Archive for May, 2014

Joe the Used Car Guy and Understanding Condo Price Increases

Monday, May 19th, 2014

P1200791by: Peter Daoust, Broker. Remax Advantage Real Estate Limited. 519-649-6000

Joe has a used car lot with 25-30 vehicles in stock at any given time. He specializes in cars which are just a tad older. In January of this year he sold five vehicles at an average sale price of $10,200. In February and March his numbers were pretty much the same, six cars sold in February at an average price of $10,700 and five sales in March with an average sale price of $9,950. That’s the price point he feels most comfortable working in.

Something different happened with the way he did business in the month of May. His number of units sold remained the same at five units however his average sale price increased to $12,800. That’s and increase of over twenty percent! What happened to explain this increase? Well Joe stepped outside of his comfort zone and purchased and sold ( pushed over the curb as they say) a newer model vehicle for $20,000. This one transaction was all it took to raise up his monthly selling average.

What is the point of telling this story? Well strangely enough there is a similarity to the way all real estate boards across the country calculate their monthly home and condo sales. Like with the auto industry, newer units are typically more expensive. It could be suggested that the average condo prices will on paper always go up because with time, more and more newer units will be coming to the marketplace. In 2011 for example, Tricar the high rise condo builder decided to employ the services of the “MLS” system to sell out 35 units in it’s new downtown “Renaisance” building on Ridout Street. Many units sold out in the $300,000, $400,000 and $500,000 price range. Guess what this did to the average selling price on London condos that year? Average prices jumped up to $179,240 from $170,000 the year before and then in 2013, one year after these high priced sales happened, fell back to $170,493 in 2013.

What’s happening is that new condo units coming to the marketplace typically cost considerably more and this is to a large extent is what is causing the ” average ” monthly condo sale price index” to go up. The average selling price of new MLS condo sales so far this year in London is $353,272 and in 2013 $291,947. That’s considerably above our current year to date average condo selling price of $180,711.

The following examples of what has happened with individual complexes will better help to explain this.
1) 330 Ridout built 2010-2013 . 180 units. 49 sales using the services of the “MLS” system of which 45 were brand new units. Ten sales were in the $300 plus sales range and ten sales were in the $400 plus range.
2)1030 Coronation built 2010-2011. 182 units. 15 sales using the “MLS” system.
3) 340 Sugarcreek built 2010-2013. 68 units 5 MLS sales since built
4) 725 Eagletrace built 2010-2014 71units sales in the $400, $500 and $600,000 price range
5) 765 Killarney built 2010-present 78 units. 7 units sold using the “MLS” system many of which were over $300,000.

Other examples include new complexes on Denview, North Routledge, Colonel Talbot and Bateman Trail. Are average monthly condo sales comparing apples to apples or apples to oranges? That’s the new question of the day.