TORONTO CONDO FORECAST

By Nate Hendley

Urbanation, which describes itself as "Canada's leading condominium market research company" recently released a market overview of condo sales in the Toronto Census Metropolitan Area (CMA). The study pegged new and resale condominium sales at 37,041 in 2010—only three percent lower than the 2007 record of 38,306 sales.

Urbanation also forecasts that 15,000 – 17,000 new condo units will be launched in the Toronto CMA during 2011, with 16,000 sales.

Studio Toronto interviewed Ben Myers, executive vice-president and editor of Urbanation for more details.

Q. Condo sales in the Toronto CMA reached a near-record high in 2010. What's driving this surge?

A. New investors are buying units in droves to rent them out because we're not building a lot of new rental buildings and we're still getting plenty of immigration. Then, there are first-time buyers. People realize the benefit of getting into real estate as soon as possible. With interest rates low and units small, they're able to purchase. We see also single women getting into the market more than they ever have before.

Q. Is the trend towards strong sales going to continue into 2011 or are we going to hit a slump very soon?

A. I don't think we'll hit a slump. If we have a slow-down it's going to be more gradual, it won't be a drop off a cliff. I think people realize the benefit of owning over renting if you're going to be there for any significant period of time.

Investors are still purchasing even though prices keep going up. People keep looking and saying, 'Oh, is this the point where investors are going to drop off?' because they're not going to get the returns that they want. Every time we think that's going to happen we have another quarter where we had 6,000 sales and that's what happened in Q4 2010 in the new condo market. It doesn't seem like anything can slow [the condo market] down.

Q. What's the average price people are paying for new condos?

A. In the new market we track … the sold price per square foot (psf) and the unsold price per square foot (psf). The sold price per square foot basically takes into account projects over the course of their life, as long as they are still active in the market. That's about $471 per square foot in the Toronto CMA area. The unsold is basically the average of all the unsold units in the Toronto market and that was $530 per square foot in the Toronto CMA at the end of the fourth quarter 2010.

Q. What parts of the Toronto CMA have the most new condo developments and strongest sales?

A. Certainly, the downtown core is always very strong, but North York city centre has been very strong too. Even the Etobicoke waterfront is doing very well. I think people see the value of having a waterfront view even if it isn't downtown.

Q. What neighbourhoods are going to be hot in the next year or two?

A. I always keep my eye on the downtown east. There seems to be a pretty big gap between Parliament Street and the DVP (Don Valley Parkway) where there's not a lot of activity. I think that's an area where developers are going to look now that we have the West Don Lands getting a little built up.

Q. What kind of condos are doing well in this market?

A. Smaller suites, as in, 500 square feet … 500 to 600 square feet is kind of the unit investors look at because they can find easier rents. First-time buyers [also like them] because those are the ones that are affordable. Developers aren't building as many large units now.

Q. Are there any particular developments you're keeping an eye on?

A. We put out a list of the top sellers from 2010. One Bloor was the best selling site in 2010, with somewhere in the neighbourhood of 550 sales.

Q. Anything that isn't doing well on the market? Anything you've noticed over the last year or so that's fizzling?

A. We did mention in our January press release, there's a kind of flatness overall in the resale market. It was at $374 per square foot in Q4 2010 and that's only up from $369 per square foot overall in Q1.

Q. Are you seeing more seniors getting into condos?

A. I don't think so. Everyone's kind of waiting for this with the baby boomers, but we certainly haven't seen that in droves. A lot of the buildings are aimed at first-time buyers in the investor market because that's what's selling. As a senior, you may not necessarily want to be living in a building that's 40 – 50 percent rented with a whole bunch of students. You'll want more of a boutique style in a quieter neighbourhood with larger suites and those just aren't getting built right now, certainly not in the former City of Toronto. There's a few being built in the suburbs, but if you're used to living in Toronto all your life you may not want to move to Aurora.

Q. Is there a demographic of the typical condo buyer in the Toronto CMA?

A. The typical condo buyer is either a young single or a couple … first-time buyers and move-up buyers.

Q. Are any new demographics emerging?

A. I think the new demographics probably came out five years ago where we started to see what we call "marriage casualties". Lots of divorcées buying units for themselves and single women getting into the market.

[In the past] a lot of families would buy a condominium unit as a first time purchase. They would get some appreciation for [the unit] then buy a house. But now we're seeing people buying the smaller unit—500 to 600 square feet—then they move up to a 700 to 800 square foot unit and then potentially even buy a third unit as opposed to going out to buy a house. That's certainly a change from where we were 10 years ago.

Q. Are there any upcoming projects we should keep an eye on?

A. The spot to watch is Waterfront Toronto's waterfront projects. I think that's going to totally change the city … You've obviously seen the Corus building being built. It's completed now. Great Gulf is going to launch a condominium tower—the first residential down there. I think that's going to be a fantastic transition down there. They've looked at other cities [to see] what works and what doesn't. [They want commercial space at ground level] and I think that will really drive it as opposed to other areas where we've had giant patches of land that we've put a bunch of towers up and there's no life at the bottom—people just going to work and coming back. This is actually going to be an area where people stay, 24/7.

Q. Final question. What are your thoughts for this year?

A. I'm a little more bullish than some people out there. I think it's going to be a good 2011.

Market Update

Good Start to 2011

February 4, 2011 -- Greater Toronto REALTORS® reported 4,337 transactions through the TorontoMLS® system in January 2011. This result was 13 per cent lower than the record result reported in January 2010.

"While off the record pace experienced a year ago, the GTA resale market has started the year on a solid footing. Home buyers in Toronto and surrounding areas continue to benefit from a diversity of housing types for sale at many different price points," said TREB President Bill Johnston.

The average selling price for January 2011 sales was $427,037, representing an increase of over four per cent compared to the average of $409,058 reported in January 2010.

"The average selling price is expected to grow at a moderate pace in 2011. Growth rates in the three to five per cent range will be sustainable from an affordability perspective," said Jason Mercer, TREB's Senior Manager of Market Analysis.

Median Price
In January, the median price was $360,000, from the $350,000 recorded during January of 2010.

Housing market will be stable next two years: RBC

A stronger economy will offset the effects of higher mortgage rates and keep Canadian house prices stable over the next two years, according to the Royal Bank of Canada.
In a market update that has the bank forecasting price gains of 0.5 percent in 2011 and 1.3 percent in 2012, economist Robert Hogue said that after two years of "gyrating wildly," the Canadian housing market is likely to be a much less interesting place for the next several years.
"Going forward, we see nearly perfectly offsetting forces driving Canada's housing market," he said. "On the upside, the economic recovery will gather strength in 2011, continuing to boost employment and family incomes. On the downside, interest rates are expected to rise."
The Bank of Canada will likely raise interest rates by 100 basis points this year and another 150 basis points in 2012, he said, making mortgage payments more expensive for the majority of homeowners. But real gross domestic product is expected to increase to 3.2 percent in 2011 from 2.9 percent in 2010.
"The net effect of these forces is expected to be close to nil, thereby leaving resale activity largely flat," he said.
There have been a flurry of forecasts issued in the last week, as the market starts the year stronger than expected. Capital Economics issued a cautious report that suggested higher interest rates could drive prices down as much as 25 percent over the next three years, while the Canadian Real Estate Association raised its sales forecast for the next two years as it suggested that a stronger economic recovery and continued low interest rates would keep the market balanced.
"Even though mortgage rates are expected to rise later this year, they will still be within short reach of current levels and remain supportive for housing market activity," CREA chief economist Gregory Klump said. "Strengthening economic fundamentals will keep the housing market in balance, which will keep prices stable."
Capital Economics economist David Madani said too many optimistic forecasts are based on too short a time frame to be useful, because many mortgages won't reset until rates rise much higher than they are today.
"Let's balance this discussion a bit and think longer term," he said in a recent interview. "As far as housing prices are concerned, we think they're overvalued and we don't see income growth closing that gap."

National resale housing activity in December 2010

Resale housing market solid in December

by mcherun

OTTAWA – January 14th, 2011 – National resale housing activity in December 2010 was slightly above average for the month of December, according to statistics released today by The Canadian Real Estate Association (CREA).
Actual (not seasonally adjusted) national sales activity via the Multiple Listing Service^® (MLS^®) Systems of Canadian real estate Boards was down 14.4 per cent on a year-over-year basis in December 2010, which reflects record level sales for the month of December in 2009.  Activity in December 2010 ran slightly ahead of the ten year average for the month (Exhibit 1).
The national trend for monthly sales remained stable in December, with seasonally adjusted sales activity having edged down by less than a percentage point from the previous month.  Led by Calgary, Winnipeg, and Hamilton-Burlington, seasonally adjusted sales activity was up month-to-month in half of local markets. Toronto, Vancouver, and Montreal were among the markets that posted a small month-over-month decline in December.
"Overall sales activity has improved in recent months, but the upturn has been uneven among local markets," said Georges Pahud, CREA President. "Housing market trends often differ due to a number of local factors, so buyers and sellers should consult their local REALTOR^® to understand how trends are shaping up in their market."
National home sales activity improved steadily over the second half of 2010, with seasonally adjusted sales up 18.3 per cent in December compared to the recent low reached in July. As a result, seasonally adjusted activity in the fourth quarter of 2010 rose 12.1 per cent from third quarter levels, and was up less than a percentage point compared to second quarter activity.
"The hand off to 2011 for sales activity in the fourth quarter suggests that the continuation of low interest rates will further support the housing market," said Gregory Klump, CREA's Chief Economist. "Sales may be starting to plateau in some of Canada's most active and expensive housing markets.  Combined with a pickup in new listings and further interest rate increases, the stage is being set for smaller price gains and a further deceleration in the growth of mortgage debt."
Some 447,010 homes traded hands over Canadian MLS^® Systems in 2010, down 3.9 per cent from 2009. Annual sales activity was higher than CREA had forecast previously due to stronger than projected sales activity in the fourth quarter.
The number of new residential listings on Canadian MLS^® Systems held steady in December, rising by less than one percentage point on a seasonally adjusted basis. New listings remain 14.2 per cent below the recent peak reached in April 2010.
The housing market remained in balanced territory on a national basis in December, with sales as a percentage of new listings amounting to 55.2 per cent. Just over half of local markets in Canada were in balanced territory in December.
Three-quarters of the remaining local markets are sellers' markets.  "With activity having returned to healthy levels and a firm floor under prices, many sellers who shied away from the market heading into the summer are expected to list their properties heading into the spring," said Klump. "Sales in the months ahead are not expected to continue trending upward as steeply as they have in recent months, so an increase in new listings may return many sellers markets to balanced territory."
The number of months of inventory represents the number of months it would take to sell current inventories at the current rate of sales activity, and can be used to gauge the balance between housing supply and demand. The seasonally adjusted number of months of inventory stood at 5.8 months at the end of December on a national basis. This was unchanged from November, and remains 1.4 months below where it was in July. The number of months of inventory in December rose compared to November levels in British Columbia, Saskatchewan, Quebec, New Brunswick and Nova Scotia, and was down from the previous month in Alberta, Manitoba, Ontario and Prince Edward Island.
The national average price for homes sold in December 2010 was $344,551, up two per cent from the same month last year, and stable compared to average price in October and November. About 60 per cent of local markets recorded year-over-year gains in December. Average price was down on a year-over-year basis in 30 per cent of local markets, and remained stable in the remainder.
The annual average price for homes sold via Canadian MLS^® Systems rose 5.8 per cent to $339,030.  Much of the increase reflects compositional factors within and across housing markets that caused average price to be skewed downward in 2009.
PLEASE NOTE: The information contained in this news release combines both major market and national MLS^® sales information from the previous month.
CREA cautions that average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighborhoods or account for price differential between geographic areas. Statistical information contained in this report includes all housing types.
MLS^® is a co-operative marketing system used only by Canada's real estate Boards to ensure maximum exposure of properties listed for sale.
The Canadian Real Estate Association (CREA) is one of Canada's largest single-industry trade associations, representing more than 100,000 REALTORS^® working through more than 100 real estate Boards and Associations.