David's Blog

head_left_image

Is the Price per Square foot Outrageous?

Is Toronto's skyrocketing price per square foot unsustainable? Are buyers being kept out of the market? Will an interest rate shift (or doubling) eliminate you from the market? How will others fare?
Manhattan Condo Listings Snapshot
Size (ft²) $ per ft² Price
Studio 539 1,103 595,000
1 BR 791 1,079 849,000
2 BR 1,300 1,213 1,595,000
3 BR 1,950 1,459 2,965,000
4+ BR 3,173 1,711 5,675,000
Medians for listings from past 60 days from StreetEasy data. Excludes some extraordinary properties. No representation is made as to the accuracy....
How is the American market dealing with these issues? Has New York City's Value Crashed and Burned? Their Population numbers at 10.5 MM compared to Toronto at 2.5 MM plus our suburbs of Mississauga, Vaughan and Markham. URL to enlarged Image Its worth the Look, See if you can find a landmark in the before and after photo... Some cities in the United States are approaching 14% unemployment rates with an average exceeding 10% nationally.
But we Live in a different Country, With a different banking system, Without Mortgage Interest deductibility. Yes, Torontonians are still buying houses and condos and we are firmly in the grip of a Seller's Market. A market does not become or change over night. It is not a light switch that is flipped from one extreme to the other. It requires time, input, evolution, activity and transactions to develop a pattern that is discernible. The only pattern we can predict is a historic trend. What was before.
The extra factor never dealt with in all this rhetoric is Reproduction Cost New. This is a very simple concept from Accounting and Appraisal. If you built this today, How much would it cost? The construction workmen, the building materials, concrete to tile and flooring plus plumbing, pipe and fixtures, the architects, the planners, the City's portion of levy and assessments, Cranes, Advertising, insurance, financing and the never ending... disputed value of a building lot within the Toronto City limits. OH, and what amenities are included.
If we move (I Hope) to a more Balanced Market that would be ideal. Prices would stabilize and finally everyone would catch their breath. But How does that change the cost of Building it today. I recently came across an ad for a Luxury condo on the waterfront boasting 1031 square feet overlooking the water asking 369K Thats $360 per square foot! Whats the catch? Ahhhh, It's in Midland on Georgian Bay. But the construction cost would the same.
To reexamine the price per square foot debate, in the west end of the City, condos are indeed available at/ or around $400 per square foot. Downtown Toronto has seen $650 psf for units that have a view of the water and one parking. And I understand the prices for affluence are moving nearer to $1,000 per square foot, the higher and larger you go.
So we can debate, we can argue, we can wait and see or you can decide to debate and argue with me as we take this shopportunity for you to find the perfect place in Toronto west. The HST will be introduced in July that may very well shake things up. RE/MAX economic outlook 2010 makes a modest price and activity increase of 2%.
What do you think?

David Pylyp

Etobicoke Real Estate Agent

Accredited Senior Agent for York Peel and Halton Regions

Lives in Toronto and promotes Giving Value

As we move forward It would be good if you also circled me on Google +
https://plus.google.com/109283965469179719942/posts

Comment balloon 4 commentsDavid Pylyp • December 30 2009 12:10PM

Comments

This is very hard for me to fathom, considering I just sold a 1,500 sq.ft. home in Southwest Florida for $30.86/sq.ft.  We certainly didn't sustain!

Posted by Brad Dohack (Absync Realty) over 10 years ago

That sounds like a marvelous deal!

Buyers should be flocking around you!   You cannot build new at those prices.

 

Posted by David Pylyp (RE/MAX Realty Specialists Inc.,) over 10 years ago

Yes, there are a lot of people starting to see opportunities.  The question is, how do we motivate more of you Canadians to invest in a winter escape in Florida?  Especially for these prices??? 

Posted by Brad Dohack (Absync Realty) over 10 years ago

As someone who has lived in Europe, US (NYC, Boston, other cities) and Canada (Toronto); the argument that Toronto will be like NYC is unbelievably laughable for the obvious reasons to those with any common sense. Surprisingly a segment of the population (schmucks) is buying into the notion (and marketing ploy) and overbidding for concrete shoeboxes in the sky. The two markets, geography, consumer demographics, wages, settlement populations, surrounding density, economies of scale and many other variables are so vastly different that it's almost futile getting into a rational discussion about the topic.

Excluding all logical reasons, let's level the field using simple mathematics. Metropolitan NYC has a population of approx. 18 million and Toronto 4 million. Using this ratio (0.22222) the 1,079 sqf 1 bedroom in Manhattan (priced at $849k) should be worth $239,777 at $239.72/sqf in Toronto. Instead the present rate is more like $530-600/sqf. So what's skewing the equation? Delusional speculation perhaps? What's happening now is a removal of equity from public markets which serve the population well (result in actual jobs, churn out useful products, spur innovation, etc) and allocating to concrete boxes which serve no other purpose than to house people priced more than they're worth and which are being superficially inflated; now approaching levels of high speculation. It'll be interesting to see how far up it'll go, just wouldn't want to be a part of it on the slide down.

Posted by janet zimmerman over 10 years ago

This blog does not allow anonymous comments