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June 28, 2019

17 years of inventory in Miami

Miami has historically had a volatile housing market because of its position as a second-home destination and because of its dependency on Latin American buyers. There is perhaps no other housing market in the US with the same kind of overall reliance on capital from abroad. This recent article by Candace Taylor in the WSJ is yet another reminder that we are once again in one of those cycles. Below are two excerpts that I found interesting. Note the stats, particularly the last bit in bold. It is also a reminder that when housing supply exceeds demand, usually something happens: prices come down.

At the same time, new condos launched just as the owners of older units looked to cash out. There were 691 condo sales in Miami Beach in the first quarter of 2019, down 24 percent from 909 in the first quarter of 2015. During the same period, single family homes sales dropped to 81 from 117. The threat of climate change has had some impact on Miami home buyers’ decisions. A 2018 study showed that the value of single-family homes near sea level in Miami-Dade County rose more slowly than that of homes at higher elevations. But agents said a greater threat to the high-end market is inventory buildup.

Meanwhile, a strong dollar incentivizes international buyers to sell the units they already own, even at below-market prices. The result is a glut of condos for sale, both new and resale. In December 2018, there were 3,663 condo listings for sale in the greater downtown Miami area—more than double the 1,591 for sale in December of 2013, according to an Integra Realty Resources report. Sunny Isles, where new buildings include the 53-story Jade Signature, the Porsche Design Tower and the Turnberry Ocean Club, is estimated to have about 17 years of inventory of condos priced at $5 million and up.

November 15, 2018

Average price of a new condo in Toronto is now above $1,000 psf

Urbanation released its Q3-2018 condo market results for the Greater Toronto Area earlier this month.

Here are a few highlights:

- The unsold inventory of new condos in development is currently 33% below the 10-year average of 14,806 units.

- Year-to-date sales of new condominiums decreased to 14,055 units from 25,839 units (same period last year). 2017 was a record year.

- The average price per square foot for new project launches in Q3-2018 was $1,044 psf. This is the first time the average has broken the $1,000 psf mark.

- This is a significant price increase from last year and it is being driven by low supply, stable demand, and rising development/construction costs (my opinion).

- The average unit size for project launches in Q3-2018 was 714 sf.

- The average opening quarter absorption rate remains above 55%. It has been this way since Q1-2016.

For the full press release, click here

Shaun Hildebrand (Urbanation) and Benjamin Tal (CIBC) published a report today called, “A Window Into the World of Condo Investors.” In it they revealed that last year (2017 data) no less than 48% of the Greater Toronto Area’s newly completed condo units were closed on by “rental investors.” In other words, almost half of the units became new rental supply.

This stat was not surprisingly turned into clickbait-y type headlines like, “Half of Toronto condos bought last year were by investors”; whereas an alternate headline might read: “Half of Toronto condos completed last year became new rental housing.” Not as jarring, I know.

In any event, there are a bunch of other interesting stats in the reports. Here are a few of them:

- 80% of all new home sales in the GTA last year were condo.

- Average resale condo prices (per square foot) increased by 26% last year and rents grew by 9%.

- Over 20% of condo investors purchased their property with no mortgage.

- Average down payment made by investors was 20%; non-investors were closer to 15%, likely because of mortgage insurance and other factors.

- Out of the condo investors who took possession in 2017 with a mortgage, no less than 44% are in a negative cash flow position – meaning their rental income isn’t covering their carrying costs.

- The returns, which the report calls exceptional, have been coming in the form of price appreciation.

- As a stress test for the market – what if all these negative cash flow investors suddenly sold their condos? – the report also estimates that if you took all of the rental investors who closed in 2017 with a mortgage and who are in a negative cash flow position greater than $500 per month, it would represent only 3.4% of the total annual supply of condos (both new and resale product).

If you would like to check out the full report, you can do that over here.

Photo by Scott Webb on Unsplash

Brandon Donnelly

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17 years of inventory in Miami

Average price of a new condo in Toronto is now above $1,000 psf

Half of Toronto condos completed last year became new rental housing