When market really started to get hot sometime in mid-2007, and pre-construction condos became the thing everyone and their mom were investing in, this long-held rule was abandoned. Prices of pre-construction started to reach heights never seen in the resale market. $600 Per Square Foot was suddenly a normal rate for pre-builds, whereas resale prices were still hovering around $425 PSF.

Over the last six months, there has been a seismic shift in the resale market. Prices have escalated at about 2% per month since June 1. If you bought a condo on May 1st of this year anywhere downtown, it likely has appreciated about 12% in value. Congrats.

Prices have gone up so much and so quickly in the resale market that the value is now, incredibly, starting to once again favour pre-construction.  Resale prices in several of the ‘prime’ downtown buildings like College Park, The Hudson, The Met, 18 Yorkville, Mozo, are now routinely hitting the $550-$575 PSF range. One upper floor 1+den with parking unit at College Park recently sold for $660 PSF! With several pre-construction projects across the downtown still selling between $500-$550 PSF, it doesn’t take a genius to figure out where the best value for your investment dollar is and where it will be in the months ahead.

If you are interested in taking advantage of some hidden gems in the pre-construction market downtown, let’s talk.

Realnet has released the sales figures for new condos for the month of January. Prices are still increasing despite the fact that the number of sales continues to be significantly lower than a year ago.

Prices are up 8% for high rise condos while sales were down 64% compared to January 2008. 

The average selling price of a high rise condo was about $388,000 in January 2009, compared to $358,000 a year earlier. The number of sales however went from 508 in the City of Toronto last year to just 184 this year for the month of January.

Even though prices are still ‘going up’ the writing is on the wall and this trend cannot continue indefinitely for new condos. We saw this in the resale market where first the number of sales dropped off, and then a few months later prices followed.  Last month prices were up 10%, this month they are only up 8%. Probably in about 2-3 months prices should statistically flatten out while in reality with the various incentives builders are now offering, prices will finally start to dip a little.

It will be very interesting to start seeing the numbers in both the resale and the new development markets for the month of February because February 1, 2008 was when the Toronto Land Transfer Tax kicked in and so we can do more of an apples to apples comparison to get a truer idea of where the market is at. 

What are your thoughts? I always appreciate your feedback. Leave me a comment below or send me an email via my contact page.

All stats from Realnet. Full report download: Realnet New Homes Market Report January 2009. **REPORT REMOVED DUE TO COPYRIGHT CLAIM BY REALNET CANADA INC.**

[**CHART REMOVED DUE TO COPYRIGHT CLAIM BY REALNET CANADA INC.**]

The final sales figures for new condos from Realnet are in for the December and the year 2008. In short, prices are still going up, while sales have dropped off significantly. [Note: these numbers are for new condos. For resale condos, see my previous posts for more stats on the downtown condo market.]In 2007, over 23,210 new condos were sold in Toronto (GTA). A record year-by a long shot. In 2008, 15,239 units were sold, representing a 34% decrease in the number of sales.

Taking a look at just the month of December, sales are down an astounding 81% year over year. In December 2007, 1024 units were sold versus 198 in December 2008 (GTA).

Yet despite the number of sales falling off a cliff, prices for the month of December year-over-year are actually up over 10% for high-rise condos. This is pretty much the exact opposite of what we have seen in the resale market where average selling prices are down about 10-11% for downtown condos. 

[**CHART REMOVED DUE TO COPYRIGHT CLAIM BY REALNET CANADA INC.**]

 

How can this be? Unsold inventory is climbing in the new condo market just as it is in the resale market. Shouldn’t the weight of all this inventory put downward pressure on prices? The answer of course is yes, but most developers are not yet facing dire circumstances where there is any need to reduce prices.

Developers have one tool in their arsenal that individual consumers in the resale market do not: they can reduce supply at any time, thereby easing the downward pressure on prices. Very few new developments will be introduced to the Toronto market in 2009. Most that were planned have been placed on the back burner. Developers will be focusing on selling the units they currently have in the pipeline, getting financing to build, and completing construction as quickly as possible.

That being said, whereas 6 months ago there was absolutely no negotiating the list prices of new condos, my personal experience of late suggests discounts of $5,000-$10,000 off of 1 bedroom or 1 bedroom + den units or $15,000-$20,000 off of 2 bedroom units can be fairly easily negotiated at most new developments.

Below are two more interesting charts, one showing total figures for new home sales in the GTA and the other shows the monthly new home sales for the past few years broken up by high-rise (condo) and low-rise (homes).

  [ **CHART REMOVED DUE TO COPYRIGHT CLAIM BY REALNET CANADA INC.**]

What are your thoughts? I always appreciate your feedback. Leave me a comment below or send me an email via my contact page.

All stats  from Realnet. Full report download: Realnet New Homes Market Report December 2008 **REPORT REMOVED DUE TO COPYRIGHT CLAIM BY REALNET CANADA INC.**