Toronto Market Report October-November 2017

18 October 2017

Toronto Real Estate Market Report Oct-Nov 2017

Sales Commentary

GTA Year-Over-Year Summary for August

September sale results on the Toronto Real Estate Board produced mixed results. For the ‘bears’, their focus was on the decline in sales from September a year ago – down 35% to 6379 units. A normal September should have produced sales in the 8,000 range. While listings for the month were up by 9%, listings were at 19,000 units at month end which represents about a 2.5 month’s supply on an annual basis. That is certainly higher than the last year but is well within a balanced market.

For the optimists, they can point to TREB's Home Price Index (more accurate than average prices) because it removes the bias caused by a changing mix of sales, and tracks similar property types in specific market areas. In the City of Toronto, detached houses are 6.6% higher than a year ago. For condos, the increase was 26%. Condo price increases were greater, primarily because they trailed house price increases in the previous two years, making condos more attractive and affordable to people entering the real estate market.

In terms of the condo market, sales downtown were 20% lower in September than a year ago. In Humber Bay, sales were 28% lower. At the same time, active listings in both markets at the end of September were lower than new listings for both and stood at just a 1.5 month's supply, an indicator of more price increases to come. We then looked at sales for the first 11 days of October and they were in line with sales for the first 11 days of September. But most interesting was that 50% of these sales were at or more than the list price.

The pre-construction condo market is tracking for a record sales year. There are 17 new projects launching downtown before year end. It will be interesting to see if all sell out. Prices are running $100-200 per sq.ft. higher than the current resale market. If they don't sell out, expect to see more special incentives (free parking, no condo fees for a year, rental guarantees, etc.) but no reduction in prices as developers try to hold the line.

Monthly with Three Previous Years for Comparison

Toronto Downtown Condos

This chart plots the monthly MLS® sales-to-new listings ratio (SNLR) for the current year and the previous three years. The recurring seasonal trend can be examined along with comparisons to previous years for each month. A normal market has a ratio between 35% and 50%. Source: Toronto Real Estate Board

832 Bay Street: Burano

The ‘condo street for Toronto has always been Bay Street. It also has some of the highest prices. This month we looked at sales at the Burano, 832 Bay. This building was finished in 2013. It consists of a three-floor podium plus 48 floors of condos. The first unit tracked is a one bedroom with balcony but no parking or locker. It is on a high floor and sold in 2013 for $389,000. It sold again in September of 2017 for $485,000. That is an annual increase of 5.7% over 4+ years. The unit is only 512 sq.ft. and that works out to $940/sf! The second unit we tracked was a two bedroom/two bath unit. It has parking, locker, small balcony but is a corner unit with magnificent views on the fiftieth floor. This unit also sold in 2013 for $727,000 and then again in 2017. The sale price was $950,000 which represents a 9.2% annual increase. At 816 sq.ft., that is a price of over $1100/sf. This unit was sold and closed well after the Ontario Government announced their new real estate changes in April. For the first time, we are starting to see bigger units appreciate at a faster pace than smaller units. Also, prime units are now commanding significant price premiums. Currently, there are six units for sale out of 486 units in the Burano. One of the units for sale is the identical one-bedroom unit described above, but one floor higher, offered at $515,000. They are asking $30,000 more in just a month, which is probably too much as it has not sold.

Rental Commentary

We have passed the peak of the rental market as just under a thousand units were leased in September (as opposed to 1300 in August). Still, multiple offers are common and days-on-market are under 10 for most condo types. The average rental price is now 101% of the list price.
This tight market will continue to drive rents higher. The studio market increased by another $50 per month to $1750 and days-on-market declined to four days for those being rented. The most popular unit in September was again the one bedroom without parking which stayed level at just under $2,000 per month.
In the one-bedroom market, the ‘den’ factor adds another $200 per month as more people are looking to team up, in an attempt to reduce their monthly expenses. On the other hand, the parking premium is not as large - $100 to $150 per month as more people who live downtown are giving up the car.
The entry point for the two-bedroom market also increased in September to over $2800 per month. The top end of the two-bedroom market – a den and parking is now at the $3400 range.
The three-bedroom market remains small. These units are being rented out at $4300 per month.
At the same time as rents are rising, the size of units is getting progressively smaller. To give you a rough idea, studios are under 450sf. A one-bedroom plus den is between 550 and 650 sq.ft. Two-bedroom units start at just under 700 sq.ft.

Number of Sales by Area for September 2017

This map shows the number of sales and median price for residential homes for September 2017 by municipal breakdown.

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