The New Reality: 2008 Edition

    230 Queens QuayThere’s a tectonic movement in the residential market and it continually grows and expand outwards from the center of downtown Toronto. As available land supply is visibly being eliminated faster then we can keep track of, insatiable demand for living quarters maintains stressfully high levels of asking for more and more supply. Not too difficult to guess, we must build smarter smaller greener stacked spaces allowing for comfortable and economical living.

  Hence we ponder outcomes and costs that this shift will bring us. If you may, think of global warming and its consequences, then play the game but this time use real estate as the storyline.

  Like other theories, ours must be put to the test in order to get either verified or thrown. Observing MLS statistics, we learn that condo sales downtown represent 87% of all residential sales*. Shocked? wait, there’s more: roughly, condo prices have doubled in more or less eight years, an average return of 12.5%.

  So, can we then assume that condo prices may double within eight years? if today’s average condo price hovers around $325,000, could it cost $650,000 in 2015? are we crazy or realistic? take a look at this simple scenario that assumes no changes in inflation and consistent market behaviour, stare at PSF and carrying costs digits for a minute and think if you will be able to afford buying in 2015.

Imaginary downtown condo: 865 sqft + balcony + parking and locker.

2007 2008 2015
Price $325,000 $355,000 $650,000
Gross PSF 375 410 750
Carrying Costs $1,920/mo. $2,100/mo. $3,400/mo.

Disclaimer: this is a sample only created for the purpose of this article; it is not to be considered as trading advise.

  $750 per foot? are we out of our minds? well, luxury buildings already selling at the $1000 PSF range. Instead ask this question: if 375 PSF is today’s average price, how long before we reach 500 PSF average? a couple of years, perhaps. Just enough time to buy early in a new development and bet that appreciation will cover for your downpayment.

Yossi Kaplan, MBA
Harvey Kalles Real Estate
+1.416.441.2888 x678

2007 Research

C01 (Waterfront to Bloor, Yonge to Humber)

Condo Apt.: 1085
Average sold price: $330,918

Condo Townhouse: 136
Average sold price: $333,149

Total condo sales in C01: 1,221 (87.46%)
Total sales in C01: 1396

C08 (Waterfront to Bloor, Yonge to DVP)

Condo Apt.: 459
Average sold price: $295,820

Condo Townhouse: 26
Average sold price: $347,538

Total condo sales in C01: 485 (86.76%)
Total sales in C01: 559

*downtown defined as MLS sectors C01 and C08. Date Source: MLS.

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