Toronto Real Estate Market Update – July 2018

There were no surprises as to the market’s performance in July. There has been a consistent improvement both as to sales volumes and average sale prices since January.  July saw the most dramatic year-over-year improvement. As compared to last year, sales volumes in the greater Toronto area increased by 18.4 percent, and the average sale price was 4.8 percent stronger than the average sale price last July.

In July 6,961 residential resale properties were reported sold in the greater Toronto area. Last year only 5,869 properties were sold. The average sale price came in at $782,129 as compared to $745,971 last July. The average sale price in the city of Toronto came in at $824,336, almost 6 percent higher than the greater Toronto average, notwithstanding that the bulk of the property sales responsible for this average sale price were condominium apartments.

For the first time since the introduction of the Ontario Fair Housing Plan measures, every housing type saw price increases as compared to last year, including detached properties. The average sale price for detached properties came in at $ 1,350,700, an increase of 3.6 percent.  Semi-detached properties increased by 7.4 percent to $935,300, and condominium apartments continued their upward trajectory, coming in at $582,247, an increase of almost 10 percent.  The average sale price for condominium apartments in Toronto’s central districts, where most sales take place (65 percent), came in at $653,137. Translated as the cost for space, central district condominium apartments are now selling for approximately $1,000 per square foot.

July also saw a recovery in the high-end of the market. The high-end of the market, primarily single-family properties, was dramatically impacted by the implementation of the 15 percent foreign buyer’s tax, the new mortgage stress testing, and three rate increases implemented by the Bank of Canada. For example, during the first 7 months of 2018, realtors reported that 1,247 properties having a sale price of $2 Million or more had sold. This number compares very poorly with the 2,625 similar properties that were reported sold over the same period last year, a negative variance of well over 50 percent.

In July this negative pattern was reversed. In July 181 properties having a sale price of $2 Million or more were reported sold. All but 16 of these properties were either detached (160) or semi-detached (5) properties. This compares favourably to the 149 similar properties that sold in July of last year, an increase of 21 percent. It should be noted that this improvement in sales volume is due to a combination of buyers adjusting to the various measures introduced by governments, increased mortgage rates and sellers accepting that their expectations as to the ultimate sale price of their properties had to be lowered. This is reflected in the fact that the average sale price came in at only 98 percent of asking price for detached homes, and in districts where Toronto’s most expensive properties are located, at only 96 percent. Even these figures are not entirely representative since they do not account for any price reduction from the original list price of these properties.

Inventory levels are a concern. Throughout 2018 they have been declining, particularly in the 416 regions. Of special concern are semi-detached properties and condominium apartments. In both categories, levels are now lower than they were last year at this time.  In July there were only 329 active semi-detached properties available to buyers in Toronto, and only 2,583 condominium apartments. Last year there were 2,710 available and that figure was substantially less than the prevailing buyer demand. Due to these shortages, all semi-detached properties sold at 103 percent of their asking price. All condominium apartments sold at 100 percent of their asking price.

Going forward the lack of inventory (semi-detached and condominium apartments) will continue to put upward pressure on average sale prices, but that pressure will be limited. The increase in mortgage interest rates and the implementation of the new mortgage stress testing will limit buyers’ ability to stretch to higher prices as was the case last year. What should result is moderate increases in average sale prices and the number of residential resales. Increases should not exceed 3-5 percent until either interest rates decline, or we see substantial increases in wages and salaries. 

Prince Edward County Real Estate Market Update – July 2018

At the midpoint of the summer season, it is clear that the trend towards market stabilization that began earlier in the year is taking root. Based on the statistics made available by the Quinte & District Association of REALTORS® Inc (“the Quinte Board”) through its Matrix data platform, the fundamentals of a healthy and sustainable real estate market for the wards that make up Prince Edward County (“the County”) appear to be in place. The stranglehold on supply appears to be easing with new listings and inventory being up on a year over year basis, providing buyers with a greater range of properties to choose from. And while as mentioned in our last report, the basis of comparison on a year over year basis as we move into the second half of the year, is the more sane and moderate conditions that prevailed following the earlier overheated frenzy which had gripped the County and much of the rest of southern Ontario in the spring of 2017, buyers appear to be taking advantage of the greater choice of properties available with both sales and average sale price reflecting positive upticks.

Specifically, and for the second month in a row, sales were up marginally year over year, tracking last month’s comparative performance with two more properties selling over the year previous (57 vs. 55 in July 2017) representing a 3.5% increase. Year to date sales, however, continue to lag behind last year’s performance coming in 24% behind last year at this time with a total of 320 properties changing hands thus far compared to 421 by the end of July in 2017.

As indicated, new listings were up in July with 155 properties coming onto the market compared to 118 last year, constituting an increase of over 31%. These latest numbers contribute to a year to date total of 857 new listings, which is 28 more than last year at this time and amounts to a 3% increase.

With the increase of new supply surpassing that of sales, inventory too, is up by over 38% with the Quinte Board reporting 572 active listing at month’s end compared to 414 one year ago. There is no question that the pace of sales has slowed since the frenzied days of the first half of 2017, but demand remains strong and steady despite tighter lending conditions which have introduced an element of, deliberation, prudence, and in some cases caution amongst buyers, all of which has had a diminishing impact on the sense of urgency that was so pervasive over a year ago. It is not surprising therefore that properties are taking longer to sell. The average days on market for July was 66 days compared to 34 last year at this time. All of this has had the effect of restoring rationality, a degree of calm and measure to the market, contributing to a greater sense of sustainability for the long term. Sellers expectations too are having a moderating effect on sales with many unwilling to compromise on selling price, holding out for that prize number firmly implanted in their head by headier times.

The effect of all of these forces combine to keep the average sale price on its upward trajectory with buyers still stepping up to the plate, but sellers demanding near top dollar for their properties. Sales that are taking place, therefore, are fetching prices that continue to push new barriers for prices in the County. In fact, the average sale price for the County came in at $452,493, over 18% higher than last July when it was recorded at $382,553.

Broader economic conditions continue to look comparatively strong looking forward, with positive numbers being generated on a variety of fronts, despite ongoing uncertainty with respect to trade, and financing becoming both more challenging and expensive. Taken as a whole, however, prospects continue to look good for a healthy and stable real estate market for the County as we move further into the latter half of the year.

Toronto Real Estate Market Update – June 2018

Nasty year over year comparisons came to an end in June. For the first time in more than a year, we saw positive variances in the number of sales and average sale prices. It was unrealistic to compare the first few months of 2017 to any period. Those months represented the most frenetic period in the history of the Toronto residential resale market, even more, dramatic than Toronto’s last frenetic increase in real estate prices in the late 1980’s. Last year’s collective market psychosis was fueled by historically low-interest rates, demand that exceeded supply, and an unrealistic belief that house prices would never stop rising. When the Ontario Fair Housing Plan measures were introduced in late April, it was the electric shock that woke up the psychotic market. What the government’s measure couldn’t impact was demand. With a large number of people migrating to the greater Toronto area annually and the limited amount of new supply available to buyers, demand will always remain strong. It’s not surprising therefore that the residential resale market produced such strong numbers in June.

During the month of June 8,082 properties were reported sold. This compares favourably with the 7,893 properties sold last year. It was not surprising that the average sale price also popped in June. In June the average sale price came in at $807,871 a 2 percent increase compared to the $791,929 average sale price last year.  As the chart below indicates, the average sale price for all properties sold in the greater Toronto area has been making a steady recovery since the beginning of this year.

Demand and supply will continue to play significant roles going forward. It is troubling that only 15,922 properties came to market in June. Last year 19,561 properties came to market, a decline of almost 19 percent. Although active listings at the end of June were on par with the number available to consumers last year, most of that inventory represents the residue of the market build-up following the implementation of the Ontario Fair Housing Plan.

What the average sale price belies is the fact that it was achieved notwithstanding that the high-end of the market continues to lag. In June 237 properties were reported sold having a sale price of $2 Million or more. Last year 264 were reported sold over the same period. On a year to date basis, 1,067 properties in this price category have been reported sold, a stunning reversal from the 2,483 that sold last year. June’s results are, however, encouraging, and as continued positive variances are produced through the balance of 2018, the higher-end will begin participating equally with the rest of the residential resale market.

The long-term problem will become affordability. Average sale prices are starting to inch towards the numbers that prompted the Liberal government to implement the 15 percent foreign buyers tax. In the city of Toronto, the average sale price for all properties sold was $870,559, approximately 9 times the average household annual income. The resilience of the Toronto and area market makes it clear that if there is insufficient supply, and growing demand, no amount of government engineering will make housing more affordable. It will take a collective political will at the municipal, provincial and federal levels to address the supply issue. Unfortunately, we have seen no collective initiative in this regard.