an article in today's Globe and Mail about Luxury Condo sale in Toronto
A market that's generally immune to downturns
International buyers of Toronto's upscale suites see great value compared with major centres elsewhere
Article Comments TERRENCE BELFORD
From Friday's Globe and Mail
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January 30, 2009 at 12:00 AM EST
If you are looking for a single sign that shows just how the condominium market has changed in this decade, take a look at the profusion of luxury projects, especially the often dazzling penthouses that crown their summits.
We have gone from almost a standing start in 2000 to a total of 13 buildings now on sale, almost all in the city of Toronto where the price a square foot starts at an impressive $881. But that's just entry level. The average price, according to RealNet Canada Inc., is $1,258, and those at the top end weight in at $1,900 plus.
Granted, $2-million can buy a large one-bedroom with a den or a slightly larger two-bedroom suite in many of these palaces, but at the top end you are looking at price tags nearing the gross domestic product of small Pacific islands.
Take the 10,000-square-foot penthouse at the top of the Ritz Carlton just west of the downtown business district. It went for between $14-million and $15-million, according to May Sheardown, the veteran agent with Baker Real Estate Inc. who sold it. Right now, she is working on a deal for the $28-million penthouse at 1 Bloor, the iconic new project at Bloor and Yonge streets, which when completed will be Canada's tallest residential structure.
At Minto Midtown, there are eight huge penthouse suites for sale. One, a 3,400-square-foot palace in the sky has been turned into a model suite by designer Dan Menchions. And it is just one of the two that occupy the top floor of Midtown's 40-storey south tower.
Price is negotiable, but the buyer will likely not see much change from $7-million.
So, is there a market for luxury suites, especially those in the ultrahigh-end price range?
The answer seems to be yes — inevitably.
One of the things that separates luxury suites from their mid-market contemporaries is that they take longer to build and longer to sell. But if past experience is a measure, the 466 true luxury suites still on the market will find buyers within the next few years.
The chief reason — in past at least — is that men and women willing and able to plunk down anywhere from $2.5-million to $30-million for a new condo have established wealth, and the ability to weather economic cycles. When they decide to buy a condo, the decision is lifestyle-driven and not linked to economic factors.
"Right back to the 1980s, monthly sales of luxury condos have varied little in either boom times or bad times," says Jane Renwick, executive vice-president of Urbanation Inc., which tracks luxury projects. "The range is between about 2.6 and 2.9 sales a month. Granted, there were fewer properties on the market back then, but those average sales stayed within that narrow range."
At the same time, Ms. Renwick says, the current economic downturn seems to have thrown sales for a loop.
"There has just been no activity in the luxury market since November," she says. "People are indeed holding off right now."
But maybe not all would-be buyers, suggests Ms. Sheardown. Her success in selling luxury condos has been built on strong contacts and relationships with international buyers. The Ritz penthouse, for example, went to an Asian buyer and the prospect for 1 Bloor's summit hails from Asia as well.
Even in the lower range — the $2-million to $3-million suites — a fair number of buyers are foreigners looking for a base in Toronto, where they already — or hope — to do business.
At 100 Yorkville, Ms. Sheardown sold, among other units, a $2-million, two-bedroom suite to a Hollywood type who regularly visits the city on business.
"What Asian and other international buyers see is an emerging global trade centre in Toronto," she says. "They want a home that speaks to their success and standing in the business community."
As well, Toronto's luxury suites seem great value compared with major centres elsewhere.
"I think what we are seeing now is a hiccough," she says. "The luxury market seems to be largely immune from the ups and downs of the economy. Buyers in the $2-million-plus range make decisions based on lifestyle changes or demands, not on finances. They have enough wealth to be largely insulated from those swings."
That hiccough is unlikely to see developers cutting prices on luxury suites, suggests RealNet president George Carras. Instead they will simply accept projects will take longer to sell than planned.
But will they sell?
As Mr. Carras points out, "As long as there are 466 people in an area of more than two million willing and able to sign a cheque for $2-million and up, demand for luxury suites will continue strong."
