By Peter Daoust
Joe has a used car lot with 25 to 30 vehicles in stock at any given time. He specializes in cars that are just a tad older.
In January 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 May. His number of units sold remained the same at five units, but his average sale price increased to $12,800. That’s an increase of over 20 per cent. 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? Strangely enough, there is a similarity to the way all real estate boards across the country calculate their monthly home and condo sales. As in 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, high-rise condo builder Tricar decided to employ the services of the MLS system to sell out 35 units in its new downtown Renaissance building on Ridout Street in London. 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.
Are average monthly condo sales comparing apples to apples or apples to oranges? That’s the new question of the day.
Peter Daoust is a broker at Re/Max Advantage Real Estate in London, Ont. www.yourcondoworld.com
