Toronto Real Estate Market Update WINTER 2012/2013

The last month of 2012 ended as the previous six months had ended, in a negative variance as compared to the same month in 2011. Like

November, sales in December were sharply off compared to sales achieved in December last year. Sales declined by almost 20 percent

compared to sales of residential resale properties in December of 2011. The Toronto Real Estate Board reported only 3,690 properties sold

as compared to 4,585 a year ago. In November of this year sales were off by 16 percent compared to November 2012, while sales in October

declined by 7.1 percent.Added to the 21 percent decline in September, the Toronto and area market place saw its greatest decline since the

2008-2009 recession in the last third of 2012.

At year end it is apparent that for the first time since the spring of 2009 the resale market is shifting in favour of buyers. December alone,

because of its seasonal nature, is never determinative of the overall market, but the last third of the year, clearly speaks to a shifting

market. Interestingly this shift has not been a crash, but rather a leveling off to numbers consistent with historical patterns of strong but not

frenzied markets over the past decade. It must also be remembered that a large segment of this market place is composed of condominium

apartments, particularly in Toronto’s central districts. That area is showing signs of considerable weakness and lowering the overall results

of the market place.

In the City of Toronto all sales (on average) happened in 37 days, 5 days longer than December 2011. This includes condominium

apartment sales, which were much slower than overall sales. In December it took a condominium apartment 44 days to sell. The slower

sales pace is having an impact on the months of inventory of properties available for sale.Whereas in the early part of this year there were

only 2.2 months of inventory, in December that number has grown to 2.7 months. It should be noted that even at 2.7 months, that is still a

very low amount of inventory. During the worst period of the American housing slump, months of inventory exceeded 10 months, with

higher inventory levels in some of the more depressed areas.

Notwithstanding seven months of negative variances, prices have (except for condominium apartments) not shown any signs of decline. In

December the average sale price for the greater Toronto area came in at $478,739, 6.5 percent higher than the $449,566 achieved in

December 2011. December’s average sale price of $478,739 was only slightly less than November’s average sale price of $485,544. It is

common for average sale prices to decline on a monthly basis as the year comes to a close.

Condominium apartment sales continue to cause concern. As 2012 came to a close, many of the condominium projects sold out in 2007

and later were registered.Many of these unit sales were to investors.A great many of those units have now made their way to market. There

is now as many as 30 percent more condominium apartments available for sale as compared to the same period last year. It is no surprise

therefore, that sales are taking longer to achieve (44 days) and average sale prices are beginning to decline. The average sale price for

condominium apartments in the City of Toronto was $342,847. This number is down 1.8 percent compared to those properties sold in

December 2011. This sector of the resale market will continue to lag as more condominium apartments come to market in 2013. Average

declines of 5 percent in sale prices are likely.

Overall there were 13,241 properties available for sale in the greater Toronto area at the end of 2012. This compares to 12,868 available at

the end of last year, a modest 2.9 percent increase. Of note is the fact that new listings coming to market in December declined compared

to December 2011. Only 4,295 new properties were offered for sale, a 10 percent decline from the 4,774 placed on the market last year. It

may be too early to conclude that this reflects a seller’s resistance to the emerging market landscape. New inventories in early 2013 will be

more determinative.

At year end 85,731 properties were reported sold for the year, down from the 89,096 sold in 2011, a 5.1 percent decline. The decline is

predominantly reflected in the last half of the year. Up until May, the market was on pace to establish a new record for sales in the greater

Toronto area, eclipsing the 93,193 sales achieved in 2007, the reigning record.

Looking forward to 2013, I anticipate a continuation of the current market trend, with large negative variances in the early months of 2013

due to the fact that they will be compared to the superlative early results of 2012. I repeat my comments from the November market update.

Sales are a function of price, servicing costs, and consumer confidence, a factor primarily drive by strong job growth.Most areas in Toronto

have become quite pricey, particularly the central districts. Low interest rates have driven market sales over the past few years. But as sales

prices push higher, the stimulating impact of low rates becomes minimized. That as well as stricter mortgage lending rules and a second

land transfer tax in Toronto are the cause of the market slow down. Mortgage rates are not expected to decline, and job growth is expected

to be tepid. Consequently, the only other area that is then a market driver, prices, can be expected to decline. The declines will be modest.