Monthly Newsletter: July 2006

Happy Canada Day everybody! I hope that you all enjoy this long weekend and find some time to kick back and have fun some. If you’re a soccer fan like me it doesn’t get any better than the on-going World Cup. Isn’t it great that we all live in a city where we can cheer for our respective teams and have most of the countries in the tournament represented? I wish your the team all the best, but for me – GO ENGLAND!!!

Since we are half-way through the calendar year I’d like to talk about the income property market so far this year. I’ll look at year-to-date sales statistics and try and surmise where the multiplex market may be heading for the upcoming months. I will break Toronto into eight key neighbourhoods and look at how the market performed in each of them.

As I have suggested in past columns, we have been more active over the past few months with live-in purchasers of income properties. This is not to say that the investment market has dried up, but at Plex Realty we have seen a lot more owner-occupied properties trade that make better fiscal sense. Essentially, buying a multi-unit building to live in is always a prudent form of home ownership since you are able to defray some of your living costs. Cap rates and R.O.I.s on the other hand have been dropping as purchasers seem to be accepting of lower returns. In my opinion, these returns will have to improve as real estate has to remain competitive in relation to other investment vehicles.

Sales statistics from TREB suggest that the overall Toronto residential resale market in 2006 has remained quite strong:

“Market conditions have been very good all spring, and the strong activity we’ve seen is a reflection of that,” TREB president John Meehan states. “With just a few days remaining, this spring has so far been over two per cent more active than last spring.” As you can see form the chart above, while April dipped a little we have seen year-on-year growth each month. The overall average selling price year-to-date for 2006 is $356,683 – approximately 6 percent higher than the average selling price for 2005 of $335,907. Remember that 2005 set a record for the highest number of sales ever, so it seems like we’re on pace to beat that record again this year.

Independent analyses of the multi-residential market do not exist. All income properties with six or less suites are lumped in with the single-family stats. In order to determine what’s going on in the multiplex market, I have gone into MLS data and pulled all sales of those properties with three or more kitchens. Naturally, there are many sales of duplexes with only two kitchens, but I have no way of distinguishing them from single family homes with basement apartments. Thus all figures below are for three units or more.

I have broken Toronto into eight key neighbourhoods for the purpose of analyzing market activity:

Downtown Toronto – south of Bloor, west of Yonge (C01)

This includes neighbourhoods like Chinatown, Little Italy, Trinity Bellwoods, etc.

Midtown Toronto (C10)

From Lawrence down to Eglinton, east of Yonge

The Annex (C02)

This is the area north of Bloor St to St. Clair., west of Yonge

Cabbagetown (C08)

This is the neighbourhood east of Yonge to the DVP, running south of Bloor St.

Rosedale/Moore Park (C09)

This is the area in between St. Clair & Bloor, east of Yonge

Riverdale/Leslieville (E01)

This is the area from the Danforth down to the Lake, just east of the DVP.

The Beach (E02)

East of Coxwell, from the lake up to the Danforth

High Park (W01)

South of Bloor, in between Dufferin and the Humber River

# of YTD Sales

Average Price

Days on Market

C01

69

519,393

28

C10

7

747,489

34

C02

55

666,302

28

C08

11

588,591

46

C09

6

1,186,667

29

E01

47

418,834

29

E02

23

526,504

25

W01

65

524,856

27

There are some interesting observations to be made from these YTD stats. It seems like it takes around a month to sell an income property no matter where it is. This also suggests that the multiple offer frenzy that has been happening with single family homes is not occurring as much with income properties. The largest number of sales occurred in C01 & W01 which isn’t surprising since these are the two largest residential areas. The high average price in C09 is a little misleading since there were only six trades and two of them were for almost $2M. It is interesting that sale prices in C01, E02 & W01 were also very close. Note too that all average income property prices are about $200K higher than the average house sale price in the entire GTA.

I have no reason to expect that this market will slow down. The summer is traditionally a little slower but then business tends to pick up after Labour Day. I fully expect a strong showing for the second half of the year. As I said earlier, I also think that more investment only properties will begin to trade as the vacancy rate continues to decrease. Owner-occupied multiplexes and properties that are purchased for conversion will also continue to be very popular, as they always make good fiscal sense.

If you ever have any questions about the income property market in Toronto or would like more even more detailed information on what’s happening in your target area, please send me an e-mail. Remember that we are the “Income from Properties” specialists and we pride ourselves on being on the frontlines of this market, 24-7.

Enjoy the long weekend and the summer months ahead.

P.A.