“I would give a thousand furlongs of sea for an acre of barren ground.”~Shakespeare
Despite the temperature drop, the real estate market remains hot! The momentum we saw in September continued its Usain-Bolt-like-sprint into the first two weeks of October.
To put this into perspective, sales activity in September of this year was 10% higher than the year before. Meanwhile, early October saw a 22% jump compared to 2013.
Now before we begin to toss around such words as “housing boom” or “condo bubble,” let’s keep a few points in mind. Last year’s fall market was relatively weak.
We are seeing more new listings (up 11% in October) come to market, sparking whispers among industry watchers that 2014 may indeed be the biggest sales year, ever.
The previous high was in 2007. The difference between then and now is that seven years ago we had one million less people residing in the GTA. Yep, that figure was not a typo.
From this angle, one could hardly consider the market over-extended. Of course, bubble forecasters—who’ve been wrong since 2004—might choose to believe otherwise. Prices have also continued their upward trend.
The low rise or freehold market (houses) is now experiencing price increases in the 10+% range. We know that increases of this magnitude over a three year period will likely produce a softening in prices.
The condo market on the other hand has shown increases in the 4% range which is more sustainable. Over the last few months it too has moved higher.
It’s worth keeping in mind that these numbers are average prices. How do I feel about average prices? A change in the mix of sales can radically shift the average price to the extent that it becomes meaningless.
Case in point: Why are average prices always higher in the spring than the fall year after year? Is it because prices are really falling?
No. The only effective measure is to track a similar or identical property over a period of time to get the actual price increase of a property.
In today’s Thursday Soup, we tracked sales at 2121 Lake Shore Blvd. on the Etobicoke Waterfront. The Voyager 1 built by Monarch has great facilities and just about every unit has a locker and parking. This area has also experienced a lower rate of appreciation than for condos in the downtown market.
Why? Probably because the condo market is currently being fuelled by investors and a younger age demographic – both of whom prefer downtown to the Etobicoke Waterfront.
The first unit we tracked was a two bedroom, two bath unit with a 90 sq ft. balcony, parking and locker. It is a south east corner unit with 9 ft. ceilings and lake views. It sold in June of this year for $380,000 or just $465/sq ft. The same unit sold in 2009 for $333,000.
That is a price increase of just 2.7% per year! We also looked at a one bedroom unit that also included parking, locker and a 90 sq ft balcony.
This unit first sold in 2005 on registration for just $156,000. The same unit sold again in 2006 for $166,000 and then in 2011 for $250,000. A similar unit, 480 sq ft, is listed today for $274,000.
It will likely sell in the $260,000 range. That translates into $540/ sq ft. The total price increase over the nine year period for this unit averages 6.2%.
On the flip side, if you were to glance at the period from 2011 until today, the increase per year would only be 2%. These prices and gradual increases hardly suggest a “housing boom” or “bubble.”
September is usually the last month of the peak rental period which starts in May. Over 800 rentals were recorded versus 500 sales for the same downtown condo market. Compare these numbers to August where there were over 1,000 rentals and 450 sales.
Most September rentals have October 1st occupancy. Even in a slowing market, rents remained fixed for studios at $1450. The entry level one bedroom without parking now averages over $1600.
The top of the one bedroom market with a den and parking pushed up over $1900. The starting point for the two bedroom market without parking remained at $2200.The high end with a den and parking also was unchanged at almost $2900.
We continue to see a slightly bigger market for three bedroom units and they are in the $3500 to $4,000 per month range. Investors and renters need to price in the ‘extras’ in the rental market.
Parking will command a premium of $125-$175/mo. depending on the building. A den has less value, in the range of $75/mo. A second washroom also adds about $100/mo.