Muskoka Real Estate Market Update – Year End 2018

It became obvious as 2018 wound down that the recreational market place was not immune to what was happening on the broader economic front. Throughout 2018 borrowers in the Toronto and area market place were reluctantly pulling in their horns, forced to do so by rising interest rates and borrowing costs, mortgage stress testing, and a 15 percent foreign buyers tax. By the end of the year Toronto and area sales had (on a year-over-year basis) declined by approximately 15 percent and average sale prices were off by more than 4 percent. It is anticipated that 2019 will be a year of sluggish sales and some moderation in average sale prices, particularly for higher priced homes. The same market scenario will likely play out in recreational property markets as well.

Interestingly sales volumes will to some extent by impacted by declining inventory levels. For example, in 2018, 1110 waterfront properties came to market in the combined Townships of Muskoka lakes, Bracebridge, Gravenhurst, Lake of Bays and Huntsville, almost a 10 percent decline from the 1224 properties that became available in these regions in 2017. It is even more concerning when 2018 inventory levels are compared to 2016 and 2015. During these years 1419 and 1594 recreational properties respectively came to market. Between 2015 and 2018 inventory levels have decreased by more than 30 percent.

On Muskoka’s big Lakes (Lakes Joseph, Rosseau and Muskoka) the same pattern has emerged. In 2015 there were 515 properties listed for sale on the big Lakes. This year that number tumbled to 332, a decline of over 35 percent. The same is true for Lake of Bays and the big Huntsville Lakes, although that decline has not been as dramatic.

Its not surprising that with declining inventories, sales have also declined. Combined in the Township of Muskoka Lakes, Bracebridge, Gravenhurst, Lake of Bays and Huntsville there were 684 recreational properties reported sold in 2017. In 2018 that number dropped to 565, a decline of more than 17 percent.

There was a similar decline in sales on Muskoka’s big Lakes. In 2017 there were 220 recreational properties reported sold, a number that declined to 165 in 2018. This represents a 25 percent drop in sales, which is consistent with the decline in inventory over the same period. On the basis of percentages, the decline in sales of properties having a sale price of $3,000,000 or more was greater than properties having sale prices lower than that.

It is interesting to note that not only were there few higher priced properties that sold in 2018, but it took longer for these properties to sell in 2018. In 2018 all properties in this category sold in 66 days. In 2017, which was a record year for the market, all recreation properties sold in only 59 days. Between 2014 and 2016, recreational properties in this price point sold, on average, in 73 days. Days on market in 2018, therefore, were consistent with historical norms. Although days on market increased between 2017 and 2018, there was no difference in the ratio between sale price and list price. In both 2017 and 2018 all properties sold at 95 percent of their original sale price.

The Muskoka and area recreational market place is varied and not homogeneous. As a result, it is difficult to determine what happened to average sale prices in 2018 with any accuracy, especially given the categories of properties that have sold and the numerous recreational locations. But evidence indicates that the average sale price for properties reported sold on Lakes Muskoka, Rosseau and Lake Joseph declined by 6.5 percent, from $2,211, 372 in 2017 to $2,069, 142 in 2018. If we include sales of properties (over $500,000) in the Lakes of Bays and Huntsville region, the decline in the average sale price is approximately 7.5 percent, from $1,994,810 in 2017 to $1, 843, 627. Interestingly, sales data of all recreational properties combined, which includes lower priced properties, indicates a substantial increase in the average sale price year-over-year. In 2017 the average sale price was $450,000, in 2018 the average sale price climbed to $650,000, an eye-opening increase of 38 percent.

What does all this market information tell us? It appears to be giving us the same signals that the market is projecting in the greater Toronto area. Lower priced properties are very much in demand and when available are selling briskly, putting upward pressure on prices. The urban equivalent would be condominium apartments. In the greater Toronto area average sale prices for condominium apartments increased by 11 percent. They are in demand primarily because they are affordable, even with the market pressures of increased borrowing costs and mortgage stress testing.

Under the prevailing economic landscape, the upper end of the market in the greater Toronto area has seen a considerable pull back, both in terms of sales volumes and average prices. The most recent data indicates a considerable decline in the sale of properties having a sale price of $2 million or more. In 2017, 3,435 properties were reported sold in this category. In 2018 only 2077 properties sold at this price point, a decline of almost 40 percent.  Average sale prices for this category of properties declined by 8%. Although property sales in recreational markets in this price point are discretional to a greater degree than urban markets, they will not be entirely immune to these market pressures.

Notwithstanding these turbulent conditions, Chestnut Park’s Port Carling office managed to beat market expectations by exceeding the next closest competitor brokerage office by more than 50 percent in dollar volume sales. Chestnut Park’s sales representatives were responsible for more than $250 Million in recreational property sales. Given the lack of inventory and the market pressures that have been discussed in this Report, this is a sterling performance.

As we go forward into 2019 the market challenges that have been discussed will continue to be at play. Next year will be a transitional year when less foreign capital, increased borrowing costs and stricter financing qualifications will impact the decision making of buyers and sellers. Added to these factors is the lack of inventory and supply in all price points, but especially properties having a value of less than $1.5 Million. As the year unfolds pricing will be the key to sales in the new normal that buyers and sellers of recreational properties will be adjusting to.

Toronto Real Estate Market Update – Year End 2018

There were no surprises in December. The year came to an end as expected. Higher borrowing costs and the new stress testing measures implemented at the beginning of the year are now a driving force in the Toronto housing landscape. The landscape is now one of moderating sales volumes and average sale prices, as was made evident in December’s resale data.

In December sales declined by more than 22 percent compared to last year. Last December 4,876 properties were reported sold by Toronto and area realtors. This year that number shrank to 3,781, the lowest number of December sales since the 2008 recession. December’s sales brought total sales for 2018 to 77,426, a decline of 16 percent from the 92,000 plus sales recorded in 2017, and more than 30 percent fewer than the 113,000 sales reported in 2016. In 2016 mortgage interest rates were half of what they are today, and borrowers did not have to qualify subject to rigid stress testing rules.

In December the average sale price for all properties reported sold in the greater Toronto area held up well, coming in at $750,180, 2.1 percent higher than the $734,847 average sale price achieved last December. On an annualized basis, however, Toronto’s average sale price declined by slightly more than 4 percent, from $822,000 last year to $787,000 in 2018.

The decline in overall average sale prices was driven primarily by the decline in sales and sale prices for Toronto and area’s more expensive properties. In December only 82 properties having a sale price of $2 Million or more were reported. Last December 116 were reported sold. In December 2016, 140 properties were reported sold in this price category. On a year-to-date basis, 2,077 $2 Million plus properties were reported sold. In 2017, 3,435 properties in this price category changed hands, an eye-popping 40 percent decline. It should be noted that the bulk of these sales took place in the first 4 months of the year before the Ontario Fair Housing Plan and increased interest rates took effect.

Notwithstanding these negative figures, the landscape for resale housing remains fractured. It could be argued that these negative numbers are due not only to higher borrowing costs and the stress testing measures but to a lack of supply. In December only 4,308 new listings came to market. Last December 6,289 new listings came to market, a decline of over 30 percent. Heading into 2019 there were only 11,431 properties in the greater Toronto area available for buyers, a decline of more than 11 percent compared to the almost 13,000 available properties last year at this time. Most of the available properties are located in the 905 regions of the greater Toronto area. In the City of Toronto, there are only 3,270 properties available to buyers. In fact, 72 percent of all available inventory is located in the 905 regions.

These inventory levels mean that there will be neighbourhoods, particularity in the City of Toronto, where demand far outstrips supply. This was evident in Toronto’s eastern neighbourhoods, (Riverdale, Leslieville, Beaches), were even in December all properties reported sold generated sale prices exceeding their asking price by more than 100 percent. Semi-detached properties in these neighbourhoods sold for more than 105 percent of their asking prices, and in just 11 days or faster.

The inventory shortage can be dramatically illustrated by looking at detached and semi-detached properties available for sale in the City of Toronto. At the end of December, only 377 new detached properties came to market, not many more than the 340 that sold in the month. The situation for semi-detached properties is even more severe. At the beginning of this year, there were only 154 active listings in the entire City of Toronto, only 38 more properties than the 116 semi-detached properties that sold in December. The situation for condominium apartments parallels the shortage of semi-detached properties.

These property shortages would normally result in substantial price appreciation. Normal however is no longer 2.5 percent ve-year fixed mortgage interest rates. Bank posted rates are currently 5.59 percent, and even if that isn’t the rate borrowers will have to pay, the buyers will, because of stress testing, be required to qualify at that rate. The disappearance of cheap and easy money is now driving the Toronto and area market place.

Looking forward, certainly, in the short term, there is nothing on the horizon that will see any dramatic changes to the current Toronto real estate market. Sales volumes will be lower than historic norms, and average prices will continue to moderate. Currently, unemployment numbers are at a 40-year low. Subject to stability in the mortgage markets, wages should start to rise beyond inflationary levels which with time will ease our prevailing affordability problems, which in turn should see moderate increases in sales volumes and to some extent in average sale prices. The process will be slow with both buyers and sellers at times adjusting painfully to the new resale landscape.

Prince Edward County Real Estate Market Update – Year End 2018

With the first few days of 2019 under our belt, we can now look back and see what an interesting and tumultuous year 2018 has been for the real estate market in Prince Edward County (“the County”). There is no question that this last year has definitely been a year of adjustment following the correction that occurred in the spring and summer of 2017 with the introduction of the Ontario Fair Housing Plan and related messaging from the provincial government that the overheated real estate market needed to be reined in. Moreover, subsequent contributing factors including a series of successive interest rate hikes and the imposition of the stress test which significantly tightened qualification requirements for financing had a marked impact on affordability, and combined to throw cold water onto the market, and restore a sober sense of reality to both buyers and sellers. Having said that, while sales are down across the County, much like most other real estate markets in Southern Ontario, the intricacies of the market are a little more complex and nuanced as buyer demand has remained remarkably strong and steadfast in the County as reflected by the impressively robust sale price trajectory that has continued to break new bounds and set new thresholds throughout the year.

The statistics published by the Quinte & District Association of REALTORS® (“the Quinte Board”) for December are further confirmation that 2018 marked a return to reality from the frenzied market experienced the preceding year, and to some extent can be characterized by regrouping, adjustment and taking stock. Sales were down over 46% from last year with only 15 properties changing hands compared to 28 in December 2017. With the year at an end, a compilation of the sales numbers for each month as reported by the Quinte Board shows that sales of properties across the County for all of 2018 totalled 532 which is 19% fewer than sold in 2017, the year previous. Clearly, that demonstrates a moderation in the market year over year, and is confirmation that the market correction that occurred in urban centres such as the Greater Toronto Area and neighbouring markets clearly had an impact on the County, but interestingly as suggested other market indicators qualify this conclusion or are evidence of ongoing strength and sustainability in the area.

Listings, for instance, remained in relatively short supply and there was little sign of distress selling in the market, or a rush to unload real estate in the County. Despite a year-end boost in listings with 60 properties coming onto the market in December compared to 35 last year in the same month, year over year there was only a 5% increase in new listings in 2018 with a total of 1240 compared to 1181 in 2017 when supply and inventory were remarkably tight. With the decline in sales, however, year-end inventory was up with 382 properties in the County available for sale compared to 207 last year at this time.

But price is probably one of the most interesting indicators as to the state of the County real estate market and stands as confirmation of stable interest and demand in the County. There was a dip in the average sale price in December coming in at $282,800 compared to $418,996 last year, constituting a drop of over 32%, but as discussed in previous market reports, in a smaller market like the County where only 15 properties changed hands, the particular cross-section of properties that sold in a given month inevitably has a disproportionate impact on the numbers, and results in larger statistical swings. When spread over the entire year, however, a clearer picture comes into focus. Despite a slower start to the year when three out of the four months of the first quarter registered a negative year over year price differential, each of the successive months for the rest of the year, (with the exception of December), racked up impressive price gains. This contributed to a boost in the annual average sale price of over 11%. Specifically, the average sale price for properties in the County for 2018, calculated on the basis of the average sale price reported for each month by the Quinte Board, came in at $422,732 compared to $379,445 for 2017.

Finally, those properties that did sell took only three days longer on average to sell (70 compared to 67) than they did last year when market conditions were much more heated and frenetic, and supply was even tighter.

All of these indicators taken together suggest that despite some calming and moderation over the last year, the County real estate market is stable and has legs going into 2019. Broader economic conditions continue to be generally favourable with positive economic output and job creation over the end of last year and extending into the new one. While the cost of borrowing is likely to continue to increase over the long term, (though potentially not as quickly as earlier anticipated), the County is well positioned to weather potential market upheaval given its relative affordability, and its status as a preferred destination to live and invest.

Collingwood Real Estate Market Update – Year End 2018

Likely due in part to the ongoing supply issues and affordability challenges for some Buyers, residential sales in the Western Region were down 8% from December 2017 with 81 sales reported in December 2018 vs 88 sales last December.

With relatively limited inventory, and Buyer demand helping to drive prices upward, the average sale price of a residential home in the Western Region was up 5.5% December 2018 over December 2017. Within the Western Region, the average sale price was up year over year in all areas with the exception of the Blue Mountains where the average sale price fell 5.3% to $587,698. The average sale price for The Town of Collingwood was $536,450 up 22.8% from December 2017. Clearview showed an 11.1% increase with an average sale price of $472,083. Meaford was up 3.2% to $494,313 and Wasaga Beach recorded a 5.4% increase with an average sale price for December 2018 of $406,647.

New listings were up 40.8% year over year and active listings increased from 360 last December to 446 December 2018, providing some patient Buyers a chance to jump into a more moderately paced market then experienced over the past few years. Despite that, and as mentioned, residential property inventories remain near historical lows.

In reviewing the past year, we can say with all certainty that 2018 was another banner year for Sellers in the Western Region, with low interest rates, tight supply and qualified Buyers driving average sales prices higher. And, as Buyers continue to be drawn to Southern Georgian Bay, due in part to more affordable housing options than currently available in the Greater Golden Horseshoe, the Region should look forward to continued strong demand for real estate in 2019.