Alexjwilson.com presents his 5 predictions for the Toronto Condo market in 2018:
1) Resale Sales on TREB will hit 100,000 units.
Resale Sales on TREB will hit 100,000 units – up 10% from 2017. We expect a normal volume after last year’s boom and bust market. Our forecast is based on the fact that there are lots of buyers waiting for the market to settle down and for more listing product.
2) The ‘Sweet Spot” in the GTA will be properties located in the 416 area between $500,000 and One Million.
The ‘Sweet Spot” in the GTA will be properties located in the 416 area between $500,000 and $1,000,000. There is a shortage of listings in this market area and most millennials want to live there and can afford these prices. There will be an excess of listings in the 905 area over $1,500,000 and this will negatively impact prices in these areas.
3) Our Forecast calls for 42,000 completions for 2018 - 3,000 less than the 45,000 required for a balanced market in the Greater Toronto Area.
Pre-construction sales usually have three measurables: sales, under construction, and completions. Sales are the least reliable and completions are the most meaningful, as these units are added to the resale pool. Given the GTA population growth and replacement needs, 45,000 new units are required each year to keep the market in balance. Our Forecast calls for 42,000 completions for 2018, based on sales and starts in 2015 and earlier.
4) Lease transactions on TREB will be 15% lower and rents will increase by 10%.
Leases on TREB will be 15% lower in number than for 2017 and 23% lower than 2015. 2017 leases were matching previous years’ numbers until the introduction of rent controls (1.8% per year). Prices for vacant units will increase by 10% +. The result will be a two-tier system. Will some tenants try to sublet at higher prices (although illegal)?
5) The average price of the downtown Toronto condo will increase between 5-10%.
Resale Prices are expected to be flat overall. The GTA is no longer a homogeneous market. We expect some markets to experience price drops of up to 5%, others to be flat, and some markets will increase by 5-10%.
Analysis - what ifyou listened to me in January 2017 and purchased a condo in downtown Toronto - what would your return be:
The average price of a downtown Toronto condo in Jan 2017 was $536,236 which increased to $626,404 by Dec 2017. This represent appreciation of 16.81% but remember we look at the leveraged return. What is the return on the money we invested.
Total investment including 20% down payment, landtansfer tax, and legal fees would be $123,126.
Therefore the return on investment (ROI) on the total money invested in the average downtown Toronto condo was 60.31% from Jan 2017 to Dec 2017.
I bet you wished you bought a condo last year. Well do not worry - there is still opportunity in 2018.
We worked out the returns assuming our prediction of 10% appreciation of the average downtown Toronto condo price:
Assuming 10% appreciation the average downtown Toronto condo price in Jan 2019 will be $689,045.
Total investment including 20% down payment, landtansfer tax, and legal fees would be $144,786.
Therefore the return on investment (ROI) on your total money invested in the average downtown Toronto condo would be 29.79%
I hope you listen to me this year .....
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