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Re/Max 2007 Real Estate Reports

C

circuitboy84

Guest
Before we look at 2007 specifically, we would like to look at the factors impacting on the next ten years for the downtown Toronto condo market. Why ten years? Because we have never been so positive about this market since it became a force in 2000. So here are TEN reasons to be bullish:
1) The primary reason for the development of the downtown condo market was supposed to be the arrival of the baby boomers who had sold their big suburban houses. They still have not arrived in any great numbers and their impact will be felt – but not for another five years.
2) Baby boomers have children – the ‘echo’ generation and they are currently making their way through college. With parents help, they will all be buying condos in the next ten years!
3) Lifestyles have changed. Young people do not want to cut the grass or shovel snow like their parents. Computers, consumerism and clubbing has much more appeal.
4) Family size is changing. Single parent families, single child families all spell condo living.
5) It’s not just people who work in ‘416’ who want to live downtown but also people from ‘905’ who are buying downtown. It’s bad enough that you have to work in the ‘burbs without living there.
6) Real estate values are cheap compared to the rest of Canada. We know we are lower than Vancouver and Calgary. But in comparison to small town Canada, we are only 30-40% more expensive. Twenty years ago, the price difference was 200-300%. If anything, incomes today are even higher in Toronto versus other centres.
7) Real estate values are cheap compared to other major cities around the world. Waterfront in Toronto is less than waterfront in Croatia!
8) Immigration will continue to be a factor in the market. Toronto is the preferred destination and downtown living is their preferred choice.
9) Inflation will come back in Canada. China is the last market where goods can be made cheaply and that is what has kept inflation down. It is only a matter of time before prices start rising in China and throughout the world. Real estate is a great hedge against inflation and with debt leverage (mortgages), equity returns are even better.
10) Don’t’ worry about oversupply! New condo developments are all built on a pre-sold basis. New construction costs will start to increase quite dramatically and this will also limit supply as the price differential between the new and resale markets will act as a break.

Historically, annual real estate prices increase by about 5% on average. Given the factors in play, we expect that downtown condo prices will appreciate by 10% per year or more than DOUBLE in the next ten years! Some years will experience better appreciation than others. The key is to stay invested during this run.

LOOKING AT 2007:
We believe that 2007 will be a solid but not spectacular year. Prices should increase by only 5% and sales volumes will level off. This is a great year to readjust your real estate portfolio if you are an investor, or to move if you are an owner/occupier . One-bedroom units will be plentiful and will experience the least appreciation going forward. If you can't afford a two- bedroom unit, then at least get a sizable one plus a den!. For investors, try to find two-bedroom units that can carry themselves. Also bachelor units will still be good investments. Stacked townhouses will grow in popularity as young couples want to stay living downtown. There is a real shortage of three bedroom condo units. Big units will eventually command the premium prices in this market!
 
Wow! That report is so not full of hype!!!! Not enough exclaimation marks?!!?!

More condo name opportunities!

The Adriatic!
The Croatia!
The buy buy buy!
The Commission! (Won't somebody think of the commission?)
 
Bulgaria is the latest small eastern European country to cower in fear of imminent invasion by middle class Brits and their insatiable thirst for cheap holiday homes and dodgy investment opportunities, apparently.
 
My dad owns a 3/10th share of our ancestoral home on the Adriatic. A lot of demand from rich Germans and Austrians.
 
RE/MAX MARKET COMMENTARY - FEB/MAR 2007

Sales Commentary:
January started out with a rush - sales up 13% over January a year ago, and a record for the month according to the Toronto Real Estate Board. You can credit that to the mild weather and not to any change in the market. Early sale numbers for February are running at the same pace as a year ago and yes the weather is colder. There is no reason to change our 2007 forecast that sales would match last year's numbers (which incidentally is more optimistic that most forecasters - but then again they have consistently underestimated the market for the last eight years). Sales for the condo market were up 10% for January, but just 8% in the Downtown condo market. This is not a surprise as condos are impacted less by changes in the weather.
Market analysis shows that 'new' and 'active' listings Downtown are virtually unchanged from a year ago. With more buyers already in the market place for '07, prices will certainly be on the rise - expect 5+%. The Etobicoke Waterfront has under performed the market over the last few years but we are starting to see improvement in sales activity with a slight increase in prices. There is an increase in demand for larger units and the price differential to Downtown is attracting some buyers. Still, a sale-to-list ratio in the 22% range is not indicative of a sellers market - one needs at least 35%!
This month we focused on sales at The Richmond - 323 Richmond St. East at Sherbourne. A lot of people thought the building was too far east when it opened, but prices have increased consistently. Back in 1998 you could buy a two bedroom with parking for $178,000 from builder plans! This unit also included a den and is about 885 sq.ft. It resold first in 2001 for $235,000 and again in 2005 for $289,000. An identical unit sold for $301,500 at the end of 2006. Current prices are $340 per sq.ft. The unit appreciated by 69% over 8 years or just under 9% per year. However the biggest increase occurred with the first buyer. From the time the unit has been in the resale market in 2001, it has increased in value by only 5% per year. The same results can be found in tracking a one bedroom plus den and parking. This unit sold last year for $235,000. The very same unit sold a year earlier for $216,000. This represents an annual increase of 8.8%. At 635 sq.ft., the unit sold for $370 per sq.ft.
Compare these numbers with average prices that most economists use. The 'average sold price' of a downtown condo in January of 2007 was $301,000 and in January of 2006, the 'average price' was $312,000! Are prices really falling?? Just ask any buyer! The answer is that the mix of sales changes from year to year and this distorts the averages and makes the number of minimal value.

Rental Commentary:
In January, 155 one-bedroom units were leased Downtown. Forty-five units were leased with no parking and went for a median price of $1350 versus $1500 with parking. There were forty-two, two-bedroom units leased with a median price of just over $2,000 per month. There were no three-bedroom units leased in January! What have we been saying about a lack of big units in this market! For those thinking of renting, the vacancy rate for apartment units, as reported by CMHC is just over 3% and represents a balanced market. Condo rentals have a vacancy rate of less than 1%! So don't expect owners to accept offers that are not at list or close to list price.
 
RE/MAX MARKET COMMENTARY - MAR/APR 2007

MARKET COMMENTARY - MAR/APR 2007

SALES COMMENTARY:
February sales matched those for February of '06. On a year to date basis, we are running slightly ahead of last year. There are no signs of a market change, and in fact, active listings this year are 3% lower than a year ago. Prices will continue to rise!
The condo market continues to out perform the overall market. Overall condo sales for February were 5% higher than the same month last year. Downtown, condo sales were running 9% above last year. The sale-to-listing ratio is also higher than a year ago at 46%. This is certainly a market that favours sellers. The Etobicoke Waterfront recorded a sale-to-list ratio of 32% - up from 20% a year ago. (a balanced market is in the 25-35% range). This is a sign that the Etobicoke market is improving.
In this issue, we looked at sales at 44 St. Joseph -just off Bay and known as Polo Club II. The first unit we looked at was a one-bedroom with solarium, no parking, just under 600 sq.ft. A unit sold at the end of 2006 for $222,500 at 104% of list price. The very same unit sold in '03 for $163,000. That represents an increase of 36% over three years, and a current price of just under $400 per sq.ft. While a sale of 104% of list price is impressive, an identical unit sold three months earlier on a lower floor for $236,000. That was 98% of list price. The lesson to be learned is that pricing a unit below market to attract multiple offers, while trendy, will not necessarily yield the highest price! Pricing at market is usually your best option.
We also examined sales on a larger unit also at 44 St. Joseph. This was a two-bedroom, two-bath unit with parking at just under 1100 sq.ft. The unit sold for $350,00 in January of this year. In 2001, you could buy the very same unit for $272,000, which represents only a 29% increase over 5 years - or less than 6% per year! What was interesting with this unit was that another identical one sold in February of this year at $365,00 but with two parking spots on a lower floor. When you adjust for the floor difference, the buyer paid $25,000 for the second parking spot!

RENTAL COMMENTARY:
February is one of the slower rental months. There were 90 one-bedroom with parking units leased for a median price of $1500 and 48 one-bedroom units without parking at $1350. Do the math! There were 75 two-bedroom units leased for a median price of $2000. Only 9 studio units were leased in February at a median price of $1100. The low number is because many landlords list studios as 'junior one bedrooms'!! People looking for three-bedroom units are still out of luck - only one townhouse leased in February for $2500. Just about all units were leased at 100% of list. While the vacancy rate for condo rentals is just under 1%, the Residential Tenancies Act, which came into effect January 31st, is also having an impact. The new Act is supposed to provide better protection for tenants. It is now more difficult to evict tenants, and it takes longer too. Landlords are now becoming much more particular in selecting their tenants in the first place. If they sense a potential tenant could be a problem, they just don't accept them, and they don't have to provide a reason. So potential tenants are making offers at full list price when they find a unit they want!
 
Market Commentary - May/june 2007

Sales Commentary:
April was a record sales month for the Toronto Real Estate Board. May is also tracking for a record. There is little to gain in reporting the numbers. What is important is whether this burst of activity represents the peak to this market with a coming correction, or a new leg up to a longer market run. This frenzy has seen the Downtown Condo Market join the Detached Market, with multiple offers the norm, and selling prices 5-10% over list as the norm.

What are the signs of a market correction? First is a run up in prices (historically double digit increases over three consecutive years) which reduces affordability for buyers. Then there is a buildup of inventory – too many listings coming to market – many from investors. Now what do we have in today’s condo market? A shortage of listings – the sale-to-listing ratio should be under 35% in a normal market and for April it was over 50%. In the area east of Yonge Street, where there is very little new product, the number was 75%! No wonder prices are up over 10% this year compared to price increases over the last few years that have averaged just under 5%.

To demonstrate this point, we looked at three sales of small units (first time buyers) in 2007. A one-bedroom without parking sold at 230 King St. E. for $220,000 in March. A year ago the same unit sold for $193,500. Another unit at 361 Front sold for $241,000 in March and the same unit went for $227,000 10 months earlier. Finally, a 600 sq.ft. unit at 77 Harbour Square sold in May for $281,000 and the same unit sold last September for $241,000.

So where are investors? Not in the resale market because renting right now is not attractive if you believe that condo prices are going to jump significantly. Investors are driving the new project market. They can buy units now with 15-20% down (as opposed to 25%), have no landlord issues, and wait as new developers from other markets enter Toronto on the belief that we are ‘cheap’ at prices of $400 per sq.ft. New projects, starting with the Shangri La, are going to range from $500 at the bottom to $1,000 per sq.ft.

What to do? There is NO market correction coming in the next two/three years. Prices are only going to go up. If you want a condo to live in, then buy now. If you are thinking about selling, you will get top dollar and have the chance to transition into what you really want. For investors, the future will be a lot more complicated than before, when you could buy anything and watch it appreciate. Now selectivity will be the key.

Rental Commentary:
April is the start of the rental season. 194 one-bedroom units were rented at an average of $1500. The range was from a low of $1150 without parking to $2800. Two-bedroom units averaged $2000, with a range of $1450 to $3800. There were 99 units leased - a big month. We continue to get requests for three-bedroom units. Only three leased in April – all townhouses from $1900 to $2400. With three-bedroom condos selling for about $600,000, there is little economic rational in renting them, as there are few buyers at $4000 per month.
 
Market Commentary - June/july 2007

Sales Commentary:
Almost half way through 2007 and this will be another record year for real estate sales on the Toronto Real Estate Board. And no one predicted it - not even this Company! May was an all-time record month with 11,146 sales, which were 18% higher than for May of '06. June is already tracking for another double-digit sales increase over 2006. On a year-to-date basis, sales are running 10% above those of last year. Condos are performing slightly better than the overall market. In June, overall condo sales were up by 20%, while Downtown condo sales were ahead by 21%.

Last month's report talked about the chances of a market correction in the short term - and there is still nothing on the radar. You can see a correction coming - a slowing of sales, prices still rising at above average rates and a growing supply of listings. But sales volumes are still increasing. Prices are rising at above average rates but that's because there is still a shortage of listings in relation to the number of buyers. Experts, desperate to get their market correction, are now saying that a forecast of rising interest rates will dampen demand by buyers. In part, they are right. Some people on fixed incomes can be eliminated from the market. But why is the Government raising interest rates? It's because the economy is too strong - there are more jobs, people are making more money, and inflation is creeping back. Seems to me that more jobs, bigger pay cheques, and the fact that future housing will cost more to build are not factors that would cause the resale market to experience a price correction!!

To illustrate the explosive price growth in the condo market this year, we looked at sales in 99 Harbour Square on the waterfront. This is an older but very popular building with great water views. The latest sale of a one-bedroom unit (758 sq.ft. with parking) on a high floor occurred in June. It attracted 12 offers and sold for $383,000 - $34,000 over the list price. That's $505 per sq.ft. The previous sale of an identical unit on a high floor took place in January and it sold for $325,000. In the previous three years these units sold for just under $300,000 with little price movement. On the other hand, a slightly smaller one-bedroom unit (692 sq. f.t.) facing north (city view) with no parking sold in May of this year at $255,000 - $5,000 over list price. The identical unit without parking sold last year for $234,000. In 2002 (that's five years ago), these units were selling for $220,000. You get the point!

Rental Commentary:
The Toronto Real Estate Board just released their Rental Market Report for the first four months of 2007. Rental activity overall was up 14% over the same period in 2006. The most active area called C01 (Bloor to the water and west of Yonge Street) experienced a 41% increase in rentals over the same period. If you include the area east of Yonge, the downtown rental market is now 37% of the total condo apartment rental market for the whole GTA. More than 60% of the units rented downtown were one-bedroom units at an average rent of just under $1500. Studios or bachelor units made up only 4% at an average price of $1150. Two-bedroom units went for $2150 on average. And there were only 2 three-bedroom condo apartment units rented during the entire period.
 
Market Commentary - July/august 2007

MARKET COMMENTARY - JULY/AUGUST 2007

Sales Commentary:
The Toronto Real Estate Board had another record month for June with sales of 10,451 residential units - 20% higher than June of last year and 600 units off from the all time record set last month. We are currently running 11% higher than 2006 on a year-to-date basis. July will be another month that will run well ahead of last year's numbers. A number of factors have contributed to this strong run. The rise in the bank prime interest rate, with the expectation of a second quarter point increase to come, has pushed people into the market that were procrastinating.
A second factor might have been the proposed Toronto Land Transfer Tax. That has now been postponed for review in October. What made the discussion ludicrous from Mayor Miller was the fact that he claimed Toronto property taxes were already too high and hence the Municipality needed alternative tax revenues. What is a Land Transfer Tax if not another form of property taxation? If people move every 4-7 years then people will be simply paying in lump sums as opposed to annually. The real problem is that Toronto residential property taxes at .852% of assessed value are the lowest in the GTA! In comparison, Richmond Hill is 1.023%, Mississauga is 1.003% and Pickering is 1.352%. Even if property taxes are increased by 6-7% as the Budget Chief is threatening, they will still be the lowest in the GTA!! And Torontonians receive more services than other municipalities in the GTA. So let's bring some sense to the debate. We don't disagree that Toronto could use a 1% sales tax, provided that the other two levels of government would reduce their take by a half a percentage each.
Back to the market. Yes condos will continue to outperform the overall market. Sales were ahead by 23% in June versus same month a year ago. Downtown the market was even hotter with sales ahead by 29% and a sales-to-listing ratio over 75%. That means over 75% of the condos available for sale in the month sold within the month! A normal market is 25-35%.
And with prices for condos rising by 15% this year, it means assessment levels will be going up by the same amount; and there Mr. Miller is your revenue increase!
Rather than tracking prices for a particular condo building this month, we focused on the cost of condos on a per sq.ft. basis. When we first started tracking prices in 1999, resale condos could be purchased for $225-250 per sq.ft. and new developments were being sold for less than $300. Today, some 8 years later, resale prices are $325-350 and new developments are $400 -450 with premium projects selling for more than $500. The average increase over this period is about 50%, but 15% of it has come in the last six months! What does the future hold? You can bet there will be no slow down for the balance of this year! And with a tight supply of product, look for another strong market next year and further price increases.


Rental Commentary:
This is a busy time of year for rentals. In June 186 one-bedroom and 109 two-bedroom units were rented out Downtown. One-bedroom units with parking averaged $1550 versus $1400 without. One-bedroom with two washrooms (usually know as a one plus den) averaged $1700 versus $1550 for a smaller one-bath unit with parking. On average you pay $150 per month for parking or you can pay $150 for an extra bath and den per month! Two-bedroom units averaged $2200. In case you were wondering in this market, the actual rental price to list price was 100% for both two and one-bedroom units.
 
just wait till the new real estate tax becomes a reality and the first time buyers run for the suburbs
 
RJR123 said:
Oh, not this tired argument all over again!
Click to expand...

not really an argument... just a simple fact. I was a first time buyer a few months ago and if the tax was there then, I probably would have bought elsewhere.
 
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