Carolyn Ireland – The Globe and Mail

Anecdotally, we’ve been hearing how strongly sales of condo units in Toronto bounced back in the first quarter of 2014. Investors swarmed some condo sales centres as soon as new projects were launched. In the resale market, some sellers were choosing among competing buyers for the first time in a long while.

Comment: It was never anecdotal, there were all sorts of stats to back it up. On April 15th we got the TREB stats showing resale condo sales had risen 9% in Q1 2014 over Q1 last year. Prices were up 5.6% during the same period. The day after, RealNet released stats showing new condo sales were up 68% from Q1 2013, and up 35% over the 10-year average. And there were data released in each of the first 3 months of the year showing rising sales and prices. It was never a secret… but the media kept repeating that Toronto condo sales were in the toilet. I found it very odd myself, as all the information was out there.

Data this week from Urbanation Inc. puts some numbers to the rebound: The market research firm says sales of new condo units soared 88% to 5,140 in the first quarter, compared with the 2,728 sold in the first quarter of 2013.

Urbanation senior-vice president Shaun Hildebrand cautions that the jump in sales is off of a particularly depressed level in 2012. He finds it more meaningful to look at the five-year average for first-quarter sales. In that comparison, the 2014 number is 5% higher than the five-year average.

Comment: Regardless how you look at it condo sales have risen 5%, 9%, 35%, 68% or even 88% – but each measure shows and increase, that is what is most important.

“It’s sort of a rebalancing of the market,” says Mr. Hildebrand.

When Mr. Hildebrand talks about the new condo market, his data encompasses projects that haven’t broken ground yet all the way to those that are move-in ready but still have units sitting in the builder’s inventory.

Comment: It is just sales, but how complete the units that sell are is inconsequential. Pre-construction sales or inventory sales, it doesn’t matter.

The new condo market had a lot of momentum all the way through 2011 and into 2012, before that year ended in a slump following the tightening of mortgage-lending rules. Many developers put projects on ice in 2013.

“The market has been very volatile over the last four years,” says Mr. Hildebrand.

Comment: Probably 7 years of crazy, if we include 2014. Annual new condo sales have bounced from 899 to 5,372 during that period. Quite a wide range!

But many investors felt renewed optimism in the opening months of 2014, says the analyst – partly because a robust resale market has helped to create an overall sense of stability. The mood was so buoyant that some openings were pulled forward from their scheduled launch in the spring.

Comment: And the demand for condos rose as house prices rose out of reach for many, while inventory fell and fell. That pushed many into buying condos, as well as wanting to rent them – increasing demand for condo overall.

“I think that a lot of people were expecting something terribly bad to happen in the market in 2013,” says Mr. Hildebrand.

Comment: And they were wrong. As usual.

Meanwhile, lots of developers were offering enticing incentives. Some reduced deposits, some did away with assignment fees, while others offered up to $30,000 cash back on a sale. Some builders capped the development levies that can be passed on to unit-holders at closing.

Comment: Nothing new, developers have been offering incentives for years. I bought my first place in 1999 and the builder offered us money off, upgraded bathroom, reduced closing costs and more.

Mr. Hildebrand points to new projects such as Core Condos on Shuter Street and YC Condos on Yonge Street, which both reported strong sales very early in the year. That success encouraged other builders, he says.

“Really, developers are quick to respond to changes in the market that they see.”

For the most part, investors continue to do the bulk of the buying in the new condo market, says the analyst, who adds that they favour central locations and buildings along transit lines or on well-known streets.

Comment: There is no data to support that conclusion whatsoever. Best estimates as to investor buying put the share at 25%, using actual numbers and not just pulling numbers out of the air. There are about 2,300 condos in the GTA, which means a good 500,000 actual condos. There were 5,033 condos rented through MLS in Q1, so maybe 20,000 annually. Which means 4% of existing condos rent out each year. Hard to extrapolate that to a majority of condo sales being to investors.

He estimates that prices in the new condo market have retreated to approximately the level of two years ago.

Comment: Everything I have seen shows condo prices rising, or staying somewhat flat. But I have not seen any data that shows prices falling.

At the same time, the overall resale market was blazingly hot in the opening months of 2014. In the 416 area code, the average price for a detached house in April hit $965,670 for a 13.2% jump from April, 2013. The average semi jumped an even more eye-popping 18% in the same period to $702,332 from April of 2013. The average price for a resale condo unit in April was $384,758, which was a slim 1.8% increase from April of 2013.

Comment: But resale condo prices rose 5.6% through Q1, a better measure, as it is 3 months and not just one. Even so, that is 4 months with rising prices – not dropping.

Mr. Hildebrand says Urbanation data backs up the anecdotal tales from real estate agents who say that many buyers priced out of the single-family home market are turning to two- and three-bedroom condos instead. Prices of resale condos had slipped during 2013 and that made the prices of older units even more attractive compared with single-family dwellings and shiny new condos.

Indeed, says Mr. Hildebrand, the fastest-growing segment of resale condos in the first quarter was in buildings registered before 1990.

Lots of empty nesters are moving out of their large houses and into condos, says Mr. Hildebrand. In many cases they prefer the diversity and space available in the established buildings.

Comment: No, that is part of the problem. Too many empty nesters are not moving, they are staying in their family homes. That is part of the problem leading to fewer houses for sale.

—————————————————————————————————–
Contact Laurin Jeffrey for more information – 416-388-1960

Laurin Jeffrey is a Toronto real estate agent with Century 21 Regal Realty.
He did not write these articles, he just reproduces them here for people who
are interested in Toronto real estate. He does not work for any builders.
—————————————————————————————————–