We are in the midst of a global financial crisis. People are naturally concerned about their jobs, their finances, their investments, and of course – REAL ESTATE. I am getting asked constantly by friends, family, and clients:
How is the market? Are prices coming down? Is the Condo Market Crashing?
I’m not an economist or any sort of a pundit, but I do want to share with my readers a few interesting statistics on the DOWNTOWN CONDO MARKET. I don’t want to talk about the GTA numbers, or even the City of Toronto numbers. These have been well publicized over the last 24 hours in every major media outlet. They aren’t good. Sales are down 35% and prices are down 10% (GTA wide). I work downtown, I live downtown, if you are reading this you are probably only interested in downtown real estate, so let’s talk downtown condos and see what we can find out about the market.
I get plenty of visitors to my website every week who are doing Google searches for things like “Condo Market Crash Toronto 2008“. The media is overloading us with messages that the real estate market is crashing all over Canada and the Condo market is going to be hit hardest because after all, there are far too many condos in Toronto, right?
Sorry to disappoint you, but the numbers just do not support this – yet. What I’m going to share with you will probably surprise you given the constant barrage of media headlines saying the sky is falling on the condo market.
The truth is that prices of condos in both C01 (downtown west) and C08 (downtown east) are actually UP compared to October 2007.
- Average price of a condo in C01 in Oct 2007 was $334,127 versus $346,344 in Oct 2008.This represents a 3.6% increase.
- Average price of a condo in C08 in Oct 2007 was $326,466 versus $339,100 in Oct 2008. This represents a 3.9% increase.
BUT – most interesting, these price increases are happening in spite of the fact that the number of sales are down significantly…
- Number of condo sales in C01 in Oct 2008 was 184 versus 287 in Oct 2007 – a decrease of 36%.
- Number of condo sales in C08 in Oct 2008 was 94 versus 120 in Oct 2007 – a decrease of 22%.
…and the number of listings have absolutely soared compared to a year ago.
- Active condo listings in C01 are up from 454 to 793 – an increase of 54% in 2008 versus 2007.
- Active condo listings in C08 are up from 147 to 313 – an increase of 113% in 2008 versus 2007.
So what does all this mean?
- For Buyers – if you are looking to pick up a downtown condo at pennies on the dollar you’re out of luck. But the soaring inventory levels can’t be ignored. There will be downward pressure on prices as we enter the traditional ‘slow season’ in real estate – November, December, and January.
- For Sellers – well priced listings can expect to take at least 1 month to sell. Over priced properties simply will not sell in this market – especially as we approach the slow months. Please don’t make the mistake of over-pricing your property!
- For Investors – be patient. Watch the market carefully and you will be rewarded. As Warren Buffet says, buy fear and sell greed. I think we will see some fear this winter in the resale condo market.
Click on the icon below to download a PDF file with all these stats and a couple of charts. I always appreciate your feedback and thoughts. Send me an email or leave a comment.
Oct 2008 Downtown Condo Stats
11.07.08 at 12:07 pm
Michelle Powell
Great article Andrew and thanks.
11.08.08 at 12:14 am
Jack
Great post – excellent analysis of the current real estate situation in Toronto. I’ve linked to this post on http://www.canadarealestategateway.com.
11.08.08 at 9:59 am
cecile
good going andrew!!!!!!!!!!!!!!!!!!!
11.09.08 at 12:58 am
Phil McArthur
Thanks for this article…it provides good guidance, we own three condos in downtown and we do not plan to sell any…but always good to know the direction of the market.
11.10.08 at 10:49 am
Toronto Bear
I guess it depends on what your definition of “crashing” is.
What actually surprises me is that you haven’t noticed the trend that has happened (and is happening) in real estate markets across the globe.
A “crash” occurs in several stages.
1. Bubble-like price increases are tempered
2. Realtor spin: Buy now or be priced out forever
3. Sales begin to drop as demand drops (due to lack of affordability, etc)
4. Inventory begins to climb
5. Realtor spin: This is temporary lull….buy now or be priced out forever.
6. Prices stagnate
7. Inventory climbs higher still
8. Realtor spin: This is the best time to buy a house.
8. Prices begin to fall slowly
7. Mainsteam media picks up on trends
8. Realtor spin: This is a self-inflicted problem due to “negative” reporting by the media. (note, no problem with hyping by the media on the way up)
9. Economy worsens, lending tightens, and panic sets in.
10. Prices begin rapid price depreciation
11. Realtor spin: “People always need a place to live…why throw your money away on rent”. LOL!
Seriously dude, you are right in that all markets are local….even the downtown core of T.O. But the trends are more or less identical from hicktown, tennessee to San Diego California. Toronto is crashing, make no mistake.
To the person who owns 3 downtown condos…prepare to lose a lot of money. I have no sympathy for you since you speculators are the reason home prices are unaffordable for the masses. Only suckers would buy now. We sold our place 6 months ago and will rent until the bloodbath is over, probably 2 years from now.
11.10.08 at 10:51 am
Toronto Bear
haha, oops it appears i can’t count….a few points i moved around and added new ones, LOL! i should pay closer attention…anyway, you get the point! LOL!
11.10.08 at 10:55 am
Toronto Bear
By the way, Andrew, I do like your site. I may disagree with your interpretation of the numbers, but nonetheless I always admire people who put the numbers out there for the people to see.
I have a question for you….do you know of any source where we might locate the average price per square foot for the GTA, metro-toronto, and downtown toronto condos over the past 5-10 years.
one thing i noticed about TO compared to other RE markets is that the price increases have been somewhat more moderate over the last couple of years, say compared to calgary, saskatoon, etc. One thing I was thinking was that in the downtown core especially, the prices have not gone up as much b/c the sizes of the places being built are so much smaller….but my hunch is that the price per square foot has really skyrocketed over the last 5 years…..I just can’t seem to find any data to support or disprove that hypothesis.
cheers
11.10.08 at 3:29 pm
Andrew la Fleur
Hey T-Bear (can I call you T-Bear?), thanks for the comments.
You sold 6-months ago and you are planning on renting for a couple years – Now that is what I call putting your money where your mouth is!
Good questions about the price per square foot issue. There is no reliable public source for that info in the resale market. There are some industry groups who track this stat in the new-construction market like Urbanation, but they don’t release their reports to the public and as far as I know, you can’t even buy them unless you are in the development industry directly.
You’re right though, the price increases have been very moderate over the past 5 years in the downtown condo market. With the exception of 2007, almost like clockwork prices have been moving at around 5-6% per year. [Side note: not exactly the stuff that usually makes for a monumental 'crash'] Could nominal prices be increasing slowly while the price per square foot is increasing exponentially? Possibly. If I had some data on that it would certainly make for an interesting post.
11.10.08 at 10:44 pm
Truth or Talk
T-Bear,
That’s definitely the case. Condos are getting smaller relative to prices.But it’s impossible to get the data. The average figures are misleading. FYI – A friend of mine bought her 425 sq ft condo 2 1/2 years ago is liberty village for $135k – no parking – she sold it in April 08 – at $205k. cheers
11.14.08 at 9:34 pm
Bri-guy
Oh…it’s crashing. One building has 26 available units! You also see empty condos…the owners have moved out…and the couldn’t sell.
My real estate lawyer said he was closing 30-40 condos per month. In October, he closed 9. Sales way down and a barometer for the market.
That’s all.
11.16.08 at 11:08 pm
Shingi
Hi Andrew,
First and foremost, great site and I commend your factual argument. I think you did miss one thing though. You said
“prices of condos in both C01 (downtown west) and C08 (downtown east) are actually UP compared to October 2007.”
and then you said,
“the number of sales are down significantly…”
and finally
“number of listings have absolutely soared”
What this indicates to me is that we have a market in which price is rising on low volume indicating that demand is pulling back while supply is increasing rapidly. This is the very definition of a market that is topping which paves the way for declining prices. Therefore while I would not go so far as to say that the Toronto condo market will crash, all indications do point toward lower prices.
11.16.08 at 11:32 pm
Andrew la Fleur
Shingi,
Thanks for the comment. I think you and I are saying the exact same thing. Prices are up, sales are down, inventory is up. i.e. Change is coming.
11.21.08 at 9:02 am
soccermom50
Hi: We are originally from Toronto living in the States. We have had enough of the US and want to get back to T.O — seems like the Cdn $ is now decent– and we are one of those vultures waiting for the shoe to drop there before we move in. I was thinking of next October as our target scouting period since the Cdn bank woes will become clear by then– who knows may be one or two of the big 5 may go under. Do you think next October would be a good time right after the summer season when sales have been depressed–also its seems that the current projects will add some more inventory–etc. etc. Is there an indicator of the inventory levels and days on the market that will indicate a total crash like in 1991?
11.21.08 at 4:42 pm
Andrew la Fleur
Hi Soccermom. With the cdn dollar where it is, yes, it would be a great time for you. buying properties at 80 cents on the dollar sounds like a good investment to me!
11.23.08 at 12:40 pm
Philip Tallian
I’ve actually bought two months ago an investment condo downtown and rent it right away at a break-even monthly rent value. The tenants did not blink when I’ve asked for $1,650/mo for a 1 bdr + den at 800 sq ft. Now I am buying another two units by the end of the year. I don’t feel like downtown market will feel a significant correction in 2009 like the one experienced by US; and if it does, that’s even better for I will be able to buy another unit, maybe two. These are great times for buyers, and so great for sellers; however, I would say that downtown investments are holding their value, for instance I’ve lost at least 3-4 properties due to a multiple-offers “war”. I feel for the guys in the suburbs with houses, but south of Bloor things are not that bad.
12.05.08 at 11:22 am
Chris
The real estate agents I chat with on open house days downtown king west area look like deers caught in head lights scratching their heads wondering wtf happened. Many are thinking that its only been a few months and things are this bad, what about the future. Personally I think now is a good time to buy if you have the stomach for it, sellers are prepared to take steep discounts. Not to mentioned, coached by Agent to sell for less, in order to close the sale and keep floating. I usually don’t use an agent (use the sellers agent) to get further discounts. I can’t justify high commissions for the work done by the buyer on the internet. Not to mention agents are simply sales people offering no value added services and have little to no construction or building system knowledge. I would be nervous if my profession was a newbie agent, the old timers will likely survive having to do with less and counting on existing client base. The prices per condo being 346,344 means nothing. Price per square foot has meaning.
12.05.08 at 1:04 pm
Chris
i like to write things, then come back and read them a few times, eventually loosing interest. Andrew please comment on my comment so i can feel like my efforts have not been wasted.
Thanks and good luck! When the going gets tough, the tough gets going!
12.05.08 at 1:08 pm
Andrew la Fleur
Hey Chris,
Thanks for the comments! You’re right, the change has been very sudden and has hit most agents by surprise. I suspect a huge number of agents will not be renewing their licenses this year!
I just posted my analysis of the NOVEMBER numbers. Check it out HERE.
12.08.08 at 6:43 pm
Bibi
Hello Andrew!
Keep the posetive energy going and of course we are felling what`s going on, but Toronto is very Strong and Smart and we well find a way out.
please let us know what goes on with the market.
Remember energy flows where attention goes!
01.24.09 at 9:25 pm
believe me
people tell me that the bay street condos is worth 600sqft. but now the new condos are selling below 400sqft.
“investors” and realters are too greedy. In 2004 the price is below 300 sqft. Some bought assignment which Isaw and today are selling around or below 400. They are making more than 100% (assignment only pay 20% of total”. They are much less condo available at that time. and much better economic enviorment than today. Considering job loss in manufacturing and oil prices and US crisis which Canada rely 70% of its export. Can you believe that politician said Canada is resistant and different and without recession!!
My suggestion is the downtown core condo price will be back to around 300$ per sqft.
To be realistic, ask a condo builder. I know some assignment buyers are returning their contract purchase and are fined 20,000–. The resale condo prices are still listed very high. My speculation is that many cannot sell even cut 10 or 20%.
See what is happening if you have specific condos in buying and selling.
Crisis are the result of greedy