TORONTO CONDO MONTHLY NEWSLETTER

TORONTO CONDO REPORT FOR 2010

TORNTO CONDO Forcasters Review

Most Forecasters never look back - that's because they don't want you to look at their 'near' misses. Our 2009 Forecast called for more sales than in 2008 (and we told you that would happen in the second half of the year)! Everyone else predicted sales at 2001 levels (a big time recession). Who was right? We also recommend that you review our ten year forecast made in 2007 whereby we said condo prices would double and the long term trend would be upwards with some pauses but not corrections along the way!

WHAT TO LOOK FOR IN 2011

First we believe that Toronto real estate in 2011 will be ‘steady’ and decidedly unexciting for those who want wild swings in prices and sales volumes. Mortgage rates will fluctuate in a narrow band. Governments heading into elections are unlikely to announce more taxes for consumers, and the economy will slowly gain strength in the Toronto Region which will mean both reported ( and the growing unreported) incomes will be higher. Power of Sale or Foreclosure sales will be minimal (unlike the U.S.) hence there will be no downward pressure on prices.

What makes the downtown condo market unique is that there are really two components: the resale market and the pre-construction market. The resale market is dominated by end users. The pre-construction market is almost entirely investor driven. Over the past year, the investor mix has switched to mainly ‘all cash’ buyers from Asia and the Middle East.

Downtown condo prices are still relatively cheap versus other areas of Canada and other major cities in the world. On the other hand, condo rentals rates are currently too low to attract certain investor types to the pre-construction market. This will lead to a levelling off on pre-construction prices and a spill over into the resale market which historically is $50-100 per sqft lower than pre-construction.

WHAT TO EXPECT IN 2011

1) Toronto resale volumes will be the same as in 2010. Prices will increase by 5%. The best time for buyers will be in the first quarter of this year. Most experts will not recognize the strength of the real estate market until the third quarter.

2) The downtown condo market will see sales increasing by 10% and prices up by 3-5%. Condo rental rates will increase by $100 per month on average. The current vacancy rate for rental condos is under 1% and for apartments it is about 2%. Condos are renting in 10-15 days on average. Expect that trend to continue.

3) Bigger condo units are now selling at the same price per sqft as smaller ones. Going forward, two bedroom plus units will sell for more per sqft than one bedroom units.

4) More and more units will be sold by Assignment rather than resale as investors of pre-construction units opt to sell rather than to rent out their units.

5) Until rental rates increase, the price of pre-construction condos downtown will stall at $700 per sqft. The ceiling for resale units appears to be $600 per sqft. Both markets are very active in the $500-550 per sqft range.

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