Much has been written and said about mortgage debt and affordability recently. No point in belaboring what has and has not been done to address this issue. I’m sure there will be plenty of that in the future, as well ample hang ringing about the so-called condo bubble, specifically in Vancouver and Toronto.
The so-called “condo crisis” (oh, how the mere thought of it makes the press salivate) in Vancouver and Toronto came to mind after I read an article in the Wall Street Journal. The article focused on the cost of condos in Manhattan. The current median price of a condo in Manhattan is the lowest it’s has been since 2004. Could Manhattan’s experience be a harbinger of what’s to come for Vancouver and Toronto? If it is then maybe the 36 people in Toronto who don’t own a condo already should go and get one.
According to the Canadian Real Estate Association, the average home price for the month of December in Toronto was $501,361, and in Vancouver it was $730, 912. Remember this includes dirt to go along with the walls. In Manhattan the average condo price in 2012 was $835,000. However, adjusted for inflation it was the lowest since 2004. Can you imagine the headlines if Toronto was similar to Manhattan’s reality? The median price in Manhattan for a 2 bedroom condo was $1.26 million, 3 bedroom was $2.37 million and a 4 bedroom was $4.75 million. Adjusted for inflation these are the lowest prices since 2004. According to the Wall Street Journal article there’s a disconnect between buyers and investment indicators. Buyers are saying there’s not enough affordable housing and yet when you take inflation into account prices have actually declined. So is it a good time to buy a condo in Manhattan? I’m not familiar with the Manhattan’s housing cycle so I’m not sure, but what I can say is this: at an average price of $2.37 million for a 3 bedroom condo in Manhattan, I think Toronto is a good buy.
Some might be aghast that I would compare Manhattan to Toronto. Well, Toronto is the 4th largest market between the US and Canada. Therefore, I think it’s valid to look at values on a comparative basis. That’s exactly what foreign investors did when buying property in Vancouver and Toronto. As absurd as we think our prices may be, the investor from Hong Kong looks at our market and thinks of great value. As we all know value is driven in large part by consumer perception. The perception of Vancouver and Toronto is that consumers buying condos are doing so at their own peril. Yet in Manhattan, home buyers lament the high cost and scarcity, all the while being told now is a good time to buy. It’s interesting how some things never change. Here’s a headline that helped shape New Yorkers perception of their condo market, “Great Scarcity in Apartments…Never before has there been such scarcity of apartments on Manhattan Island.” That headline came from the New York Times, in 1916!
Until Next Time