Condo Market Report - August 2021
As we previously forecasted, sales in July continued to slow from the previous month. TRREB reported 9390 sales, down 15% from July of last year and 15% from June. On the other hand, July sales were the biggest since 2016 for the month. Looking forward, we expect August sales to be even lower than July. The true test of sales activity will be in September when we are expecting sales to increase from summer levels.
With lower sales, most other markets would expect lower prices. Not in real estate. Most sellers prefer to take their listing off the market rather than reduce the price. The slow down in the current real estate market is from a lack of listing product. One of the key metrics is the ratio of sales to new listings in July. Anything above 60% is a ‘sellers’ market. We are at 75%. In fact, new listings in July were the lowest in the past 6 years.
When you look at the condo market, July sales were 8% higher than for July of last year and were down only 7% from June. The condo market, which under performed the overall market in 2020, is now outperforming the market this year. At the same time, new listings this July are down by 21% from this time a year ago. With a sale to new listing ratio of 62%, it suggests that there may be more opportunities for buyers in this segment.
The downtown condo market has also rebounded along with the overall condo market. Sales are 10% higher than a year ago and the sale to new list ratio has improved to 59%. More significantly, active listings in 2021 are now down over 35% from a year ago. Inventory is shrinking quickly as people are preparing to return to living downtown, and those who have moved out of town need some sort of accommodation if their employer wants them to work out of the office.
SALES-TO-NEW LISTINGS RATIO COMPARED TO AVERAGE ANNUAL PRICE PER CENT CHANGE IN HOME PRICE
RESALE VERSUS NEW / PRE-CONSTRUCTION CONDOS
Most of our commentary is focused on the resale market with stats from TRREB. Many buyers prefer the new condo market. They like the fact that deposits can be staged, and you do not have to take delivery of the unit for 4-5 years with the hope that prices will continue to increase over the period.
The challenge for buyers is determine an acceptable premium for new. Historically the premium or gap was between $25 (a bargain) and $100 psf. In 2020, developers were trying to sell at $1400 psf when resale was under $1,000. Recently, resale prices have increased by 10-15%. Developers have moved to cheaper locations i.e., not a subway stop or a 10-minute walk to downtown in the 416. They also moved aggressively into the 905 area and over 50% of all new sales are taking place in this area. The result of these decisions is that New sales in the Second Quarter at 9,000 units were the third highest Quarter on record. The Table below compares the price premium between Resale and New.
1. 33% of all condos in Toronto are in the rental pool.
2. The vacancy rate in Toronto is 1.7% (versus 905 at .8%). Unchanged this year.
3. We can tell you that multiple offers for rentals are already appearing as we await the September market. For tenants, it is not just who will pay the highest rent but more importantly, who is the safest credit risk for landlords.
Most units in Humber Bay Shores include parking which is not found in smaller units downtown. Also, Humber Bay units tend to be slightly larger.