in downtown east (C08) and west (C01) are very similar. Is the gap between the east and west narrowing?

With no end in sight to the cheap money (i.e. low interest rates) in this country due to the still anemic U.S. economy and our strong Canadian dollar, I see little chance of a slow down in the market over the next 6 months. Agree? Disagree? I’d love to hear your thoughts. Please contact me or leave a comment.

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Market Snapshot: May 2011

The sales statistics for the month of May are in from the Toronto Real Estate Board for the resale market. As usual, I am only concerned with looking at the downtown condo sales as the stats for a metro area of 5 million people tells us nothing really about the downtown condo market.

My observations for this month’s stats:

• Most interesting to me as always is the inventory level. There were 183 fewer condos available for sale downtown in May versus last year, or about 11% less inventory. Low levels of inventory is a constant problem in this city. Those who keep harping on about ‘they are building too many condos!’…obviously don’t read my blog.
• Prices are up marginally versus last year (both average and median prices)
• Sales:Active ratio is about 38% for downtown total, which statistically indicates a ‘balanced’ market (as usually defined by about 25-40% Sales:Active ratio). This may explain partially why some listings sell with multiple offers while others sit for 3 weeks or more without an offer.

Takeaways:

Buyers - You still need to act quickly and be ready to engage in a bidding war for the best listings. I don’t see this changing much over the next 3 months.

Sellers - If you price your property right and prepare your property for sale correctly, you can still acheive great results, but it’s no longer a market where you can just throw anything out there and expect it to sell for top dollar in a week or less.

Investors - Watch for those properties that have ‘slipped through the cracks’ with DOM (days on market) over 20. These sellers may start to believe their Realtors who tell them ‘the market must be changing!’ and you may be able to get some leeway with sellers.

Questions or comments? Contact me.

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Market Snapshot March 2011

The above chart shows the latest data on downtown Toronto condo sales from the Toronto Real Estate board for March 2011 as it compares to March 2010. C01 is considered ‘downtown west’ and C08 is considered downtown east.

A few observations:

• Downtown west is always the most relevant data to look at when gauging the downtown condo market. The vast majority of sales downtown are in downtown west (C01). Downtown East (C08) is not great to look at on a month-to-month basis as sample sizes are quite small. It is quite common to see very different trends in downtown east versus downtown west (as is the case this month)
• Active listings are up, but so are sales and prices in Downtown west
• On average, prices have gone up about 6.6% since last year at this time in Downtown west
• The downtown west market once again outperforms the overall Toronto Real Estate market (where are you planning on investing this year?). Sales for GTA are DOWN 11%, and prices up 5%
• It’s still basically a seller’s market in both downtown east and west with the sales: listings ratio still hovering around 50%. Anecdotally, the number of ‘quality listings’ remains incredibly thin, while “investor” buildings have plenty of units available for sale.

I hope you find this information useful. Questions or comments on the market? Contact me or leave a comment below.

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2011 Market Forecast From Remax Condos Plus

If December is the annual ‘year in review’ month, then January is ‘predictions’ month. My broker (aka The Big Boss Man) over at Remax Condos Plus, Jamie Johnston, has put out his 2011 forecast for the downtown condo market. Here it is below for your reading enjoyment. Of particular note: Jamie now believes that the pre-construction market is now nearly 100% investor-driven. Love to hear your thoughts on this:

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Buyers Take a Beating in June

The headlines all proclaim that June was the “best month on record“, but if you were a buyer in the month of June, you’d probably disagree. As usual, let’s take a look at the numbers just for downtown condos.

In C01 (downtown west) let’s compare the June numbers from the past 3 years:

SALES: 2007 – 336 sales | 2008 – 276 sales | 2009 – 400 sales (up 45% from ’08 and up 19% from ’07)

AVG PRICES: 2007 – $315,207 | 2008 – $360,010 | 2009 – $340,895 (down 5% from ’08, up 8% from ’07)

MEDIAN PRICES: 2007 – $281,000 | 2008 – $307,570 | 2009 – $307,500 (flat from ’08, up 9% from ’07)

SALES:ACTIVE LISTING RATIO: 2007 – 71% | 2008 – 44% | 2009 – 70%

In C08 (downtown east) let’s compare the June numbers from the past 3 years:

SALES: 2007 – 123 sales | 2008 – 126 sales | 2009 – 165 sales (up 31% from ’08 and up 34% from ’07)

AVG PRICES: 2007 – $309,449 | 2008 – $322,003 | 2009 – $345,465 (down 7% from ’08, up 12% from ’07)

MEDIAN PRICES: 2007 – $271,000 | 2008 – $303,500 | 2009 – $327,000 (up 8% from ’08, up 21% from ’07)

SALES:ACTIVE LISTING RATIO: 2007 – 90% | 2008 – 57% | 2009 – 88%

Sales are way up over last year and even above where they were in 2007. If you look at the sales:active listing ratios, the numbers are off the charts in favour of seller’s. Supply is just not nearly keeping up with demand.

Median prices for downtown west (where the bulk of condo activity occurs downtown) are basically flat from last year which fits with anecdotal evidence that suggests prices are right back to where they were at the peak of the market.

What does the future hold? I think June will go down as the busiest month of 2009. I think July and August will be very active months, however, heading into the fall market and into the winter I have to believe we have no where to go but down (in terms of number of sales and directional pressure on prices). Things should be improving for buyers soon. Interest rates have gone up substantially of late, and hopefully as some new condo buildings come online over the next few months, we will see a bump in inventory levels.

For additional reading check out “Alarming Inbalance in Toronto’s Real Estate Market“.

Questions? Comments? I’d love to hear from you.

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May Stats Show Sellers in Control Once Again

The Stats are out for the month of May from TREB, and as I predicted in my last post, they show May as being the busiest month of the year so far.

Let’s break down the numbers for downtown condo sales:

In C01 (downtown west), there were 325 sales compared to 302 in May ’08 which represents an increase in sales of about 8%.

• Average prices were down from $372K to $327K BUT the median price was only down from $320K to $304K. Clearly the high-end of the condo market has been hit hard over the past year.

In C08 (downtown east), there were 134 sales this year versus 120 last year (+12%).

• Average prices in C08 were $298K versus $314K last year, and median price was $280K versus $293K last year. Again showing the trend that the average price has been hit harder than the median price.

Also of note, the Sales:Active Listing ratios for condos for C01 and C08 in May were 48% and 50% respectively. Clearly May was a seller’s market. This is a huge change from just a few months ago when we were seeing Sales:Active ratios in the 13-15% range.

Still that is nothing compared to the absolute frenzy that is happening in some areas of our city like East York, Riverdale, The Danforth, Leslieville, and the Beach. In these areas May had Sales:Active listing ratios in the 70-100% range.

Why the temporary insanity in the market? In my opinion it boils down to one simple reason: Supply and Demand. Supply is way down because seller’s feel a recession is no time to sell, and Demand is up because interest rates are at all-time lows.

Questions? Comments. You know what to do.

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Signs of Life? February Condo Market Stats Have a Pulse

It’s that time of the month again, TREB just released their stats for February. The numbers aren’t as painful to look at as in the previous few months, but does this mean we are on the way to recovery?

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2009 Begins As a Buyer’s Market

TREB has their January stats up for resale properties. Looking at the numbers for downtown condos it is now very clear: we are in a serious buyer’s market. 

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Sales Down. Prices Down. Inventory Up & Down?

Finally the numbers are in. TREB took a lot longer than usual to release the final sales numbers for the month of December, maybe because they were so painful to look at they had to double check them several times, hoping they would magically improve themselves. Here are all the gory details.

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