Toronto Condo Market Report October-November 2019

17 October 2019
Remax-Condos-Plus

Toronto Condo Real Estate Market Report October-November

SALES COMMENTARY

GTA Year-Over-Year Summary for September 2019

September was another solid month for sales, which clearly confirmed the upward market direction of this market. Sales were 22% higher than for September of last year. But this number is also slightly below the peak September years of 2016 and 2015. We continue to look at Listings as a future indicator. ‘New’ Listings for the month were 2% lower than last year and the current level of ‘Active’ Listings is 14% lower than a year ago. Again, supply is holding back this market. In terms of the condo market, sales in September were 16% higher than September of 2018 and listings were unchanged from a year ago as ‘new’ listings’ for the month were lower than the ‘active’ listings at month’s end which means supply continues to fall.

The end result is higher prices. For a sustainable market, we need prices to increase by approximately 4% per year to maintain a balance and ongoing affordability. Currently, we are running at 5% on average for the overall market. Yes, prices are lower in York Region from a year ago but that is the only area as prices are 7+% higher in Peel and Halton Regions.

This brings us to a discussion on real estate ‘bubbles’. Outside observers, based on average real estate prices to average incomes, and average real estate prices to average rental prices, over twenty-five years, believe that Toronto is in a ‘bubble’. This argument does not take into account interest rates over this period either. But the real definition of a ‘bubble’ is when demand (buyers) exceeds supply (sellers with listings) which forces prices to rise to much higher levels. For people living in Toronto, the question is not if we are in a bubble but when will it break – i.e. more sellers than buyers. When you look at the population growth and when you look at how quickly developers can bring new housing to market, you quickly realize that we are a long way from a market balance. On an annual basis, we need almost 40,000 new units each year. Over the last ten years, we have never reached this number in a single year. Our advice, we are years away from any serious price correction. Yes, Government intervention may cause a market to slow down for a short period of time (2017) but these are only temporary as the market learns to adjust.

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CITY OF TORONTO CONDOS AVERAGE PRICE

Toronto Condos Average Price

This graph plots the average price of Toronto Condos since 2013. We can see that the average annual increase is 9.7% each year. This has resulted in a narrowing of price differences with the low-rise market and slower sales.
Source: Toronto Real Estate Board

LAGO CONDOS:   
56 ANNIE CRAIG DRIVE

The Lago is located in Humber Bay Shores in Etobicoke. It is 50 storeys tall with 448 units. It was completed in 2017 as one of the newest buildings in the area.

We looked at a one-bedroom unit on a low floor with balcony and parking but no locker. It sold in 2017 as an Assignment for $340,000. It sold again in 2019 for $468,000 – an increase of 37% in two years. The actual size of the unit is under 500 sf, which translates to a price of over $950/sf.

A larger two-bedroom, two bath unit sold in 2018 for $525,000. It has parking, locker, and large balcony. Fifteen months later it sold again for $567,000 for a gain of 8%. This unit sold for just under $800/sf. The building originally was sold by the developer for under $600/sf with 9 ft. ceilings and all units included parking. Currently, there are four units for sale, all over $900/sf.

RENTAL COMMENTARY

The downtown condo market continues to lead all rental activity. The area bounded by Bloor St. to the north, and between the DVP and Dufferin to the west accounted for 43% of all condos rented on TREB in the Third Quarter of 2019. This figure was 22% higher than for the same period in 2018. This supports our view that most new condos downtown are being absorbed into the rental market.

Further proof can be found in the rental rates for various sizes of condos. Studio prices are now averaging $1950 per month (which is just under $5/ft per month). The one-bedroom market starting at $2300, without parking or a den, is over $4.50/ft per month.

The two-bedroom market ranges from a low of $3100 per month to almost $3600 when you include parking and a den. The three-bedroom market remains in the $4500 per month range.

For investors, expect rents to average $4.50/ft per month as the bottom ask for any purchase.

We are now in the Fall market when rents usually soften. But strong demand has resulted in rents remaining at summer levels. While the rental market does show a number of list price (rent) decreases, it is because investors, aware of rent controls, want to maximize the rent at the outset so don’t be fooled by this trend.

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TORONTO SALES AND MEDIAN PRICE BY AREA

Click on an area of Toronto to view the sales and median price for residential properties for the month of September 2019.

Source: Toronto Real Estate Market


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