Residential Resale Market – We expect sales to remain at the 90,000 level.  Remember that the all time sales record was achieved in 2007? Toronto is now a much bigger market in terms of people and incomes than five years ago, so why would sales drop? With a lack of new detached housing, prices in this sector – particularly in Central Toronto – will continue to appreciate.

Condo Resale Market – We have 18,000 condo units that were completed in 2011 and half of them will be added to the resale market. This extra supply will mean that prices will be flat in 2012. Stay in the $500-550 per sf range and you will be in good shape.

People love the condo lifestyle.  Baby boomers downsizing and moving into condos has just begun. In five years, it will be significant. The ‘echo’ generation, children of baby boomers, are just entering the real estate market and want to live in condos, centrally located in a happening neighbourhood.  Lastly, Toronto’s immigration is not going to slow (80,000 per year).  Many of these people want to be living downtown, close to public transit, Universities, and the ongoing events & festivals that Toronto has to offer. That being said, expect demand to be high for condos in 2012.

Pre-Construction Market – Almost 100% of pre-construction sales are to investors. They buy condo units either to rent out or to sell as ‘Assignments’ to end users to live in. They look at rental rates and try to anticipate future price appreciation. By the end of 2011, pre-construction sales downtown were averaging $800 per sf which we believe is unsustainable. The price gap between the resale and pre-construction markets is too big and fewer investors believe that resale prices will rise that fast over the next four years. That being said, we expect a number of projects that were announced to not be built.

Rentals – Rates will increase by another $75 per month. That means the basic one bedroom without parking will increase to $1600 per month. Vacancy rates will remain below 1%.

Interest Rates – Are not going anywhere. People keep talking about a rise in interest rates which could lead to problems. What you need to know is that if rates rise, it means the economy is stronger and we have higher inflation. That translates into higher personal income too, which will act as an offset. Inflation has always been a friend to real estate.

MY TIPS TO YOU FOR 2012

1) People try to make residential real estate far more complicated than it needs to be. Residential real estate is all about having a roof over one’s head. You either own the roof and pay yourself, or someone else owns the roof and you pay them.  Which sounds more desirable?

2) Timing the market is the absolute worst strategy! If you sit on the sidelines and the market keeps rising, you lose significantly. The longer you wait to get into the market, the less money you’re going to make! It’s never too early to start building equity.  Who doesn’t like to make tax free money?

3) Take advantage of the historic low interest rates.  Upgrade to a larger space, buy a second property and rent it out, or refinance your current property.

Currently the downtown condo market frenzy is centred on pre-construction sales. While there are too many launches to count (every downtown parking lot has a sign), the most important factor is to track the `price gap’ between this market and the resale condo market. The resale market is currently selling for approximately $500-550 per sqft and the pre-construction market is at $700 per sqft; higher for some premium projects.

When buying, investors are betting that in four years time, the resale market will rise to pre-construction price levels. When the price gap is below $100, investors are much more confident. However with the size of the current gap, we believe that some investors will start to pull back and there will be a number of new condo projects that will not be built. Pre -construction prices should begin to level off and in some projects might actually be reduced!

We also have to take into consideration the rental rates. Rental rate have moved higher by over a $100 a month this year.  Investors will not come close to breaking even at current pre-construction prices unless rental rates move higher by another $250 per month over the next four years. Is that even realistic?

What does this mean? If pre-construction prices are going to cap out and investors are going to pull back because the price gap is too large, resale prices are going to level off.  I do not see much of a price hike for downtown condos in 2012.

HOUSING OUTLOOK

Although all markets do influence each other, the housing market is separate from the condo market here in Toronto.  Depending on the neighbourhood, type of property and upgrades, you can purchase a house anywhere from $400K and go as high as $2Million+.  When the market slows down, higher end housing prices tend to remain stable as the target market is small.  Because there is a higher demand for houses under $700K, sellers are able to be more aggressive with their list price, causing values of properties to increase.   You will likely see this in neighbourhoods that are still developing or going through a transition period.  That being said, even if we are faced with a slower spring market, I still see potential growth for the lower end housing sector in 2012.

RENTAL COMMENTARY:

The rental market continued to be very active, even though this is usually the slowest period of the year. * Studios continue to be in short supply and are being leased for $1350 on average.

* One-bedroom units are being leased from $1500 for the basic without parking to $1750 for a one bedroom plus den and parking.

* Two-bedroom units are leasing from a low of $1950 to a high of $2500 with den and parking.

Most Tenants are paying 100% of list price as there is little room to negotiate in this type of market.  Landlords are also being more selective with tenants and are demanding good credit scores and employment records.

Have a safe & happy holiday!

The financial institutions will also keep their Prime Lending rate at 3%. Fixed rates have remained steady at record low rates of 3.49% for a 5 year fixed term while variable rates are staying closer to Prime.

The next Bank of Canada Rate Announcement will be on January 17, 2012.

• If you know someone who is thinking of buying or selling real estate in the Toronto area, pass their name and contact information along to me or have them contact me directly
• For each referral, you’ll receive one entry into a draw (entry is not contingent on an actual purchase, sale or lease)
• I will provide your referral with my professional, award winning service to help them achieve their real estate goals
• The ‘Grand Prize’ will be drawn at the end of December 2011
• The winner will receive a 32” LCD television

* Please Note that my standard referral rewards program is still in effect.

“A referral is sending someone you care about – to someone you trust.”

Thank you for your continued support and referrals

Looking back at October, sales were only slightly higher than September, which is the first sign of a slowing market.  Not only are there less active listings on the market than a year ago but there are also less active buyers. It looks like the mortgage restrictions introduced by the Federal Government in stages are now starting to impact demand. Good news for any buyer; less buyer competition means less budding wars, resulting in more of an equal market.  On the other hand, sellers trying to maximize their price have missed the peak and may have to wait to test the spring market.

If you are looking to buy and sell at the same time it becomes a little trickier.  Everyone knows that it is best to buy when the market is down and sell when the market is booming, but unfortunately that is easier said than done.  If one had to choose, I would recommend upgrading in a slower market as the monies saved from the purchase will likely to be greater than profit lost on the sale.  Why? Because cheaper properties hold their value more as there is a larger target market.   Higher end properties tend to dip a little more in price because of declined buyer demand due to affordability.  That being said, not only can you take your time and find the perfect property but it is unlikely you will be participating in constant bidding wars; purchasing a property is stressful enough without the added drama.

Now that we are in mid November, expect things to be slow until March/April when the spring market hits.  If you are looking for the ‘good deal’, now is the time to be in the market.  Buyer demand is at a minimum as people are starting to focus on the Holidays, and the supply is still healthy because owners are trying to sell before the snow falls.  This won’t last long!  Inventory will start to level off over the next couple of weeks.  By the first week in December, most sellers will hold off until the new year.

RENTAL COMMENTARY:

The rental market downtown is extremely tight. Multiple offers on rentals are very common.

* One bedroom units were rented from a low of $1550 without parking to a high of $1800 for a den plus parking. These are the highest rental prices we have seen this year.

* The market for two bedroom units ranged from a low of $1900 without parking to a high of $2500 on average for a unit that included a den and parking.

* Days on market ranged from 3 to 10 days on average, depending on the unit. That is the shortest period we have seen. Tenants get your running shoes on. Don’t start shopping without a filled out Rental Application and an Employment Letter.

The outlook for the Canadian economy has weakened since July, with the significantly less favourable external environment affecting Canada through financial, confidence and trade channels. Although Canadian growth rebounded in the third quarter with the unwinding of temporary factors, underlying economic momentum has slowed and is expected to remain modest through the middle of next year. Domestic demand is expected to remain the principal driver of growth over the projection horizon, though at a more subdued pace than previously anticipated. Household expenditures are now projected to grow relatively modestly as lower commodity prices and heightened volatility in financial markets weigh on the incomes, wealth and confidence of Canadian households. Business fixed investment is still expected to grow solidly in response to very stimulative financial conditions and heightened competitive pressures, although it will be dampened by the weaker and more uncertain global economic environment. Net exports are expected to remain a source of weakness, owing to sluggish foreign demand and ongoing competitiveness challenges, including the persistent strength of the Canadian dollar.

The financial institutions will also keep their Prime Lending rate at 3%. Fixed rates have remained steady at record low rates of 3.49% for a 5 year fixed term while variable rates have risen rates to 2.90% or Prime.

The next Bank of Canada Rate Announcement will be on December 6, 2011.

Another strong summer for real estate in the Toronto area.  August sales were 24% higher than that of last year for both the residental housing and condo markets.  What is more impressive is that the sale-to-listing ratio went up from 34% a year ago to 42% this August, in the condo market, in spite of more product. A balanced market – between buyers and sellers – is usually 25-35%.

The real question for many is: how will this market perform going forward? September was down from the summer but this is consistent with the seasonality of real estate sales.  October is usually the largest sales month in the fall so if you want an early indication of the market for 2012, just watch the numbers for October and November. I’ll be sure to touch on them in my next market report.

It’s great to look at ratios, percentages, and units sold, but for most part it’s all about sale prices and my feeling is that they are about to level off. In the condo market, there are two markets; pre-construction and resale.  Pre-construction properties are fuelled by investors who then rent or resell their units into the resale market. Investors are only concerned with prices per square foot and our new projects are now approaching the $600-700/sqft range. Resale prices are always lower; today they sell for approximately $500-600/sqft. Investors only buy if they believe they can sell for more later. If pre-construction doesn’t move any higher, then neither will resale.  

The residential housing market is completely different.  For starters, it’s very rare for people to price per square foot as there are many more factors to take into consideration when putting a value on a house.  For instance, is it renovated or does it need work?  Is the basement finished? What’s the age of the roof, furnace and air conditioning? What’s the lot size and useable yard space? Is there a garage and is the driveway mutual or private? Number of bathrooms and size of kitchen will also matter. If it’s in a well established neighbourhood,  near schools and close to a shopping strip, it will hold it’s value more.  As you can see there are many more ways a house can be unique and stand out of a crowd than a condo.  That being said, there is still room for housing prices to continue to rise.

RENTAL COMMENTARY:

* Studios are renting for $1275/mo

* The entry level for a one bedroom unit without parking is now $1500

* The most popular unit is a one bedroom plus den with parking which now rents for about $1725 on average

*  Two bedroom units start at $2,000/mo and rise to over $2500 on average for two bedrooms plus den and parking

*  If you can find a three bedroom unit (three were leased in August), you can expect to pay over $4,000/mo

Under $400/sq ft to live in downtown Toronto; what a deal??!

* Approx 591Sq Ft W 10Ft Ceilings.

* Open Concept Kitchen with Centre Island & Breakfast Bar.

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Don’t Miss This Amazing Opportunity!!

- Additional photos available upon request -

As many of you know, we have long extolled the strength of the Toronto Condo Market. On many occasions we have criticized the logic of those calling for a major price correction over the past five to ten years. However, while we see no prospect of a major price drop, we do have the feeling that we are reaching the top of the mountain and there will be a levelling off of prices for 12-24 months.

Our rationale has nothing to do with low rental rates for condos or the rationale of per capita income to condo prices. Rather it has everything to do with our prices versus those of other major cities in the world and more particularly New York where we like to draw comparisons – even if only to dream!

When we look back ten years ago, resale condo prices were just above $300 per sq. ft. and pre-construction or new development sale prices were at $350. Today we are at $500-600 in the resale market and $600-700 in the new market. New York has not enjoyed that level of appreciation. In Manhattan you can find condos starting at $1,000 per sq. ft. and that market has far more appeal than ours and has a lot more wealthy individuals. It is also not moving up as quickly.

While experts keep focusing on the end-user in the resale market; prices in the new development market trickle down to the resale market. (Yes most investors are well financed and they will only sell their units at a profit – not a loss). Right now, there are less and less investors who have the appetite for condos at $700 per sf which will be the brake to the resale market where you find the end-users.

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Parking & Locker included.  Stainless Steel Appliances, Washer & Dryer, and Laminate Flooring. High Floor with Balcony.

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