The One Thing That All The Top Selling Toronto Condo Projects Have in Common
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There has been a lot of talk in the mainstream media about the fact that new condo sales are down significantly in the past year. This is a fact that I don’t dispute. In 2013, sales of new condos were around 14,000 (official numbers not out yet). One of the lowest numbers on record from the last decade and only about half the number of sales we saw in the record-breaking year of 2011.
What I do dispute is the notion that the condo market is in trouble. The condo market has been self-correcting itself for the past 18 months and many projects are selling just as well if not better than the crazy days of 2011 when you had people camping out overnight to buy condos.
The buyers are there. The demand for condos is there. The buyers are just more discerning than ever before on which projects they will and will not invest in.
The One Thing All The Top Selling Toronto Condo Projects Have in Common
I’ve noticed a trend that developed in 2013 that has now carried over into 2014 with the massively successful launch of CORE Condos last week: 1) the condo projects that are selling well, the ones that are reaching 50,60,70% sold in a matter of weeks, are the projects who have 2011 pricing.
It’s apparent that early 2012 was the market peak for new condo sales – that was when prices and sales were at their highest point. The projects that are still trying to sell at 2012 pricing are not doing well. Those who scaled back the pricing to 2011 levels are still seeing units fly off the shelves.
So think about the opportunity from an investor’s perspective: you can buy a condo in 2014 at 2011 pricing that will not be completed until 2018/2019. The price appreciation potential for buyers in this scenario is huge. Since sales are going to continue to be much lower than the long-term average in 2014, the number of new condos completing in 4-5 years time will be too few to meet demand.
And Another Thing…
Another thing that has become apparent is that condos in “A” locations are still doing very well while condos in “B” and “C” locations are generally struggling.
With a plethora of projects to choose from, if your project is not in an “A” location, it’s very hard to capture the buying public’s attention – even if you have great pricing.
Today’s condo investors want 3 things: great pricing, great locations, unique buildings.
Conversely,the projects that are selling poorly and languishing on the market, those making up the record high levels of unsold inventory, are projects that are priced at 2012 pricing.
A Huge Condo Success Story from 2013
If you look at Harbour Plaza Residences – easily the top-selling project of 2013, what you see is that prices were on average below that of the current resales at the comparable Residences of Maple Leaf Square (55 and 65 Bremner). They actually had some units priced below $600 per square foot. Units at Maple Leaf Square regularly sell for over $700PSF. Units at ICE Condos (currently under construction across from Maple Leaf Square) were selling for higher prices than Harbour Plaza way back in 2009!
Harbour Plaza was an amazing project in an “A” location with excellent pricing and as a result it was a home run for the developer (Menkes).
My Message to Toronto Condo Investors in 2014
My 2 cardinal rules with buying pre-construction condos for investment: 1) always buy below current comparable resale values and 2) always buy cash-flow positive (given current market rates and assumptions).
Still there are people shouting from the rooftops that these 2 rules are not possible in today’s condo market. These people are only looking at the projects stuck in 2012/2013 pricing and that is why they feel this way. They are missing out on a massive window of opportunity that the current market is providing.
Core condos was the first great investment opportunity of 2014. The next? YC Condos. Register today to get on the list for this project.