Toronto Real Estate Market Update Winter 2012-2013

The Toronto residential resale market provided some intriguing data for the month of February. Looked at as a whole it would appear that it is undergoing a negative shift, the continuation of a trend that started in the second half of 2012 and has continued into this year. On closer inspection we see a fragmented market, with some sectors as robust as the record breaking pace of early 2012, and others clearly lagging, dragging the overall performance of the market into negative variance territory.

In February, 5,759 properties were reported sold. In 2012, 6,809 properties were reported sold by the Toronto Real Estate Board, a decrease of more than 15 per cent. Notwithstanding the decline in sales compared to last year, the average sale price increased, but more moderately than recent months. Last February the average sale price came in at $500,249. This year it increased to $510,580, an increase of 2.1 percent. Increases over the past few months have been in the 5 to 7 percent range.

Interestingly enough, the sales that were recorded took place at a pace normally associated with very robust markets. In February all reported sales took place in 28 days (on average) after they were listed. Any time the average days on market is less than 30 days it reflects a seller’s market, which is ironic in light of the fact that compared to last year, the market was off by more than 15 percent.

Last year, when the market was on pace to smash all previous records for sales, the average days on market was 24 days. A deeper analysis of the market indicates that some sectors and housing types are more robust than others. The high-end, or ‘luxury’ home, market is showing weakness compared to last year. Similarly the condominium apartment market is lagging compared to 2012.

In February 2012, 407 properties having a value of $1 Million or more were reported sold. This year that number declined to 334, a decline of 18 percent. The decline in the very high-end properties, having a value of $2 Million or more, has been even more dramatic. Last year 69 properties in this category were reported sold. That number declined to 50 this year, a decrease of more than 27 percent. This decrease has an obvious impact on the monthly average sale price.

It is difficult to pinpoint why this area of the marketplace is not performing well. One explanation is that buyers can no longer obtain a high ratio mortgage on properties with sale prices in excess of $1 Million. It might also be that the value of high-end properties, particularly with values in excess of $2Million, are no longer supportable. During the robust market between the spring of 2009 and last year, prices of high-end properties were strong. Perhaps they pushed the limits that the market could bear. With a second land transfer tax, purchases in excess of $2 Million become quite onerous. For example the combined provincial and municipal land transfer tax a buyer of a $2.5 Million property pays is an outrageous $92,200.

The other sector that is lagging is the condominium apartment sales. I do not believe, as is often reported in the press, that this is primarily due to an overwhelming increase in inventory. In the Toronto (416) marketplace, sales in February were down by 20 percent. Average sale prices declined by 4.7 percent. On average it took 36 days for a listed condominium apartment to sell, 33 percent longer than all properties in Toronto. Detached and semi-detached homes in Toronto sold very quickly, as low as 15 days in Toronto east end districts to 20 days in Toronto’s central districts. In comparison, condominium apartment sales are at best tepid.

Condominium apartment inventory has not increased dramatically compared to last year. The total number of condominium apartments available for sale in the Greater TorontoArea (416 and 905) was 5,458. Last year there were 5,066, an increase of slightly more than 8 percent. In the city, where the bulk of condominium apartments is to be found, the increase is less dramatic. Last year there were 3,712 available for sale. In February of this year there were 3,785, an increase of a mere 73 additional condominium apartments. Considering that sales are off by 20 percent, inventory levels have actually declined. It may be that we will see inventory levels grow as we proceed through the year, but it has not happened yet.

So the reputed cause for the slow down in condominium apartment sales cannot be attributed to higher inventory levels. Rather it is not doubt due to the restrictive mortgage lending rules that the federal government has implemented. Condominium apartments are usually the first and only choice for first time buyers. In the city of Toronto (416), the average sale price in February was only $352,614. There are reports that indicate that 17 percent fewer buyers qualify under the new stricter lending guidelines. A number that is not inconsistent with the 20 percent decline in the condominium apartment market in 2013.

Prepared by: Chris Kapches, Senior Vice-President and Legal Counsel

February 2013

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Toronto Real Estate Market Update FALL 2012

October’s market performance delivered another monthly negative variance as compared to October 2011, although the decline was not as pronounced as the decline in September. Sales in October were off by 7.1 percent compared to October 2011. In September sales were off by 21 percent as compared to September of last year. These statistics are not, however, reflective of the overall market. Not all sectors of the residential resale market are performing in the same fashion, with some trading districts and various types of properties, clearly not in market lockstep.

Notwithstanding a decline in overall sales as compared to last year, demand does not appear to have weakened. What has happened is that buyers are more judicious and deliberate, particularly when it comes to price, location, and housing type. This is evident in the fact that throughout the Greater Toronto Area all sales in October took place in only 28 days, only 2 days more than October 2011. This data includes all housing types, including condominium apartments, which are under-performing compared to the rest of the market.

In the city of Toronto all sales (again including condominium apartments) took place in only 26 days. Detached houses sold in only 19 days, even in Central Toronto where the average price for a detached home in October came in at $1,171,873. Semi-detached homes sold even quicker, in only 18 days. In the eastern trading areas (Riverdale, Leslieville, the Beaches) all sales on average took place in under 14 days. These numbers do not reflect a buyer’s market, particularly when sales prices, on average for these housing types, are exceeding 100 percent of the asking price.

Clearly the buyers are there, and if an attractive detached or semi-detached house becomes available, they have no hesitation in making a quick decision to purchase it. The difference in this market is that buyers are not, as in the early spring, randomly and indiscriminately, purchasing almost all properties that became available.

This buyer demand continues to result in rising home prices (except for condominium apartments). Even though sales declined from 7,425 properties in October 2011 to 6,896 this year, the greater Toronto average sale price increased from $474,241 to $503,479 over the same period, an increase of 6.2 percent. In the city of Toronto detached homes increased by 5 percent to $779,484, and semi-detached homes by 7 percent to $575,618. The average sale price of condominium apartments declined by 2 percent.

At the beginning of November there were 8,492 available properties for sale in the city of Toronto. Of those properties 4,849 are condominium apartments, or 58 percent. Of those 4,849 condominium apartments 3,072 were located in the central trading areas. In other words 63 percent of all condominium apartments for sale are in Toronto’s central districts. As more projects achieve registration, the supply of condominium apartment inventory will continue to increase, and with this increase in inventory prices will continue to decline, as apartments take longer to sell. In October it took 35 days for a condominium apartment to sell in the city of Toronto. This is substantially higher than the time it took for free-hold properties to sell. It is significant to note that only in May of this year all condominium apartments were selling in only 27 days, a 30 percent increase in selling time.

Overall the Toronto resale market finds itself with 2.4 months of available inventory of resale properties (including condominiums), and 2.6 months of inventory in the city of Toronto. In actual numbers this represents 20,737 available properties, a 16.5 percent increase compared to 2011. This increase can to some extent be attributed to the increase in the number of available condominium units. In October 13,054 new listings came to market, up 6.1 percent compared to the 12,306 that became available in October 2011.

This market report indicates that not all market sectors are acting similarly. Detached and semi-detached homes continue to sell quickly, particularly if they are well priced, and have an asking price less than $1,500,000. Condominium apartments take almost 50 percent longer to sell. These sales patterns reflect rising prices for detached and semi-detached homes (about 6 percent) and declining prices for condominium apartments (2%). This pattern will not change soon, but in fact will only be accentuated as more condominium apartments come to market.

Going forward we can anticipate these market conditions to continue. Condominium apartment sales will continue to be weak, probably through 2013. At some point prices will become so attractive (and assuming mortgage interest rates stay low) that condominium buyers will return in some force to the market, but that is not in the foreseeable future. Days on market will probably exceed 50 in the new year. As freehold sales decline (detached homes declined by 7 percent in October, semi-detached by 4 percent) price increase will begin to moderate, but there is no indication of massive price declines, as predicted by some economists.

Prepared by: Chris Kapches, Senior Vice President and Legal Counsel at Chestnut Park Real Estate Ltd., Brokerage

Toronto Market Update June 2012

Although the sales results for residential resales reported by the Toronto Real Estate Board were down in June as compared to June of 2011, the month’s performance was still strong. As in the case of the previous few months, the number of new listings coming to market continued to increase, prompting some economists to conclude that the sellers’ market that has been in play in Toronto since the latter part of 2009 may be coming to an end. I believe that this prediction maybe premature. It will take a string of months when sales decline and listings continue to increase before the market will convincingly move from a sellers’ to a balanced market.

In June 9,422 residential properties were reported sold. This request is down by more than 13 percent compared to the 10,850 sales reported in May, the most sales reported in any month in 2011. June’s sales were also off by 5.4 percent compared to the 9,959 sales reported in June 2011. This is one of the few months in which sales in the current month did not exceed sales for the same month in the previous year. On a year-to-date basis, 50,778 sales have been reported. This pace, if it continues, will exceed the record year of 2007 when Toronto area Realtors sold 93,193 residential properties.

A trend reported in the last monthly report continued into June. Sales growth continues in the 905 region, while sales are beginning to decline in the 416 marketplace. In June sales of detached houses were down 9 percent in the 416 area, yet up 2 percent in 905. Similarly semi-detached home sales were down 15 percent in the 416 region, while the corresponding housing type in the 905 region was up 7 percent. It is only in the case of condominium apartment sales that the 905 and 416 markets are in lock step. Condominium apartment sales were down 18 percent in the 416 region and 20 percent in the 905 area, the largest drag on the over market.

New listings continued to increase as compared to June of last year. 16,679 new listings came to market, 13 percent more than the 14,755 that came to market last June, but substantially fewer than the 19,177 that came to market in May. Since April 52,292 new listings have come to market. During this same period 30,400 sales have been reported, resulting in an increasing active listing base. At the beginning of July there were 20,583 active listings, 13.7 percent more than the 18,102 properties available for sale in July of 2011. As I have indicated in previous reports, the increasing inventory, if it continues, will shift the balance in the market, resulting in more buyer choice and ultimately moderating price increases.

Not withstanding the increasing inventory levels of residential properties in the Toronto area properties continue to sell at a very brisk pace. In June it took only 22 days for all properties (on average) coming to market to sell. Last year it took 24 days. Although the pace in June was blistering, it was one day less than the 21 days it took all properties to sell in May. Like the months of inventory, the days on market statistics must be keenly observed to see if any moderating patterns are developing.

June’s average sale price declined as compared to Mays. In May the average sale price was $516,350, slightly less than the all time record average sale price of $516,608 established in April of this year. Junes average sale price came in at $508,622, 7.3 percent higher that the $474,223 achieved in June 2011. Junes decline, as compared to April And May, is consistent with cyclical seasonal declines, and does not, therefore indicate that average sale prices are declining. Historically prices begin to decline in June, and continued to decline in July and August.

Central Toronto remains the most expensive place to purchase detached and semi-detached houses. On average a buyer can expect to pay $1,306,000 for a detached house, and $ 700,000 for a semi-detached house. Properties in these categories sold in 19 and 14 days, respectively, notwithstanding their expensive selling prices. The least expensive detached and semi-detached homes can be found in Toronto’s eastern trading districts. On average homes sold for $ 506,370. Buyer’s had to be ready to act quickly. Properties in these categories were often spending less than 10 days on the market before being reported sold.

July will be an interesting month to monitor. If at the end of the months sales for July of this year are less than sales for July 2011, it will be two consecutive months of negative sales variances. Still too early to pronounce that the market has shifted to a balanced market. But clear signs that change is underway If this does not occur, then one can anticipate a brisk market for the remainder of 2012, though less frothy than the first six months of this year. Early indications are that July 2012 will compare well to the performance achieved in July 2011.

Prepared by: Chris Kapches, Senior Vice-President
Chestnut Park Real Estate Ltd., Brokerage

Toronto Real Estate Market Update – May 2012

The Toronto Real Estate Board reported very strong numbers for the month of May. The only change to the market place in May was the number of listings that came to market and the longer term impact that more supply will have on market conditions. Until very recently demand outdistanced supply. We are beginning to see the very first signs of supply catching up to demand.

In May 10,850 residential properties were reported sold. This number represents the most sales reported in any month in 2012. Sales in May of this year exceeded sales as compared to May of last year by 11 percent. There were 9,766 sales reported in 2011. Year-to-date 41,651 residential resale properties have been reported sold. If the current pace of sales continues, sales for 2012 might top the 93,193 sales reported in 2007, the best year in the history of the Toronto and area marketplace.

What is emerging is that sales growth is the strongest in the 905 regions. Sales of detached and semi-detached homes in the City of Toronto are up by 6 percent over last year. In the 905 region sales of similar types of properties are up by 13 and 12 percent respectively. Surprisingly the same is true for condominium apartments. In the City of Toronto sales were up by 5 percent, and 12 percent in the 905 region. In absolute numbers, however, many more condominium apartment sales take place in the City of Toronto (1,632) than in the 905 region (704). There are a number of factors responsible for these variances. Generally property values are less in the 905 region than in the City. There is more supply. There is no additional land transfer tax. In the City of Toronto the municipal land transfer tax adds approximately $6,000 to the averaged priced property.

May saw one of the largest influx of new listings in many months. 19,177 new listings came to market, 20.2 percent more product than the 15,949 new listings in May 2011. Coupled with the 16,436 new listings in April, 35,613 new listings came to market in the last two months. During this same period 20,978 residential properties were reported sold. Approximately 15,000 properties remain unabsorbed heading into June. These 15,000 unabsorbed listings are reflected in the 20,462 active listings at the beginning of June. This is a 10 percent increase compared to the total number of available listings at the beginning of June of last year. If new listings continue to increase at May’s pace, price growth will moderate, as all but the most exceptional properties will take longer to sell. The months of supply data will be the statistic to watch over the coming months.

Given the foregoing it is not surprising that days on market data provided by the Toronto Real Estate Board is at record levels. In May all residential properties that came to market sold in 21 days. Last May it took (on average) 23 days for all properties coming to market to sell. In Toronto’s hot, and less expensive, eastern districts, sales took place in less than 17 days on average, even as low as 9 days in some of the eastern sub markets.

The average sale price in May came off the record average sale price of $517,556 achieved last month. May marked the end of a string of record breaking months. May average sale prices subsided slightly to $516,787, yet still almost 6.5 percent higher than the $485,362 average sale price reported in May of last year. Sales of properties having a sale price of $1 Million or more did establish a new record. In this category of homes, 668 properties were reported sold, eclipsing the record established just last month. In April 643 properties in this category sold. It should be noted that 100 properties had sale prices exceeding $2 Million, also a record.

Central Toronto remains the most expensive location to buy a home in the greater Toronto area. The average price of homes in Toronto at $568,768 is 12 percent more expensive than the averaged price property of $516,787 for the entire greater Toronto area. In central Toronto average prices rose to $681,261, 32 percent more than greater Toronto prices. And this includes condominium apartments. A detached home in central Toronto now costs $1,249,967 (almost identical to April’s price), and a semi-detached home will cost a buyer $766,440. As has been the case throughout 2012 the most accessible properties for buyers are available in Toronto’s eastern districts. The average sale price for all eastern districts in May came in at $439,376, well below the average Toronto resale price of $568,768.

Going forward the key to the way in which the market will evolve is supply. As this report has indicated, May saw one of the largest supply of new listings in years. A continuation of a large number of new listings over the remaining months of 2012 will cause the market to moderate. Prices will level off as buyers have more choice.

Prepared by: Chris Kapches, Senior Vice-President at Chestnut Park Real Estate Ltd., Brokerage