Tara Perkins – The Globe and Mail

The large num­ber of con­dos being built in Toronto is now curb­ing the rise in both prices and rents.

Resale prices for high-rise units in the country’s most pop­u­lous city are flat­ten­ing out after years of appre­ci­a­tion, and the degree to which monthly rents have been ris­ing has begun to slow.

The lat­est fig­ures sug­gest that the record amount of sup­ply that is com­ing on stream, as well as the impact of recent mort­gage insur­ance rule changes, is now shift­ing the bal­ance between sell­ers and buy­ers as well as own­ers and tenants.

For the first time in this lat­est quar­ter the median price of a resale condo in the Greater Toronto Area showed no sig­nif­i­cant year-over-year appre­ci­a­tion. Prices of pre-construction con­dos in the city have already been drop­ping, but this is the first time that prices of resale con­dos over the MLS sys­tem have not increased mean­ing­fully since the recession.

The aver­age resale price was $334,204 in the third quar­ter, flat com­pared with the aver­age price of $332,969 in the same quar­ter a year ago.

Com­ment: Funny, had prices gone down, they would have given the per­cent­age. That is actu­ally an increase of 1%, give or take. Not quite flat… but not quite the same as the 10%+ we saw towards the begin­ning of the year. Time for a mod­er­a­tion I say!

Resale condo prices slipped into neg­a­tive ter­ri­tory around the height of the finan­cial cri­sis in early 2009, but had been ris­ing on a year-over-year basis since then. Price growth stretched up toward nearly 20% in early 2010, and had been bounc­ing around in a range between about 2% and 10% since.

The soft­en­ing comes as the mar­ket adjusts to a new abun­dance of avail­able units. There were 488 condo sales over the MLS sys­tem between Oct. 1 and Oct. 14, the Toronto Real Estate Board said Tues­day. That’s down 18% from the same period last year. The aver­age price for the con­dos that sold this month was $356,312, down 4% from a year ago.

Com­ment: Inter­est­ing that every mea­sure is drop­ping. Fewer list­ings, fewer sales, less price increases, less rental increases and even fewer new condo sales, launches and com­ple­tions. The whole thing is slow­ing down. Which is good, it was get­ting just a LITTLE out of hand!

Mean­while, the num­ber of con­dos that were rented by way of the MLS sys­tem rose three% in the third quar­ter to 5,241. But the num­ber of con­dos listed for rent in the same period rose 18% to 8,845.

Aver­age rents rose by 3.4% for one-bedroom units, to $1,605, and 2.2% for two-bedroom units, to $2,097. But those price increases were gen­er­ally not as strong as the ones the mar­ket had seen in the past four quarters.

Com­ment: Yet there are still bid­ding wars for rentals. I just had mul­ti­ple offers on a $3,300/month unit!

“Prospec­tive renters had more units to choose from, which led to less upward pres­sure on rents,” said Jason Mer­cer, senior man­ager of mar­ket analy­sis at the Toronto Real Estate Board.

One– and two-bedroom con­dos accounted for 95% of the rental trans­ac­tions the board saw in the third quar­ter. The less-abundant three-bedroom units saw their aver­age rent rise 12.7% to $2,660.

Indus­try experts say that the demand for three-bedroom con­dos is out­pac­ing the sup­ply. Data from TheRed​Pin​.com sug­gests that just 3.2% of all of the pre-construction units under devel­op­ment in build­ings that are still mar­ket­ing are three-bedrooms, while more than 90% are one– and two-bedroom.

Com­ment: No, sup­ply is actu­ally ahead of demand for larger units. Sure, only 3.2% of all new units have 3-bedrooms, but most devel­op­ers can­not sell them. Ask any­one, the big ones are sit­ting. So even if there are some avail­able, peo­ple tend not to want them. Why would you pay $700,000 for a 3-bedroom condo that might be 1,200sf when you can buy a 3-bedroom house in Leslieville for $500–600,000 and get more room, a fin­ished base­ment, back­yard and more. With no $800/month condo fee. That is why big con­dos don’t sell.

When devel­op­ers talk about the rea­sons that they believe Toronto’s condo mar­ket can han­dle the cur­rent con­struc­tion, they often cite restric­tions on fur­ther expan­sion of the sub­urbs due to the Green­belt. But it’s not clear that con­dos are a viable alter­na­tive to sub­ur­ban liv­ing for most fam­i­lies, due to the lack of larger units.

Com­ment: What I said.

Devel­op­ers tend to favour smaller units because they tra­di­tion­ally have sold faster, are eas­ier for investors to rent, and are sub­ject to less taxes.

Com­ment: The main buy­ers of con­dos are first time buy­ers, sin­gles and investors. They mainly want small afford­able con­dos. And devel­op­ers tend to build what peo­ple buy, duh…

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Con­tact the Jef­frey Team for more infor­ma­tion – 416−388−1960

Lau­rin & Natalie Jef­frey are Toronto Real­tors with Cen­tury 21 Regal Realty.
They did not write these arti­cles, they just repro­duce them here for peo­ple
who are inter­ested in Toronto real estate. They do not work for any builders.
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