Toronto Real Estate Market Update – February 2015

The Toronto residential resale market was distinguished by a number of “records” in February, highlighting its strength and buyers’ insatiable desire to take advantage of the historically low mortgage interest rates. In February 6,338 properties were reported sold, 11.3 percent more than the 5,696 reported sales last February. It must be remembered that 2014 was the Toronto market’s second best year on record, so February’s performance was exceptional.

For the first time the average price for a detached property in Toronto (416 area) exceeded $ 1 Million. In February detached properties saw the highest year-over-year increase. Detached property sales increased by 16.9 percent as compared to February 2014. As of February the average sale price for detached properties in Toronto is $1,040,018, a record. The average price for semi-detached properties also increased to $702,035, up almost 5 percent from last year. Actual sales of semi-detached properties declined by 1.5 percent over the same period, but this decline was due to a lack of inventory and not buyer demand.

A lack of inventory has shaped Toronto’s residential resale market for almost two years. In February only 10,508 new properties came to market, almost 3 percent less than the 10,808 that came to market last year. As a result at the beginning of March there were only 12,793 properties available to buyers across the greater Toronto area, about 9 percent fewer than the 14,019 that were available last year. The properties available for sale translate into only 2.1 months of inventory for the greater Toronto area and 2.3 for Toronto. Toronto’s months of inventory is higher due to the high concentration of condominium apartments in the City’s central core. A balanced real estate market is one that has approximately 4 months of inventory.

In February 628 properties having a sale price of $1 Million or more were reported sold. It is safe to say that a property selling for $1 Million is no longer high end. For example, in February 2005 there were only 105 properties sold that had a sale price that exceeded $1 Million. Those properties represented only 1.7 percent of the overall market. By contrast this February’s $1 Million plus property sales represented approximately 10 percent of the market.

Given the number of properties selling with sale prices exceeding $1 Million it is not surprising that the overall average sale price continues to increase. February’s average sale price for the Greater Toronto Area came in at $596,163, which is a new record. The previous highest monthly average sale price of $587,940 was achieved in October of last year. For the City of Toronto (416 area) the average sale price came in at $630,858, also a record. The most expensive district continues to be Toronto’ central core where the average sale price was $1,584,194 for detached homes and $862,455 for semi-detached properties.

As has been pointed out in past updates, the inventory shortages and the increasing cost of purchasing a detached or semi-detached home in the City of Toronto are driving buyers to choose condominium apartments, particularly first time buyers. These market conditions were reflected in the fact that condominium apartment sales increased by 12.4 percent compared to the same period last year. Average prices did not correspondingly increase. Due to the number of properties available for sale, average sale prices remained almost the same as a year ago at $369,655 for the City of Toronto, and at $428,757 in the central core. In the City of Toronto condominium apartments now account for almost 50 percent of all properties reported sold.

Not surprisingly the pace of sales was very brisk in February. On average all properties that were listed were sold in only 24 days. Last February it took 26 days on the market. In the City of Toronto all properties sold for 101 percent of their asking price. The fastest trading area was the eastern districts, with all properties requiring only 21 days to sell and all selling for 104 percent of their asking price. Within some of the eastern sub districts the pace was even faster, particularly those districts closer to the central core. Sales in these districts only took 13 days on average, with the average sale prices exceeding the list price by almost 107 percent. In this environment it is almost impossible to determine what constitutes fair market value. It is basically what competing buyers will pay.

After two months of reported sales for 2015 this year is on pace to break 2007’s record of 93,193 sales. There have been 10,683 sales reported to date, 9 percent more than the 9,799 that were reported in 2014. The market is on pace to exceed 100,000 sales for 2015. The only thing that will slow this market is the market itself. With no likelihood of an interest rate increase, the constantly increasing cost of housing in Toronto may reach a point where affordability becomes an issue.