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.

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.

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.

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.

2010 IN REVIEW:

At the start of 2010, we predicted that the year would be made up of two parts: a strong first half with no real estate bubble and a drop off from July onwards. Other forecasters picked up on our theme and started to sing the same song by May and June. As the fall market continued to rack up monthly year over year decreases of 20%, we told you that the market had already bottomed in August but the experts were still predicting a serious decline. With that as a background, we are more bullish for 2011 than most of the experts who believe that Toronto sales will decline by 5% in 2011, which means back to 2004 levels! We also don’t believe that prices are overvalued by 10-25% as international experts keep claiming. Our pet peeve is that most experts keep talking about national markets, where real estate is localized, and prices can vary significantly between neighbourhoods and condo buildings.

WHAT TO LOOK FOR IN 2011:

First we believe that Toronto real estate in 2011 will be ‘steady’ and decidedly unexciting for those who want wild swings in prices and sales volumes. Mortgage rates will fluctuate in a narrow band. Governments heading into elections are unlikely to announce more taxes for consumers, and the economy will slowly gain strength in the Toronto Region which will mean both reported ( and the growing unreported) incomes will be higher. Power of Sale or Foreclosure sales will be minimal (unlike the U.S.) hence there will be no downward pressure on prices.

What makes the downtown condo market unique is that there are really two components: the resale market and the pre-construction market. The resale market is dominated by end users. The pre-construction market is almost entirely investor driven. Over the past year, the investor mix has switched to mainly ‘all cash’ buyers from Asia and the Middle East.

Downtown condo prices are still relatively cheap versus other areas of Canada and other major cities in the world. On the other hand, condo rentals rates are currently too low to attract certain investor types to the pre-construction market. This will lead to a levelling off on pre-construction prices and a spill over into the resale market which historically is $50-100 per sqft lower than pre-construction.

WHAT TO EXPECT IN 2011:

1. Toronto resale volumes will be the same as in 2010. Prices will increase by 5%. The best time for buyers will be in the first quarter of this year. Most experts will not recognize the strength of the real estate market until the third quarter.
2. The downtown condo market will see sales increasing by 10% and prices up by 3-5%. Condo rental rates will increase by $100 per month on average. The current vacancy rate for rental condos is under 1% and for apartments it is about 2%. Condos are renting in 10-15 days on average. Expect that trend to continue.
3. Bigger condo units are now selling at the same price per sqft as smaller ones. Going forward, two bedroom plus units will sell for more per sqft than one bedroom units.
4. More and more units will be sold by Assignment rather than resale as investors of pre-construction units opt to sell rather than to rent out their units.
5. Until rental rates increase, the price of pre-construction condos downtown will stall at $700 per sqft. The ceiling for resale units appears to be $600 per sqft. Both markets are very active in the $500-550 per sqft range.

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.

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.

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?

Compared to February 2008:

• In C01 (downtown west), condo sales are down 31%, average prices are down 8.5%, and inventory is up 46%. The number of sales as a percentage of active listings was 19% versus 40% last year.
• In C08 (downtown east), condo sales are down 9%, average prices are down 13%, and inventory is up a 85%. The number of sales as a percentage of active listings was 29% versus 59% last year.

Everything is still down over last year, but the drop is not nearly as extreme as it has been over the past few months. The trend has been double the inventory and half the sales, with average prices down 10-12%. So what exactly is going on here?

• Total inventory is actually down slightly in both C01 and C08 compared to January (last month). Normally we would expect inventory to increase as the weather warms and the spring market approaches.
• How about C08? Sales are down only 9% over last year (compared to 32% and 45% over the last two months respectively), and median prices are down only 7% (compared to 9% and 8% last 2 months). 
• Compared to 2007 numbers (2 years ago), average and median prices in both CO1 and C08 are still up significantly

So what is up? Is the market showing strength and signs of recovery? Maybe. My feeling is the appearance of postive change is mostly attributable to the fact that February 2008 was the first month where we started to see a dip in the market overall. Sales began to slow and inventory started to climb. February 2008 was also the first month that the Toronto Land Transfer Tax kicked in as well.  In short, we will have to wait to see a few months worth of data before we can say the market is trending up.

Download a PDF file with all the stats for February.

Your thoughts? Leave me a comment or send me an email.

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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. 

Compared to January 2008:

• In C01 (downtown west), condo sales are down 58%, average prices are down 9.5%, and inventory is up 70%. The number of sales as a percentage of active listings was 12% versus 46% last year.
• In C08 (downtown east), condo sales are down 32%, average prices are down 12%, and inventory is up a staggering 116%. The number of sales as a percentage of active listings was 19% versus 60% last year.

So the story continues as we have seen for the past three months. Prices are down about 10%, sales are about half of what they were last year. DOM (days on the market) has gone up nearly 100% (27 days last year for C01 and C08 versus about 45 days this year). This underscores how much of a buyers market it really is out there. Even if sellers have price their condo with the 10% deduction from last year built into their price, they are still finding that it takes much, much longer to sell than it did a year ago.

Click on the PDF icon to download the full stats package for the month for downtown.

Previous posts in this series:

Jan 2009 Downtown Condo Stats

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.

Compared to December 2007:

• In C01 (downtown west), condo sales are down 49%, average prices are down 10%, and inventory is up 76%. The number of sales as a percentage of active listings was 14% versus 48% last year.
• In C08 (downtown east), condo sales are down 45%, average prices are down 10%, and inventory is up a staggering 180%. The number of sales as a percentage of active listings was 20% versus 101% last year (not a typo-Q4 2007 was absolutely crazy!).

So if we just stopped there the numbers would be very similar to what was reported for the month of November, but there is something else very significant happening which will likely not be reported on much in the news media. Check this out:
Compared to November 2008 (last month):

• In C01, condo inventory has decreased by 26% (843 listings in November vs. 667 in December)
• In C08, condo inventory has decreased by 29% (359 listings in November vs. 254 in December)

Let me preface this by saying that it is normal for inventory to drop between the months of November to December as it is well known that December is not the best month to be a seller. However, this could be a sign of what many are fearing:

Sellers are holding off en masse to re-list their properties in the spring. Some believe that the market will be flooded with listings this spring and that will be when it really ‘hits the fan’. Time will tell.

So what do the latest numbers mean to you?

1. For Buyers – Prices are down, but not everywhere. Median prices have not changed all that much. Shop for bargains now but understand that there is no rush as Spring could bring surplus inventory. 
2. For Sellers - If you couldn’t sell your condo in the fall and are planning on relisting this spring, you might want to speed up the process and go to market now to try to avoid the rush to the gate.
3. For Investors - Stick to the fundamentals. Look for properties that have been on the market the longest and offer the chance at positive cash flows.

Dec 2008 Downtown Condo Stats

Previous Posts in This Series:

• October 2008 Condo Market Update: “Is the Toronto Condo Market Crashing?”
• November 2008 Condo Market Update: “Tipping Point? Downtown Condo Prices Fall, Inventory Soars”