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Tipping Point?

For the first time in 16 years, sales of new condominiums in Toronto were lower in the second quarter than they were in the first quarter. This, according to the latest stats in from Urbanation. So what? Well, real estate is highly cyclical (at least it used to be), and the busiest months of any given year are usually during the spring market (April-May-June).  This year we sold so many condos in the winter months (5415) that we couldn’t match that total in the spring (we only sold 4991). Does this represent a tipping point in the new condo market?

Readers of this blog will know that the resale market peaked back in late March/early April. And they will also know that I’ve been preaching that the new development market would do the same, but it would just take a few more months to do so. So things are playing out in a predictable fashion so far this year but we need to know how to understand this changing market and where it is going next.

There are basically two ways of interpreting this data. One is that sales were so incredibly (and unusually) high in the first quarter of this year that we had no where to go but down. The other is that this has never happened once in the last 15 years in our market – 15 years of a nearly continuous bull market – and so this must represent a fundamental change in our market. The truth is probably somewhere in between these two extremes.

I don’t see any cause for concern that the pre-build market is about to ‘crash’ or face any significant price reductions, however, I do see and hear more caution and less optimism in developer’s voices when I speak to them and they are no longer assuming anything they throw at the market will be absorbed. My personal opinion is that given the ongoing fluctuations in the global economy and the Bank of Canada’s bi-monthly statements which assure us they have no idea what is going on either, we are entering into what could be a prolonged season of uncertainty in our real estate market. Continue to invest smart and with a long-term outlook. Buying to flip is sooo 2007.

Want to discuss your investment options in this market? Contact me today.

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New Condo Sales Back From The Dead

After nearly a year of massive declines in sales and stagnant or falling prices, it seems that new condos are back. Urbanation’s sales figures for Q2 2009 show a dramatic change from Q1. We aren’t back to the hedy days of 2007-2008, but 2963 units sold sounds a heck of a lot healthier than the paltry 917 sold in Q1. Still, the numbers are 40% below Q2 2008 when 4,962 new condos were sold.

In the past 3 months, I’ve personally been involved with 3 major new condo launches or relaunches: FLY, One Cole, and Liberty Market Lofts. All three saw sales in the hundreds of units in a just a matter of 2 or 3 days. This was the norm back in 2007-2008, where new condos were launching every week and if they weren’t quick to raise their prices after initial launch they would sell out faster than you can say ‘economic collapse’.

Now some developers are starting to do something I wouldn’t have predicted just 3 months ago: raise prices. Check out one of Brad Lamb’s recent ‘tweets‘. And all this is taking place concurrently with the resurgence of the resale market. It seems that the lack of inventory in the resale market and elevating prices have people once again looking at new developments as a viable alternative. More bodies in the new condo sales centres of late has developers thinking less about lowering prices and more about raising them.

The focus now for buyers is ‘where can I get the best price, the best value for my investment long term’. No longer are they swayed by frilly incentives like free maintenance fees or low interest rates. Buyers are returning to the price per square foot equation as the best predictor for long-term ROI.

Still, there are more shoes to drop. More condo projects will be axed or relaunched in the coming months. I expect an active fall for the new condo market and more opportunities for buyers and investors to come.

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New Condo Sales for November 2008

Today I want to share with my readers a press release from BILD – Building Industry & Land Development Association. 

They just released their sales statistics for new homes and condos sold in November. For Toronto, 789 high rise condos were sold. At first glance this number sounds pretty high, but when you hear that in November of 2007 1922 new condos were sold in Toronto, this means that sales this November were down 59% versus last November. This is very consistent with the numbers for November’s resale market, where downtown west condo sales were down 61% and downtown east 51%.

We have surpassed the 15,000 mark for condos sold in the GTA for 2008 so far. We will likely end up with about 15,500 condos sold in 2008, which is far off of 2007′s record pace of 22,000, but pretty much dead-on with previous predictions from new development tracking company, Urbanation, who was calling for around 16,000.

Click here for the full press release, or continue reading.

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Where is the Toronto Condo Market Heading?

I attended a very informative and interesting seminar last night at the Market Wharf sales office. The event was put on by Context (the developer behind Market Wharf, Spire, Radio City) and was billed as a ‘Buying a Condo Seminar’. It was open to anyone who is on Context’s marketing email list. Normally I avoid events like these like the plague because they are blatant bait-and-switch sales events designed to lure uneducated consumers into buying a condo at a development they know nothing about. However, this one offered something different and I’m glad I attended.

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Toronto Resale Market Slows; New Developments to Follow?

Interesting article in today’s Globe and Mail about more anecdotal and factual evidence that the Toronto resale market is slowing down.

Agents are starting to see conditional offers more and more, negotiations are actually taking place, and sellers who price their property too high are getting a rude wake-up call to the new realities of the marketplace.

Gone are the heady days of 2007 when a seller could simply list their property at seemingly any price and they would usually be rewarded with an offer.

So what about the market for new condos? What is the market like today and what will it look like heading into the final quarter of 2008 and into 2009? I spend most of my time helping buyers enter into the pre-construction condo market in Toronto.

A new report from Urbanation, a research firm run by the folks behind Market Vision-a brokerage specializing and new developments-seems to suggest that new condos will be following the trend currently happening in the resale market.

“We’re expecting a slowdown in 2009,” said Jane Renwick, editor and vice-president of Urbanation, a condominium market research company.

“So we would say that we were at 22,000 [condo] sales at the end of 2007. We’re predicting 16,000 sales to round out this year. And we’re expecting sales to dip beyond that in 2009.”

Urbanation released a report yesterday about the Toronto condo market’s second quarter of 2008.

Following record condo sales in 2007, she said, the market is now back to 2005 and 2006 levels.

Anecdotal evidence, evidence on the ground from my own experiences and the experiences of my colleagues who also specialize in new condo developments, suggests that the market is currently still hot. People are still lining up for condos (overnight in many cases), and prices are still rising. However, there is a sentiment that slow times are ahead and smart buyers are proceeding with caution, not just jumping into any development that comes along. If you are looking to flip a condo and make a quick profit overnight, it is probably not the best time to buy.

If you ever have any questions about new condos or Toronto Real Estate, please give me a call or send me an email.

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