Toronto Condo Market Report March-April 2020

16 March 2020
Remax-Condos-Plus

Toronto Condo Real Estate Market Report March-Arpil 2020

SALES COMMENTARY

Toronto Real Estate Year-Over-Year Summary

The real question is not how strong the current real estate market is; but what will be the impact of the Coronavirus (Covid-19) versus the impact of lower mortgage rates and a lower stress test going forward. To briefly recap: February results from the Toronto Regional RE Board, overall sales were up 45% over February of 2019. For condos the increase was 25%, and in downtown condos it was 24%. Overall new listings were up by 8% over February of last year. In terms of condos, the increases were even smaller, just 5%.

These numbers, a rising sales-to-new listing ratios, means that prices are rising even faster than we forecast at the start of the year. We told you, 1-12%, depending on the region and price type. So far this year, increases are in the 5-20% range. We know it will not last.

But back to the question at hand. Covid-19 has made a huge impact on stock market levels. Suddenly real estate looks like the safer and better investment. The lower Canadian dollar will be attractive to non-resident buyers; and lower interest rates and a lower stress test will attract more Canadian buyers. Certainly Covid-19 will impact some Canadian businesses and will make buyers and sellers more cautious in moving about. In the short term, we think real estate will benefit from all these factors. We know that Covid-19 will be temporary, but we do not know for how long and for how severe. We look back to 2017 and a similar booming market which came to a halt by the end of April. We don’t expect a similar drop.

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Luxury Condo Sales Year-To-Date

Luxury Condo Sales Year-To-Date

This Graph compares the number of condo sales between 1-2 million dollar units to those over 2 million for the first two months of the year.
Source: Toronto Real Estate Board

Vu Condos Comparison

SHANGRI LA:   
180 UNIVERSITY AVE

The Residences of Shangri La are located at 180 University and Adelaide. The 66-storey tower consists of a luxury hotel on the first 17 floors, and condos from the 18th floor upwards. Its prime location makes it one of Toronto’s most expensive condo buildings. When first completed in 2012, the price offering was $1,000-1,200/sf and sales were slow. Price tended to stay flat and many listings expired. Today, Shangri La is one of the most desired buildings as prices in the overall market have finally caught up.

The first unit we looked at is in the Private Estates, concierge service (over 50th floor). It is a large one bedroom with parking and locker. It was first offered for sale at $999,000 in 2013 and the listing expired. The first sale was in 2016 for just $800,000. It resold in 2020 for $1,237,000. While the unit appreciated by 50% in the last four years, it experienced no price appreciation from the developer’s price in the first four years. At just under 900 sf, the current price psf is $1400.

The second unit we looked at was also in the Private Estates. It was a two bedroom with den or family room and three washrooms. It also had a locker and two parking spaces. It sold in 2015 for $2,530,00 and then in 2020 for $3,000,000 – an increase of 19% over five years. At just under 2,000 sf, the current price is $1520 psf. Out of 393 units in Shangri La, there are currently five for sale, ranging in price from $1,125,000 to a high of $4,588,000.

The reason we selected this building is to demonstrate that the condo market is more than just 500 sf condos. It is maturing with larger sized units which appeal to families and downsizers. We also wanted to demonstrate the overall growth of bigger, more expensive condos by tracking the increase in unit sales of condos over one million dollars in the last three years. See Graph.

RENTAL COMMENTARY

Over one thousand condo units were leased downtown in February. That was 10% higher than in January. Rents have also stabilized at current levels and most properties are sitting for just over 20 days on market before leasing.

In previous Reports, we have talked about the value of a parking spot. The premium most renters are willing to pay is $200+ per month. With the average parking spot costing over $30,000, and new spots at $60,000; the return to investors is 2-4% before financing. The reason for low returns is that many tenants living downtown do not own a car and a spot is of less value. In this Report, we looked at the value of a second bathroom. We looked at a one plus den, with one bathroom versus two. The difference was $200 per month on average. Then we looked at a two bedroom with one bath versus two. The difference of a second bathroom here is $300 per month. A second bathroom is at most $20,000. For investors, the better return is to pay for the second bathroom rather than for a parking spot!

In terms of rents, the studio unit is averaging $1900 per month. The entry point for a one bedroom without parking is still $2150 on average. Adding a den will increase the average rent to $2300 per month.

In the two-bedroom market, the entry point is $2850. It increases with parking and den to $3500 per month. The three-bedroom market remains small and has settled in at the $4,000 per month level.

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