March, 2014

Toronto Real Estate Market Update – February 2014

The story of Toronto’s resale housing market is straight forward yet troublesome. There are simply not enough properties on the market to meet demand, and as a result, average prices continue to rise. These rapidly rising prices are beginning to cause observers of the Toronto resale market to express concern. The Deutsche Bank (the most skeptical), the International Monetary Fund, and the Organization for Economic Co-operation and Development are amongst the various institutions expressing concern that Toronto’s resale market is overvalued. Various economists, including Nouriel Roubini and Ed Devlin of the bond giant Pacific Investment Management Company, have also stepped in, announcing that there is a lot of “frothiness” in the Toronto market. Except for the Deutsche Bank no one sees the market approaching bubble territory, but all are predicting a meaningful correction of some degree.

The data is beginning to speak quite eloquently. Notwithstanding an extreme winter month, February produced 5,731 resale transactions in the greater Toronto area, 2.1 percent more than the 5,613 reported sales in February 2013. In the City of Toronto condominium apartments accounted for half of all reported sales. Sales of other housing types were down as compared to February last year. They were down because there was an insufficient number of available detached, semi-detached and town houses to meet the demand. Detached were off by 8 percent, semi-detached by 11.8 percent, and townhouses by 8.8 percent. Condominium apartment sales were up by 9.6 percent. Of the 2136 reported sales for the City of Toronto, 1031 were condominium apartments.

Insufficient inventory continues to plague the market place. In February 10,897 properties became available for sale in the greater Toronto market place, 1 percent less than the 11,005 that became available last year. This decline, albeit moderate, contributed to the dwindling portfolio of the active listings. At the beginning of March there were 14,019 properties available for sale, more than 12 percent less than the 15,969 properties available to buyers in 2013. This lack of inventory is what is fueling the market, causing buyers to compete for favourable properties, and in the process driving average prices higher. At the beginning of March there were only 2.5 months of inventory for the entire greater Toronto area. A balanced market is not achieved until there are 4 months of inventory.

In January the average sale price for all properties sold came in at an alarming 9.2 percent. There was little abatement in rising average sale prices in February. February’s sales produced an average sale price of $ 553,193. This was 8.6 percent higher than last year’s average sale price of $ 509,396. By housing type, the increase in average sale prices was even more dramatic. Detached homes in the City of Toronto increased by 15.7 percent to $ 995,314; semi-detached moderately increased by 8 percent to $ 668,298, a small increase due to a lack of supply; and townhouses increased by a startling 20.7 percent to $ 545,043. The overall average was brought lower by condominium apartment sales, which only increased by 6 percent to $ 372,628. The most expensive neighbourhoods in Toronto are located in the central core. The average price for a detached property in Toronto’s central core came in at $ 1,425,485. Semi-detached houses on average cost $924,496 in the central core. Notwithstanding these lofty prices, all detached houses listed in February (on average) sold in just 19 days, and all semi-detached houses sold in an eye-popping 9 days, and for 109 percent of the asking price.

The most active trading area in Toronto is the eastern districts, and in particular for detached properties. Every district in the eastern trading area reported sales that met or exceeded the asking price, and in some cases by astonishing numbers. For example, sales in the eastern neighbourhoods known as Riverdale and Leslieville, saw the reported sale price exceed the asking price by 12 percent for all properties sold. Not only that, but all these properties took only 9 days to sell and be reported sold.

The slowest housing sector remains condominium apartments. Whereas all other property types were selling in 26 days or less, in the City of Toronto it took condominium apartments 34 days on average to sell. Reported sale prices for condominium apartments were not as frothy as the sale prices of other housing types. On average sale prices came in at only 98 percent of asking price. The average sale price for central Toronto condominium apartments (where most are located) was $ 419,663, a lot less than the average sale price of detached and semi-detached homes. Surprisingly there are still condominium apartments for sale (in the far eastern districts) that are priced at less than $ 200,000.

Looking forward little change can be expected in March. Expect more inventory shortages driving prices higher, while fraying the nerves of buyers desperate to buy properties while interest rates remain at historically low levels. Low mortgage interest rates continue to fuel the inventory short market. With five year rates available as low as 2.99 percent, how can a buyer not be motivated to purchase a property?

Collingwood Real Estate Market Update – February 2014

Extreme weather and the unseasonably frosty temperatures appear to have had an influence on the Georgian Triangle real estate market as well as so many other aspects of life in the area, and the province generally for that matter. Travel conditions were often hazardous, and many properties remained snowbound affecting access and the ability of potential buyers to fully appreciate the outdoor components and landscape of properties, to say nothing of the willingness of property hunters to venture out into the winter storms to view listings and keep their scheduled appointments. It is difficult to pinpoint and quantify the impact of any one factor on market trends, but property sales did continue to lag behind last year’s pace, which was compounded in part by a lower inventory of available properties.

With the publication of the Southern Georgian Bay Association of REALTORS® (“SGBAR”) February MLS® Statistic Report for the Georgian Triangle month over month improvement in the market was evident with 122 sales as compared to 83 the month previous, consistent with seasonal trends. Despite narrowing the substantial negative differential of 27% year over year in the month of January, however, February sales still came in 3% behind last year for the month when 126 sales were reported. Year to date figures therefore remain 14% behind last year’s pace when 239 sales had been logged compared to only 205 this year.

Despite the “polar vortex”, sellers were able to bring out 428 new properties on the market which was 6% more than last year when only 405 new listings were recorded. That was not enough, however, to make up for last month’s shortfall in new supply. Year to date figures for new listings amounted to 918. That remains 6% behind last year’s numbers of 975 at this time. Nor did it make any dent in the limited inventory of properties for sale in the area which continues to trail 2013 figures. At the time of the creation of the SGBAR report there were 1851 active listings on the market which is 13% fewer than last year at this time when 2128 properties were recorded as being on the market. The lack of supply inevitably limits the choice available to potential buyers looking in the area which plays out as a further depressant to market activity and volume of sales.

Limited availability, however, also means buyers are fighting over fewer properties and that tends to put upward pressure on prices. Year to date, the average residential sale price has gone up over 8% coming in at $391,311 compared to $361,487 at the end of February 2013. The year over year comparison of the average sale price for single family residential properties for the month of February is even more significant coming in a whopping 15% higher than last year’s figures for the month, breaking the $400,000 mark at $404,588 compared to $352,100 last year. Measured over a longer twelve month period the annual increase is a more sustainable 3.5% ($335,421 compared to $323,846). Whether the surge in average sale price recorded in February is an anomaly explained by the particular composition of properties sold in the month with a higher concentration of high end sales, or is a broader phenomenon of recovering prices due to basic supply and demand forces remains to be seen, but certainly affordability will be adversely affected if these sorts of price increases continue at the pace recorded this month.

Generally speaking, the market remains on firm ground despite the deep freeze. Moreover, interest rates show no sign of any significant uptick within the foreseeable future, moderating the negative influence of rising prices on affordability. While signs of general economic recovery persist, continuing sluggishness in job and income growth remain sticking points to a broader more robust economic picture with lasting traction and qualitatively transformative benefits to the real estate market.