Tagged ‘rosedale‘

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.

Toronto Real Estate Market Update – February 2017

The question that economists, journalist, politicians and realtors are all asking is: What’s happening to the Toronto real estate market? What they are discovering is that there are no easy answers to this question. What’s prompting the question is the most recent residential resale data for the month of February.

In February, there were 8,014 reported property sales, a 5.7 percent increase compared to the 7,583 sales that took place last February. The positive variance is not large, but considering that 2016 was a record breaking year, substantially so, a positive variance speaks to the strength of the market in 2017.
Sales in and of themselves are not one of the major concerns related to the market. It’s the available inventory that’s the problem. At the beginning of March there were only 5,400 active listings. This compares very unfavourably to the 10,902 properties available for sale last year at this time.
Even at 10,902 that was an insufficient number of properties for sale in the robust market of early 2016. The decline in inventory year-over-year is more than 50 percent. And it is not going to get better. In February, only 9,834 new properties came to market, a decline of 12.5 percent compared to the 11,234 properties that became available for sale during February of last year.
What these numbers mean is that for the greater Toronto area there is only 1 month of inventory, and for the City of Toronto, 1.2 months of inventory. These are unprecedented low inventory levels. By comparison only a year ago, there were 1.7 and 2.1 months of inventory, respectively available to buyers. To put these numbers into perspective, a balanced market is one in which there are between 3 to 4 months of inventory.
It comes as no surprise therefore that all listed properties are selling at the speed of light and for prices never seen before in the greater Toronto area and the City of Toronto. All properties listed for sale in February (on average) sold in just 13 days. Last year, which I repeat was a record breaking year, it took 21 days for all properties in the greater Toronto area to sell, more than 38 percent faster than last year.
But what has captured everyone’s attention is the sale prices that are being obtained in the greater Toronto area and the City of Toronto. Overall, for the entire region, including the 416 and 905 geographical areas, the average sale price for all properties sold in February was $875,983. That number represents a stunning increase of almost 28 percent in only one year. Last February the average sale price was only $685,735. If you were a buyer who decided to postpone purchasing a house in 2016 and now are in the market, the house you could have bought last year will now cost you $190,000 more.
Prices are substantially higher in the City of Toronto. A detached property now costs $1,573,622, a 30 percent increase compared to last year. A typical semi-detached property for the rst time now costs more than $1 Million ($1,085,484). In Toronto’s central districts the average sale price for a detached property is now an eye-popping $2,503,188. Unbelievably, last February the average sale price for detached properties in the central districts was only $1,869,749, an increase of $634,000 or 34 percent. In February there were 389 properties that were reported sold with a sale price of $2 Million or more. Last year there were only 187 sales in this price category and a mere 103 in 2015.
The one plentiful source of housing, namely condominium apartments, has all but disappeared. At the end of February there were only 1,301 active listings in the City of Toronto. In February 1,632 condominium apartment were reported sold. That’s 25 percent more sales than available listings. At that pace, you don’t have to be a mathematician to see the market wall that we are heading towards. By comparison only a year ago, there were 3,432 active condominium listings, a year-over-year decline of an incredible 62 percent.
So what is happening to the Toronto residential resale market? There is no easy answer to this question. It is a combination of factors that have come together to create the perfect real estate storm – imperfect if you are a buyer.
In no particular order, the following factors have come together to create the market place we are experiencing. Interest rates remain historically low, as they have for many years. Currently a buyer can secure a five-year fixed mortgage with an interest rate of only 2.69 percent. The long period of low interest rates has generated an insatiable appetite for debt. At the current low rates, and they have been lower, if you are a buyer why not take on all the debt you can. It’s cheap money, particularly when inflation is running at about 2 percent.
Because of Toronto’s strong economic environment, to a large extent driven by the real estate industry, particularly new construction, approximately 100,000 immigrants have been making their way to the greater Toronto area annually. That means 30,000 new households, perhaps more, require new shelter annually. That number begins to compound over time.
Historically low interest rates and an increasing population have driven demand to unprecedented levels. This level of frenzied demand has in turn and over time diminished the available inventory. As indicated above, at the beginning of March there were only 5,400 active listings available to buyers in the entire greater Toronto area, which is very large geographical swath. By way of random comparison, in March 2002 when Toronto’s population was substantially less than it is today, there were 15,524 active listings. That was fifteen years ago. Ten years ago, there were even more available listings as a result for the economic upheavals the banking industry was experiencing.
Foreign buyers have also entered greater Toronto’s market place, although their impact is less a factor than some journalists and economists believe it is. A recent study by the Toronto Real Estate Board indicates the foreign buyers are involved in less than 6 percent of all resale transactions. Moreover, and unlike Vancouver, foreign buyers in the greater Toronto area are not simply parking their money in Toronto real estate, leaving properties empty for extended periods of time. In one form or another foreign buyers tend to be end-users.
There is no easy solution to the problem plaguing the Toronto market place. Greater supply would help, but the lead time to delivering new properties to the market is at least 2 to 3 years. In order to facilitate this solution governments at the municipal and provincial level will have to deregulate the existing legislation, and free up land for development. What we don’t need is government intervention in the form of higher taxes or taxes targeted at specific buyers. That might slow the market, but it won’t bring prices down and the broader impact on the economy would be disastrous.

Toronto Real Estate Market Update – January 2017

The Toronto and area residential resale market picked up where 2016 ended. In fact it accelerated the pace of sales we witnessed in December. This is unusual behavior for the market in January, usually a slow month, as buyers and sellers kick out the holiday season cobwebs. But these are unusual times, very unusual times.


The shortage of available supply is causing buyers to hunt for properties for sale, even at the very beginning of the year. In January there were 5,188 reported sales, almost 12 percent higher than the 4,640 reported sales in January of 2016. January’s sales figures would have been higher if there were more active listings available to buyers. This is clearly demonstrated by the fact that in the City of Toronto there was a decline in the number of detached and semi-detached properties sold, while at the same time average sale prices increased by almost 27 percent for detached properties and more than 26 percent for semi-detached properties.
The other interesting piece of data that emerges from January’s results is the speed at which properties were listing for sale and then reported sold. In January all properties listed for sale (on average) sold in just 19 days. The number, when compared to January 2016, is startling. Last year it took 29 days for all properties to be reported sold, a speed-up in sales of almost 35 percent. It must not be forgotten that 2016 was a record breaking year in all categories, including days on market.
It is no surprise that with a listing shortage, fast sales, and a certain buying fervor that the average sale price for all homes sold in the greater Toronto area increased sharply in January. The average price for a home in the greater Toronto area was $770,745. That is not a record, but it was close. The record is $777,031 achieved in November of last year. Last January the average sale price was only $630,193, a dramatic increase of more than 22 percent. That increase included condominium apartment sales. Excluding condominium apartments the average price of a detached home is $1,336,640, and $902,688 for a semi-detached property, eye-popping increases of 26.8 and 26.4 percent from last year.
In Toronto’s central core the numbers are even higher. A detached house in the central core will now cost a buyer $2,324,593, with semi-detached properties now trading for $1,169,123, if you can find one. Only 33 semi-detached properties sold, again speaking to the shortage of supply, and they sold in only 13 days. Other trading areas in Toronto produced similar or even more shocking results. For example, all detached properties in Toronto’s Beach neighbourhood (there were only 6 of them) were placed on the market and reported sold in only 2 days! And at 114 percent of their asking price. These are unprecedented market performances.
The decline in the number of available condominium apartments for sale is also becoming troubling, especially since the bulk of all reported sales in Toronto in January were condominium apartments. In January the combined total of detached and semi-detached properties sold was a mere 584. By contrast there were 1,125 condominium apartment sales, an increase of almost 27 percent compared to last year. At the end of January there were only 1,387 active condominium apartment listings. Last year there were 3,231 condominium apartment listings, a shocking decline of 57 percent. We have reached the stage where there is just over one month of inventory of condominium apartments, and we are only in February. It appears that the last source of abundant housing, like detached and semi-detached properties, has dried up. It is not surprising that the average sale price of a condominium apartment jumped by more than 13 percent in January.
Inventory levels will dictate how the market unfolds for the remainder of 2017. At the beginning of February there were only 1.1 months of inventory in the greater Toronto area, and 1.3 months of inventory in the City of Toronto. The 1.3 months of inventory translates to only 2,230 properties available for sale. The market is far removed from a balanced market. We would need three times the current number of listings on the market to begin approaching a balanced market.
The market is clearly heading towards a state of paralysis. Sellers are holding o putting their properties on the market unless forced to, because there are few alternatives for them in the market place. The supply shortage continues to drive up prices – the average sale price in January was $770,000 – eventually taking them to unsustainable levels. Unless there is a change in the supply side, we could see the 2016 Vancouver pattern develop in the greater Toronto area.
Even without government intervention prices reached such exhibitant levels in Vancouver that by the middle of the 2016 sales began to decline. The decline was accelerated, of course, by the 15 percent foreign investor tax that was implemented in the fall. By year-end the average sale price of houses sold in the greater Vancouver area dropped by 6.6 percent compared to a year ago and sales tumbled by almost 40 percent. The average price for detached properties sold in the region tumbled to $1.5 Million last month, a 17.8 percent decline from the record high of $1.83 Million in January of 2016. The average price for a detached house in Toronto in January was $1,336,640, and $1,068,670 in the greater Toronto area.