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September, 2013

Pricing in Toronto’s Real Estate Market

When preparing to put your home on the market, the goal is (quiet obviously) to get the highest price possible. Perhaps you’ve owned your property for decades, perhaps you’ve invested time and money in improvements like interior updates, additions, or landscaping. Presumably, all the care and attention you have shown your home will be rolled into the cost value in your mind. And while this is all completely reasonable, it is advisable to avoid overpricing your home above all else when putting it up for sale.

Many home sellers reason that they’d like to set the price barrier high and negotiate down from there, but this can be a dangerous move that could cost you some great sale opportunities. Interest in your home will be at its highest when the property is first released on the market (generally within the first week). Home buyers who are serious purchasers will be ready to pounce on new inventory that is well-priced, which could lead to a swift transaction. If the list price of your home is set too high, home buyers and their agents could be discouraged to view it. Later on, as the home sits on the market, you may be required to reduce the price below value in order to drum up new interest.

Remember, the value of your home is determined by what the current market will bear; not what you paid for it originally, or how much you’ve invested in updates. Setting a fair price will attract serious buyers, and if you’re lucky, drum up enough interest for multiple offers.

Courtesy of Chestnut Park Real Estate Limited, Brokerage Blog

Toronto Real Estate Market Update – August 2013

The summer months saw mortgage interest rates rise to levels not seen for more than a year. In June buyers could find five year fixed mortgages with interest rates at 2.79 percent. It would appear that those historically low rates are now a thing of the past. By the end of August rates had increased to 3.79 and has high as 3.89 percent at one of the major banks. Although 3.89 percent continues to be low by historical standards, it does represent more than a 30 percent increase in rates in less than two months.

During this same period the Toronto residential resale market has begun to heat up, bringing it to the attention of bankers and the Federal Minister of Finance. The Finance Minister implemented a number of measures to slow the housing market July of 2012, including reducing the amortization period to 25 years for high ratio mortgages. The market has clearly absorbed those restrictive measures. The belief amongst economists is that the surge in sales in July and now in August has been driven by increasing mortgage interest rates and the likely possibility that they will continue to increase during the remainder of this year and into 2014. Buyers, particularly at the low end of the market, may be concerned about the risk of increasing rates and are making accelerated decisions now to purchase homes while they are still affordable. The increase in average sale prices is also contributing to this buyer pressure.

In August the average sale price for properties sold in the greater Toronto area was $503,094, an increase of 5.4 percent compared to August of 2012. In the City of Toronto the average sale price was $518,145. This number is moderated by the average sale price of condominium apartments which represent almost 30 percent of all reported sales in the month of August. Detached and semi-detached properties are becoming very pricey. The average sale price for a detached home in central Toronto is now $1,319,539. In the western trading districts detached homes sold for $ 644,354 and were least expensive in the eastern trading areas, coming in at $538,826. Semi-detached homes sold for $ 788,542 in Toronto’s central core, and sold for $501,230 and $507,819 respectively in Toronto’s western and eastern districts. These average prices represent year over year increases of 4.7 percent for detached homes and 8.7 percent for semi-detached properties.

The least expensive properties in Toronto are condominium apartments. In August the average sale price was $357,572. Although much lower than detached and semi-detached properties, August’s average sale price was 2.3 percent higher than a year ago. Given the rising mortgage interest rates and average sale prices, it is not surprising that the demand for condominium apartments was soaring in August. The 1,280 condominium apartment sales reported in Toronto represent a 21.4 percent increase in sales compared to last year. As a result of all these sales, Toronto’s condominium inventory is rapidly decreasing. At the end of August there were 4,413 active condominium apartment sales. Last year at this time there were 4,657, a decline of 5 percent.

The number of reported sales overall showed a marked increase compared to August 2012. 7,569 residential properties were reported sold, an increase of almost 22 percent compared to August last year. Moreover, these properties sold very quickly. The average days on market for all properties reported sold was only 29 days. In some trading districts the pace of sales was even more dramatic. Properties in the eastern districts continue to be in demand. All sales of detached houses took place in 19 days, and only 14 days for semi-detached properties. Condominium apartment sales were the slowest taking 36 days in the City of Toronto.

Given the prevailing market conditions we can anticipate similar results for September and October. This could change if mortgage interest rates continue to rise and average sale prices make the purchase of some types of properties prohibitive to some buyers. At the other end of the spectrum, being the least expensive, condominium apartment sales will continue to outpace the rest of the market. At the end of August 61,704 residential sales have taken place in 2013. At its current pace the Toronto market will produce more than 85,000 sales, matching and perhaps exceeding the 85,501 sales that took place in 2012.

Prepared by: Chris Kapches, President & CEO Chestnut Park Real Estate Limited, Brokerage