Monday, February 11, 2013

Results of Urbanation's Condominium Industry Survey

For the past three years we have done a survey of our clients, plus selected other lenders, brokers, and developers that are active in the new condominium apartment market in the Toronto CMA.

Here are some quick highlights from the December 2012 questionnaire:

1) 53% of respondents expect 17,500 to 20,000 new condominium apartment sales for the Toronto CMA in 2013. In 2011, 41% of respondents answered the same way - there were 17,997 new condominium sales in 2012.

2) Just over 1/3 of respondents think investors make up 45% to 60% of buyers of new condominiums, which was the top response. 60% to 80% was the top response in our December 2011 survey.

3) 34% of respondents think the biggest concern in 2013 will be a flattening or decrease in condo prices in 2013. A further 18% think construction lending will be more difficult to obtain this year.

4) There is also concern among 37% of respondents that incomes are not keeping up with growth of condominium pricing. 23% of those that took the survey think there will be less investors in the market this year.

5) 36% of respondents think the new mortgage rules had the greatest negative impact on their bottom line in 2012.

6) 91% of respondents of our survey think media reporting on the condominium market in Toronto is skewed negative and stories are sensationalized.

7) 1/4 of respondents think the best new condominium launch strategy in 2013 is to wait until market conditions approve and keep the project the same, while 24% think prices should be lower and the project scale and scope kept the same.

8) 53% of respondents think 6-8 storey condominium projects on the avenue is the next big market opportunity in the Toronto market.

For full results of the 2012 survey, click here.

For full results of the 2011 survey, click here.

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Friday, February 8, 2013

Q4-2012 Press Release Supplement - Toronto CMA Rental Condominium Market


ATTENTION: News; Financial; Real Estate Media


More Rental Activity and Higher LLR in each 2012 Quarter in Comparison to the Equivalent Quarter in 2011

TORONTO – February 8, 2013:  Urbanation Inc., the leading source of information and analysis on the Toronto condominium market since 1981, today released summary results of its Q4-2012 UrbanRental report.

There were more registered unfurnished condominium apartment units leased through the Toronto Real Estate Board (TREB) in 2012 than resold (15,355 vs 15,292), as demand for investor-held private rental suites remains very strong.

In Q4-2012, there were 3,292 rental transactions in the Toronto CMA, an increase of 13% year-over-year from 2,902 in Q4-2011. Index rents increased 3.2% annually in the CMA to $2.29 psf (Average: $1,836 per month for 803 sf).

While listings in the resale condominium market declined annually in Q4-2012 (-4%), rental condominium listings increased 11%. Despite the jump in supply, the Lease-to-Listings Ratio (LLR) increased year-over-year from 64.8% in Q4-2011 to 66.5% in Q4-2012.

"An LLR above 50% would likely be considered a landlord's market, anything below 40% a renter's market, and anything in between being a balanced market" says Ben Myers, Urbanation Executive Vice President. "So to put the 66.5% LLR in perspective, a further 3,500 listings would be required to drop the market into renter's market territory!"

Approximately 15% to 20% of units in completed buildings come up for lease in the quarter the project registers, therefore for the market to see 3,500 more listings, approximately 18,000 more units would have needed to register in Q4-2012 (more than the past five quarters combined)!

Myers adds, "the rental condominium market remains under supplied, and even if record condominium completions are realized in 2013, Urbanation expects the rental market to remains strong for at least the next 15 to 18 months".

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Urbanation is Canada’s leading condominium market research company. Since 1981, Urbanation has analyzed the Toronto condominium market, publishing the “industry bible” – Urbanation’s Condominium Market Survey. This quarterly report tracks new, resale and future condominium projects. The newest report from Urbanation is UrbanRental, which tracks activity in the condominium rental market. Urbanation also provides the development community with essential consulting services, which include site and topic specific market studies and surveys.


Rent to Resale Update

At Urbanation we do not believe "magic bullet" forecasting models like the rent-to-resale ratio really tell you if a market is overvalued, headed for a decline, or is getting more or less affordable. To think a market as complicated and dynamic as the Canadian Real Estate market could be boiled down to two variables is absurd. Comparisons of these types ignore location, product type, unit age, unit size, unit upkeep, maintenance, taxes, interest rates, mortgage insurance rates, the political environment, etc, etc, etc. Read more about it here: March 2012

Now that we have a better time series from collecting data from our UrbanRental Report we wanted to compare resale index pricing and index rents to see if the Toronto Condominium Market is becoming more un-affordable or not. We took the average resale index price in 46 submarkets across the Toronto CMA and divided that figure by the average index rent in that submarket in each of the last eight quarters to get a price multiplier by submarket. We took an average and a median of the 46 submarkets for each quarter since 2011 to derive the two lines in the figure below. Our model controls for product type, location and size. 

If you look at the green median trendline, there has essentially been no change in "affordability", if you look at the blue average trendline, the Toronto CMA condominium apartment market has got more affordable since 2011!