Toronto Condo Market

Toronto Condo Market

 

A Couple of days ago I decided to join in on a webinar which was hosted by Baker real estate.  Baker represents many of the developers of Toronto condos in terms of their sales.  Barbara Lawlor and Jeff Clark were conducting the webinar and I thought many of the points they made were worth reporting.  They started with a review of the sales history for 2012 for the condo sector as well as a prediction of what they thought was going to happen for the 2013 year. 

Here are some of the highlights:

  • They talked a lot about how people choose Toronto condos because their decisions are based upon lifestyle choices or investment choices.
  • Jeff Clark reported the sales for the low rise versus high-rise for 2012 as follows: low rise sales were 14,069 and high-rise sales were 18,755 for total sales in the GTA of 32,824. They pointed out as you can see here clearly that high-rise sales have now surpassed low rise.  
  • Then went on to describe remaining inventory in the GTA: low rise there are 7,524 units; high-rise there are 20,998 units for a total of 28,522 units.   
  • Further they went on to discuss how many months of active supply inventory we have. In the low rise sector we have 6.4 months and in high-rise we have 13.4 months on hand. When averaged out it came to 10.4 months which is less inventory that we’ve had the last couple of years. 
  •  The last thing they discussed was the index price. The low rise index price was $632,868 and the high-rise was $436k.  Commenting on the widening in the high-rise to the low rise market pricing, they pointed out that the high-rise has become the only affordable product for many buyers.

In 2012 the new home sales looked like this: Toronto condos represented 51% of the sales and detached homes represented 26% of the sales. Why are condos becoming so much more popular? Well there are many reasons;  a lot of it has to do with affordability and then of course are the lifestyle choices for the young people as they lead very busy lifestyles and perhaps don’t have time for all the maintenance issues that a house entails; as well, condominiums provide a great sense of community and security.

What are people buying when they are buying Toronto condos? The number one choice remains one bedroom and dens (1+1) and this choice clearly dominates by a large margin.  Investors particularly like them because they can often rent the unit as a two bedroom solution which would appeal greatly to students. The second most popular choice is the one-bedroom unit, followed by the two bedroom units.

 

 The part I found most interesting was that there is little demand for studios in relation to a far greater demand for efficient junior one-bedrooms.   Each development is mandated by the city to provide 10% of their units in a three bedroom unit type. At present there is not a great demand for these three bedroom units but probably as the years go on and affordability becomes more of an issue families will turn to 3 bedroom units as a feasible choice.

 

 

Jeff Clark went on to say there are some strong market fundamentals for 2013 as we have 237 new high-rise builds under construction which represents 60,713 new units. Another surprising statistic to know is that as of December 31, 2012, 88% of all those units were sold. 

 

They pointed out that if the housing needs keep pace with our population growth, then housing supply is not keeping pace with this current growth.

 

The numbers they used were 120,000 newcomers in 2012 likening it to the population of a city like Fredericton, N.B.  However I am not sure that this is accurate; I believe I have read that the immigration into Toronto is decreasing since immigration policies are changing and tightening up. However there is an increase of foreign students coming to this city for various studies.

 

The government mandates referred to earlier have to do with intensification promotion which will be vertical and not urban sprawl. Condos will become the first and only affordable units for the first-time buyer, empty-nesters will also be gravitating toward condominiums and retirees will also of necessity gravitate to one level living.

 

Barbara Lawlor, president of Baker, went on to describe that that Canada is the most urbanized country in the world, 30% ahead of the United States and just ahead of Australia.

 

Predictions for bank interest rates for 2013 are that interest rates will remain low for the foreseeable future.

 

There will be decreased rental stock. As a matter of fact we have not seen low vacancy rates like this for several years. We’re down to 1.7% vacancy rate in Toronto and thus for the investor it sounds like a great time to buy real estate in Toronto.  It’s actually been my own experience in downtown Toronto that there are multiple offers on well priced and well located downtown rental condo properties. There were actually more condos rented in 2012 then there were resales, marginally but true. Also, 2012 saw an increase in the monthly rent market values.

 

Lastly, Barbara Lawlor went on to compare the returns of the Toronto Stock exchange against condo returns: since 2007, the TSX has gone up 8.8% while condominiums have gone up 50% in price. In the short recession of 2008 there was a loss of one third of the value of stock prices on the Toronto Stock exchange while the worst loss in condos was 4.6% giving you another measure as to why it’s a good idea to invest in condos (real estate), as in the near term it has outperformed most stocks.

 

Once again, for the fifth year in a row, Canada’s banks have been rated as the most sound in the entire world.

 

There are many new Toronto condo projects coming to the market this spring, putting further demands on the construction industry to keep up.

An interesting question was posed but no stats seem available: where are the investors coming from? Which countries?  She knew for example that in Miami market the buyers were coming from the Spanish-speaking countries of Cuba, Latin America and Mexico.  Canada is culturally diverse and has buyers from many different countries was as best she could answer.  

 

So in summary it sounds to me like as far as Baker Realty is concerned it’s going to be another great year for Toronto condos in 2013. A Milborne representative was in our office on Monday and essentially did the same sort of presentation stating that it is not as bad as what you read in the papers and that there are great incentives out there and there are still lots of buyers whether it’s end-users or investors.

 

Hmm…..

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