The Toronto Real Estate Board recently released their June 2016 market stats and it was another hot month for GTA real estate.
Sales were strong across the GTA, constrained solely by listings as demand continues to far outweigh supply. It seems that not even the never-ending ascent of Toronto real estate prices can stop the flood of new buyers hoping to enter the market. What it is doing is pushing more first- and second-time buyers towards condos and lofts for sale in Toronto.
Let's take a closer look at what's been happening at the start of the summer market.
You can see from the above chart that prices were up quite dramatically year-over-year across every property category in both Toronto and the 905. What's key in this chart is the decline in sales in two of the most popular freehold property categories for young buyers - townhomes and semi-detached houses - as it's pushing more buyers towards condos and lofts which have experienced a pretty dramatic 15% sales increase in Toronto year-over-year.
Keep in mind, first-time buyers are the largest market segment - an estimated 55% - and they're looking for more affordable property options. Add to that a growing down-sizer market coupled with second- and third-time buyers who are having to stay within the loft and condo market longer than expected (upgrading to larger units rather than buying a freehold home), and you can see why demand has surged.
Condominiums are not only an affordable alternative, in some neighbourhoods, they're the only property that's coming up. In prime neighbourhoods close to downtown, freehold property listings have been so constrained that even the "undesirables" are attracting multiple bids. Long gone are the days when a gut job attracted contractors and serious investors only; end-user buyers are willing to do whatever it takes to get a permanent address in some of Toronto's hippest 'hoods.
So, what does this mean for the Toronto loft market? Well, despite condo sales being up year-over-year, the loft market as a segment of that overall condominium market is facing very similar constraints to the freehold market. Authentic, hard lofts are a rare beast this summer and when new listings do hit the market, they often sell quicker than the average days on market.
What does this mean for you?
If you're thinking of selling soon, June's market results may seem like great news but a hot market doesn't mean you can sell for top dollar without a solid strategy.
There are a number of key decisions you'll need to make up-front with your Realtor. Firstly, you'll likely want to hold for offers in hopes of multiple bids but that's a tactic that can (and often does) backfire. You really need the advice of a Toronto Loft Expert on both pricing and whether or not to hold.
Secondly, depending on the location and type of property you want to buy, you may want to consider buying before you sell, bridge financing if necessary. It could take you six months or longer in this market to find your next home.
The other thing you want to bear in mind is, just because this is a seller's market, that doesn't mean your Realtor can get away without staging and properly marketing your home. In fact, if you want to stimulate a bidding war, it's essential that you create the conditions that lead to prospective buyers feeling motivated and comfortable enough to bid quickly and aggressively.
For buyers, the challenges of an unbalanced market may be obvious - it's almost certainly going to take more time and more money than you originally thought to buy a Toronto loft.
The two most important things you need to do to set yourself up for success are to:
a) get mortgage pre-approval, particularly if you're a first-time buyer who's not porting an existing mortgage,
b) hire a Toronto Loft Expert who knows the loft buildings in Toronto inside and out. Not only are you assured expert advice on which buildings will meet your needs and which to avoid, you'll be more confident in moving quickly on offer night because your Realtor knows the history of the building and will make sure you're well-informed.
Both of these tactics will help you move fast which you're going to need to do if you find yourself facing a competitive bids. You may not have the luxury of sleeping on your decision for a few days so do your research, get your finances in order and spend time reviewing options and numbers with your Realtor before stepping foot into a prospective loft building.
Have a read of our previous post on how to win bidding wars.
While lofts have always been in demand (let's face it, we Torontonians love us some soaring ceilings and exposed brick), the sharp rise in active buyers we've been experiencing (thanks to low mortgage rates and skyrocketting rents) coupled with very little building activity in the loft segment has created a scenario where demand far outweighs supply.
That's unlikely to change as new conversion projects are few and far between. The fact of the matter is, it tends to cost more to convert an historic building than to build from scratch and there aren't that many attractive conversion opportunities left anyway. And so soft lofts took over as the norm from hard lofts years ago.
Now, there are a ton of absolutely stunning, soft loft buildings that we wouldn't hesitate to recommend here at MrLOFT. But there are also bog-standard condominiums in disguise with nothing truly "loft" like about them other than an exposed concrete ceiling. You really have to be careful not to spend more for a project called a "loft" that isn't offering the benefits and character features you should be getting for your dollar.
We saw something similar happen over the last few years with townhomes. Townhouses became the most desirable alternative to a freehold, semi-detached or row-house and the stats reflected this as both sales and prices climbed dramatically. Developers build to the most profitable market segments, naturally, and so for awhile, there was a builder's frenzy on new Toronto townhouses.
While they're still shooting up across the city, most models are one or two bedrooms and not family-sized. Stacked designs have become the norm because it's more profitable to squeeze in more, small units. So, basically, these are low-rise condominiums and not townhouses at all - at least, not in the traditional sense save for private entrance (and sometimes, not even that). The kicker is that the price tags in many new townhome developments are comparable to true townhouses in the re-sale market where you have three bedrooms and an actual yard, not a potted plant that's called an "urban garden".
So, be careful not to be swayed by fancy marketing brochures if you're buying new. And always check out the re-sale loft market before deciding on a new build because there tends to be much greater value there and far less risk.
If you're thinking of buying or selling a Toronto loft, give us a call at 416.583.1660 and we'll set up a time for one of our Toronto Loft Experts to call you to discuss the market and your best options.
June real estate statistics chart courtesy of TREB.