SALES COMMENTARY
July was the biggest sales month of 2020 but also the biggest sales month ever for a July according to TRREB. This is the Spring market coming late. We also expect August numbers to be strong, with a slow down coming in October. We still believe in a COVID-19 second wave coming late in the Fall. Kids going back to school will be at best, COVID spreaders and colder weather will force everyone indoors. Just look at Melbourne, Australia.
The GTA is also a tale of two markets. The low rise (mainly detached) versus condo apartments. July of 2020 saw a 44% increase in sales of detached homes over July of last year. Compare that to condo apartments, where the increase was just 6%. Going forward, the markets will continue to diverge as shown in Table 1 below.
On the other hand, ‘active’ listings for condo apartments are over two times bigger than current sales. Inventory will get bigger and prices will start to decline in the next 30-60 days!
Even though the condo market is bigger in 416, the 905 area has slightly outperformed it. See Table 2 below.
COMPARISON BY PROPERTY TYPE.png?width=800&dpr=2&height=161 "Property Type")
Table 1 source: Toronto Real Estate Board
COMPARISON 416 VS 905 AREA CONDOS.png?width=800&dpr=2&height=160 "Condo Apartments")
Table 2: The sales-to-new listings ratio is at 47% for the 416 compared to 53% for 905. Active listings are also lower than 416 at less than two times sales in 905. While condo prices have risen faster in 905, we believe this trend will continue as the average price of condos in 416 is still $200-300 psf higher than for 905.
source: Toronto Real Estate Board
source: Toronto Real Estate Board
WHAT'S THE VALUE OF BALCONIES?
One of the primary reasons that low rise has been so popular is that people want a backyard. For people who choose not to abandon their condos, the balcony becomes their oasis during COVID-19. Most analysis of condos focus on the price per square foot of condos. Some developers try to include the balcony. But the balcony does not belong to the condo owner but instead the condo corp. The balcony is a common element with restricted usage. You can only gain access through the condo and hence only the condo owner gets to use it.But buyers do pay a premium for condos with a balcony or terrace attached. It is extremely difficult to value this difference as you must look at a building with units that have and do not have balconies. We examined sales in 77 Harbour Square on the Waterfront which has both. You need to compare units of the same size and floor level. More challenging, you must get sales at approximately the same time to avoid market differences. We examined sale of one-bedroom units with parking on high floors. We focused on 2019 because we got the most sales.
When we adjust for size, the price difference between the units is $42,000. The balcony in question is 83 sf, which works out to a premium of just under $500 psf. Most balconies in the City are about 40 sf so the premium would be $20,000. My only advice is if you don’t have a balcony, then sell your unit in the winter!!
SALES-TO-NEW LISTINGS RATIO COMPARED TO AVERAGE ANNUAL PRICE PERCENT CHANGE IN HOME PRICE
Table 3: The graph shows that the market is slowly increasing after the pandemic. The average price annual percent change is inclining at a faster rate than the sales-to-new listings ratio.
source: Toronto Real Estate Board
Table 3: The graph shows that the market is slowly increasing after the pandemic. The average price annual percent change is inclining at a faster rate than the sales-to-new listings ratio.
source: Toronto Real Estate Board