Rising Development Charges and Land Costs Are Only Part Of The Toronto Condominium Picture

This weekend, George Carras wrote an article in the Toronto Star entitled 'If you think condo prices are high now, fasten your seatbelt'. It's a great article that, rightly so, predicts prices will rise for the new condo sector, not just based on immigration factors or low interest rates but on two hard and ultimately predictable facts. The first is that land is getting more scarce. Perhaps you heard the famous expression ' buy land, they aren't making any more of it'! Simple economics say that the more people want something the more expensive it gets. The second,  is that if there is one thing the city is great at it's finding more places to increase taxes or service charges. In the case of building condos, it's the dreaded development fee. 

I thought it would be interesting to add some information on the existing stock of condos and what is going on with the condo resale market. I've been tracking condo sales for the last few years concentrating, for the most part, in my trading area, old Toronto (aka the 416),  401 to the lake east to Vic Park and West to Kipling.

Unless you are right in the middle of it, it may surprise you that the condo sector in Toronto is seeing unprecedented price growth. Prices for resale condos are as high as they have ever been and, like its freehold brother (or sister), demand is very strong and supply is low. Consider that at the end of August 2015 there were 620 new condo listings compared to this week's mere 400. That doesn't seem like much of a difference but consider the sales side. 181 sales this time last year compared to 272 this week. Tighter supply, more sales. Not only is it driving up prices but competition for those condo suites is getting tougher. I have also been keeping a close eye on the percentage of suites that are selling at or above the list price. That simple statistic is one of the best to watch and produces an interesting view of the condo market. Consider that at the tail end of August 2015 over 16.5% of all condos sold traded at or above the list price compared to a remarkable 40.1% last week. What is even more surprising is that this is the second highest percentage I have seen all year and we are supposed to be in the traditionally slower summer months.

So what is driving this growth? Certainly low interest rates and consistent immigration paint part of the picture but there is more. From a broker/manager perspective I have seem countless home buyers choosing condo living over the traditional home with a tree in the backyard because entry level homes in Toronto's core are simply getting to far out of reach. And since it is that time of year, I'm reminded of the call of the CNE carnival huckster at the wheel of fortune screaming out, 'round and round she goes, where it stops nobody knows!'.

By the way, in case you are wondering who I am....I'm the broker/manager at Bosley Real Estate located right in the middle of it all. I'm also the Past President of the Toronto Real Estate Board. This blog entry does not represent the position of either BosleyRE or TREB.