Since I started the newsletter in 2016, the consistent trend in Toronto real estate statistics has been that condo prices have been steadily increasing while the freehold market has shown more volatility.
The July 2019 Toronto real estate statistics continued this trend. Condo prices increased with increases (ie. semis) and decreases (ie. detached) in the freehold market having a net overall increase in Toronto’s prices.
In last month’s newsletter, I reviewed the last 5 years of real estate data and concluded that Torontonians are paying more for condos than they ever have, while housing for freehold owners peaked in 2017.
Condos have become the more popular housing of choice due to affordability. From 2015 to 2019, condo sales have risen from 52% to 58% of the total market in terms of units sold. With condo prices continuously increasing and a pullback in freeholds, the price gap between condos and freeholds has narrowed. With 2019 average freehold and condo prices at ~$1M and $650,000 respectively, do we expect the price gap to widen or narrow?
To answer that question, let’s look at the historical relationship between Toronto freehold and condo prices. The table below is the average freehold price to average condo price ratio.
This tells us that from 2015-2017, the average freehold used to cost close to double the average condo, whereas currently freehold costs just over one and half times condos.
While these ratios are helpful to understand the trend, let’s take a look at what this means in actual dollars and cents. The table below shows the average dollar difference between the average freehold compared to the average condo.
The largest difference of close to half a million dollars occurred in 2017 while the gap has narrowed to ~$360,000 in 2019. Putting this in perspective, you can purchase the average Toronto condo and another small condo for the cost of an average Toronto freehold which could look like:
Recent Toronto $1M freehold sales:
- 3 bdrm, 3 bath Don Mills townhouse with 2 parking on 13’ x 96’ lot at 35 Greenbelt near Don Mills and Lawrence
- 4 bdrm, 3 bath Junction semi with 2 parking on 16’ x 100’ lot at 267 Lappin Ave. near Lansdowne and Dupont
- 4 bdrm, 3 bath Agincourt detached home with double car garage on 50’ x 110 ‘ lot at 40 Groomsport near Birchmount and Huntingwood.
Recent Condo for $650,000 sales:
- 665 Sq ft 1+1 bdrm downtown condo with no parking at 33 Bay on the waterfront;
- 661 sq ft 1+1 bdrm midtown condo with parking at 83 Redpath near Yonge and Eglinton
- 1,005 sq ft 3 bdrm uptown condo with parking at 188 Doris near Yonge and Sheppard.
Recent Toronto $360,000 sales:
- 407 Sq ft downtown studio at 555 Yonge near Wellesley
- 375 Sq ft uptown studio at 19 Avondale near Yonge and Hwy 401
- 748 Sq ft Scarborough 1+1 bdrm at 88 Corporate Drive near McCowan and Hwy 401
When watching basketball, a good friend of mine tells me not to worry when an opponent is playing our of their mind and scorches the Raptors in the first half as he preaches that shooting percentages will revert to the mean. I believe the same will prove true in the real estate market with the longer term norm being an average freehold valued at closer to 1.7 times the average condo.
In order for this ratio to climb from its current level of 1.56, I’m expecting freeholds to gain ground on condos because:
- There will be more supply of housing available especially condos when Toronto passes its short term rental (eg. Airbnb) housing policy leading to slower price growth especially for condos later this year
- There will be upward pressure on freehold properties as a higher proportion of young condo dwellers change life stages
- With ever more density in urban areas, consumer preferences for more space will intensify
So to answer the question about the price gap, I predict the current trend of the narrowing price gap to reverse as buyers see more value in buying freehold properties.
3 things I’m noodling through:
- Just finished reading The Girl with the Dragon Tattoo by Stieg Larsson and then watched the movie. While I enjoy seeing the characters come to life and marvel at wonderful sets/site locations, movies have rarely stood up to the books, case in point The Lincoln Lawyer by Michael Connelly, The Lion Witch and the Wardrobe by C.S. Lewis, The Firm by John Grisham etc.. Are there any movies that you enjoyed more than the books?
- I’ve been a reluctant social media adopter. Recently I created my own Instagram account. If you’re interested in seeing what real estate anecdotes I’m sharing each week, catch me @dsorealestate
- I’ll be going on our family’s annual cottage trip shortly. We take turns making meals. I’m clearly not the strongest cook in the family. Do you have any recipes to share that can scale up to 12 people, doesn’t require obscure and numerous ingredients while not taking hours to make and clean up in a snap?
August is a popular time to get work done around the house. Perhaps you’re planning to do some repairs or get started on a decorating or renovation project and need a contractor, interior designer, cleaner, or other professional to help.
If so, give me a call.
Through my connections in the local “home industry”, I may know reputable professionals I can recommend.
In fact, making recommendations is just one of the ways I continue to help my clients in between transactions. It’s part of my mission to be the kind of real estate agent you’d like to work with again, and refer to others.
So, don’t be shy about contacting me if you need recommendations or have questions. I’m always delighted to hear from you.