This article was written by Natalka Faulkner, VP Corporate Development, Chestnut Park Real Estate Brokerage, Limited
Garry Bhaura, the Toronto Real Estate Board President, is a champion of the belief that Toronto’s real estate market is “a good investment”. He draws his conclusion from TREB’s June 2018’s housing market report which shows that home sales were up 2.4 percent, as compared to June 2017 home sales:
“Homeownership has proven to be a positive long-term investment. After some adjustment to the Fair Housing Plan, the new Office of The Superintendent of Financial Institutions (OSFI) stress test requirement and generally higher borrowing costs, home buyers are starting to move back into the market, with sales trending up from last year’s lows. Market conditions appear to be tightening, with sales accounting for a greater share of listings, as new listings have dropped compared to last year,” said Mr. Bhaura”.
The strength of public opinion, as expressed by June’s home purchases, has overpowered government efforts to cool the market. The market is strong. You can make money in this industry. But, of course, not always. If you bought a multi-million dollar detached home last year in June, for example, it may have decreased in value by 1.9% (see TREB’s June 2018 Market Report). On the other hand, if you bought a condo, you saw a whopping 7.9% increase in your investment. What’s really impressive, however, is the value increase experienced by people who bought neither a house nor a condo.
Parking – The Better Investment?
Urbanation Inc. compared 2015 parking values with 2007 parking values. The increase is impressive:
Back in 2007, the average parking spot sold for $27,500 with the priciest parking digs at Trump International — The Residences — selling for $35,000 each. Flash forward eight years and the average spot is selling for $51,376 with the priciest spot being the $69,000 paid at Massey Tower on Yonge Street.
Between 2007 and 2015, your parking lot investment increased 86.62% while your home purchase “only” increased 65.35%. If the Canadian and local real estate boards gathered this information, I have no doubt that the information would prove, at the very least, that parking values in Toronto continue to grow aggressively. In fact, in 2017, Nobu’s parking space was $80,000 and some spots now commanded over $100,000.
My “parking is a great investment (until cars are automated and the sharing industry is adopted) hunch” is based on the fact that parking in downtown Toronto is a more restricted commodity than a one-bedroom unit. This restriction is because building and land costs continue to sky-rocket, making underground parking cost prohibitive and taking a significant bite out of the developer’s bottom line. The developer’s natural solution has been to reduce supply by building fewer parking spaces per unit. This, in turn, creates a classic “supply and demand” issue, which drives up values.
As Toronto continues to cement its place as a luxury market, the price of both our homes and parking spots will continue to grow. And there’s a lot of room to grow. Take, for example, the record-setting sale of a parking spot in Hong Kong. A local couple set this record and saw a profit of 330,000 USD in just nine months. They bought the space in the Kowloon district in September 2017 for 430,000 USD and, nine months later, sold it for 765,000 USD. Given that Hong Kong saw a 600% increase in the average parking space cost, it may be wise to push for a parking space with that condo purchase as it, too, can be a sound investment.
Source: Chestnut Park Blog