Toronto Real Estate Market Update – December 2013 Year End Summary

There were no surprises in the data related to the Toronto residential market for the last month of 2013. Since the late spring the Toronto market has been very robust, outpacing comparative months in 2012. December was no exception, with 4,078 residential properties reported sold, almost 14 percent higher than the 3,582 properties reported sold in December 2012. Also as in previous months, the average sale price was up sharply at $520,398, almost 9 percent higher than the average sale price of $477,756 at the end of 2012.

Increases in average sale prices were particularly high in the case of detached and semi-detached Toronto homes. In December detached homes saw average sale prices rise by 18.9 percent to $864,351, and semi-detached prices rose to $ 644,423, an increase of 15.9 percent. The overall average sale price increase was tempered by an increase of only 7.6 percent in the case of condominium apartments. Having said that condominium apartment sales increase by almost 21 percent in December, while detached property sales declined by 6.7 percent, and semi-detached properties increased by only 8.8 percent. These disjointed numbers point, of course, to a supply problem. At the end of 2013 there were only 11, 418 properties for sale in the greater Toronto area. This compares vary unfavourably with the 13,241 at the end of 2012, almost 14 percent fewer properties available for sale year over year.

By year end the greater Toronto area compiled sales of 87,111 residential properties. In 2012 only 85,496 homes were reported sold. Although this only represents an increase of about 2 percent, 2013’s results came in as the fourth best year in the history of Toronto and area sales. The record for sales remains 2007 at 93,193 reported sales, followed by 2011 (89,096), 2009 (87,308) and now 2013. This year’s results were only marginally less than the third best year on record.

The consensus is that 2014 is likely to resemble the results of the 2013 resale market. Prices are expected to increase less robustly than in 2013, registering an equal or slightly higher number of sales in 2014 as compared to 2013. There are some potential problems for the market going forward. The above-noted levels of availability of resale houses for sale are exceptionally low. Currently the months of available inventory are only 2.5 months for the greater Toronto area, and only 2.6 months for the City of Toronto. Toronto’s eastern trading areas have eye-popping inventory levels of less than 2 months, not nearly enough to accommodate buyers’ demand. Unfortunately these low inventory levels are having a direct impact on average prices. Low inventories are resulting in multiple bids for available properties causing prices to rise at alarming rates – i.e detached and semi-detached home prices rose by 18.9 and 15.9 percent respectively in December.

If you are a Toronto area home owner these increases are psychological pleasing, but the negative side is that they are moving house prices to levels that are inconsistent with average household incomes. In 2013 average household incomes increased by 2.4 percent, substantially less than average house prices. So what has been sustaining the robust Toronto resale market? Simply, mortgage interest rates. Notwithstanding an increase the summer of 2013, mortgage interest rates continue to hover near historical lows. Toronto and area homes remain affordable because of the current mortgage interest rates. An increase in rates, particularly a sizeable increase of more than 1 percentage point, would significantly impact the market. The good news is that rates are not expected to rise.

Based on the performance of the Canadian economy and the signals being sent by the Bank of Canada, the earliest rates are expected to rise is in the latter half of 2014, and perhaps not until 2015. Notwithstanding the U.S Federal Reserve’s decision to reduce quantative easing (by buying fewer bonds each month going forward) the latest employment numbers do not indicate that either the American or Canadian economies are strong. In December Canada lost 45,900 jobs, increasing the jobless rate to 7.2 percent, and the U.S saw an increase of only 74,000 new jobs. That being the case, do not expect mortgage interest rates to rise. However even these low interest rates can support a market with rapidly rising sale prices for only so long without a corresponding increase in household incomes. That is not going to happen.

So from this corner we anticipate a very strong market for the first half of the year, clearly out pacing last year over the same period. The second half should moderate as prices continue to rise and the threat of increased mortgage interest rates becomes more likely. Sales between 85 – 87,000 are likely – not because of demand, but rather availability – and with a year-end average price coming in at approximately $ 540,000 or 3.5 percent higher than the $ 523,036 achieved in 2013.

Green Condo Checklist

Toronto Real Estate Market Update October 2013

October marked the fifth consecutive month in which reported sales of residential properties have outpaced the same month in 2013. Since June the greater Toronto market place has produced 31,049 property sales. During the same period last year only 25,987 properties were reported sold. This represents an increase of over 5000 property sales or 19.2 percent. October’s results were a carbon copy of this 4 month period. 8000 properties were reported sold. An increase of 19.2 percent compared to the 6,713 properties reported sold in October 2012. October’s results clearly have dispelled any notion that the recent increase in sales activity in the greater Toronto area was an aberration.

Previous market updates posited that the recent increase in sales activity may have been due to a perceived fear that mortgage interest rates were climbing higher. Increases in interest rates combined with the rising average sale price for Toronto properties would make home ownership unaffordable for a large number of potential buyers, in particular first time buyers. During the month of October mortgage interest rates actually came down. Five year fixed rates at 3.49 percent are now available. Since rates are not now anticipated to increase anytime soon, Toronto’s strong resale market is not likely to abate and will continue into 2014. The increasing cost of purchasing a house in Toronto and perhaps the intervention of the Federal Minister of Finance are the only factors likely to curb the current strong market.

Adding to these strong market conditions is the lack of available properties for sale. In October 13,110 new listings were delivered to the resale market place. This is a decline of 4.2 percent compared to the 13,685 delivered in 2012. Heading into November only 18,557 properties were available to buyers in the greater Toronto area. Last year there were 20,737, a decline of 10.5 percent. Interestingly sales of semi-detached homes declined by 2.4 percent in the Toronto market place. This decline was not due to demand, but to supply. This is reflected by the fact that in October the average sale price for semi-detached house sales in Toronto increased by 11.7 percent, almost the equivalent of the increase in the average sale price of detached homes (12.4 percent).

May of this year established the highest average sold price in the greater Toronto area at $ 540,544. October came very close to matching that achievement. The average sale price for all properties sold was $539,058, a 7.4 percent increase compared to the average sale price of $502,127 produced in October 2012. The average sale price for detached homes in the City of Toronto came in at $873,509. Semi-detached homes were a little less expensive at $642,112. Unfortunately there is not much supply for buyers to choose in the case of semi-detached homes. In Toronto’s central core area the cost of a detached house was $1,369,135, this is slightly off from the $1,397,683 it cost to by a similar type house in September.

Generally high end, luxury home sales (properties having a sale price of $ 1 Million or more) continued the improvement witnessed in September. In October 550 properties were reported sold in this category. This compares very favourably to the 378 sold in October 2012, and the 371 sold in October 2011. An increase of approximately 50 percent. 90 of these high end sales exceeded $ 2 Million. 8 of these 90 reported sales were condominium apartments, the rest were detached homes. No semi-detached property sales exceeded $ 2 Million.

Condominium apartment sales have continued to do well in the second half of 2013. In October condominium apartment sales exceeded the results of the overall market. Sales increased by 20.4 percent in the City of Toronto compared to last year. The increase in sales was accompanied by an increase in average sale prices. In October the average sale price of a condominium apartment was $ 384,441, an increase of 7.2 percent. Notwithstanding the improvement in condominium sales, they still take longer to sell than other types of properties, averaging 33 days in the in the City of Toronto. Overall sales in the greater Toronto market place (including condominium apartments) were achieved in 27 days. Sales were much faster for various housing types and various areas of the City. For example sales of semi-detached homes in the eastern trading districts took place in only 13 days. Sales of these types of homes were even faster in the central districts, coming in at an astounding 12 days. Condominium apartment sales brought the overall average for days-on-market to 27 days.

Looking forward more of the same can be expected in November and December, with of course, the seasonal adjustment coming to play. There is simply no economic change that is anticipated that might cause the current market conditions to change.

Prepared by Chris Kapches, Chestnut Park Real Estate Limited, Brokerage

Green Home Checklist

Toronto Real Estate Market Update September 2013

Since June the Toronto residential resale market place has outpaced sales achieved in the same month in 2012. September was no exception. September’s performance was very strong. 7,411 sales were reported for the month, far out-distancing the 5,687 sales reported in September 2012. This represents a 30 per cent increase. August’s increase, compared to August 2012, was 22 per cent.

These strong numbers are no doubt being driven by consumer concern over increasing mortgage interest rates. In the last few months rates have increased by more than 30 per cent. The fear is that rates will continue to rise throughout 2013 and into 2014. The strong performance by the Toronto area market place in part is an indication of buyers making buying decisions today that would otherwise have been made in 2014.

All property types showed very strong agains compared to the same period in 2012. In the City of Toronto detached home sales were up by 31.7 per cent, semi-detached by 13.3 per cent, townhomes by 18.3 per cent, and condominium apartments by 31.5 per cent. Similar data emerges from the 905 trading area.

It is not surprising that the average sale price continued to rise in September. The average sale price for all properties sold in the greater Toronto area was $533,797, an increase of 6.5 per cent compared to September 2012’s average sale price of $501,326. In the City of Toronto the average sale price was even higher, coming in at $571,410. Last year it was $547,901. Detached and semi-detached homes in the City of Toronto are the most expensive housing types. The average price for a detached house was $856,169 in September. Semi-detached homes were less expensive, but still pricey at $616,049. It is not surprising to see buyers rushing to take advantage of still low interest rates. Five year fixed mortgages are still available at 3.69 per cent, and in some instances as low as 3.59 per cent. The most expensive homes in Toronto are detached properties located in the central core of the city. The average price for a detached home in the central core was $1,397,683. Last September the same property sold for $1,224,940, an increase of more than 14 per cent.

Not only were a lot of sales achieved in September at higher average sale prices, but properties sold in very fast order. All properties (on average) that came to market in September in the entire greater Toronto area sold in 27 days, 2 day faster than last year. The speed of sales was even faster depending on housing type and location. Detached homes coming to market in September in the City of Toronto sold in 22 days. Semi-detached homes sold in an eye-popping 14 days. In Toronto’s central core they sold in only 11 days. This pace verges on frenzy. Only condominium apartment sales lagged behind other housing types. Condominium apartments took 36 days to sell, more than 30 per cent longer than the overall market pace. This pace is identical to the rate at which condominium apartments sold in September 2012.

Muskoka Real Estate Market Update

The heavy weather that the region experienced this winter and the early spring, including the flooding in many parts of the region, is now long forgotten. The early fall has seen some of the best weather of the year, and with the improved conditions, listings and sales have increased, bringing the market to a status quo similar to where it found itself at this time last year. During the first quarter of 2013, both sales and inventory were off by 20 percent. Market conditions improved in the second quarter, with continued improvement throughout the summer months.

At the beginning of October there were 1236 active listings of recreational properties available in the Muskoka-Haliburton multiple listing service. This represents an increase of 4.7 percent compared to the same period last year, and a dramatic improvement compared to the recreational property inventory available at the beginning of July. Available recreational properties increased in all the trading areas in which Chestnut Park’s agents work with buyers and sellers. On the Muskoka Lakes 341 recreational properties were available, an increase of more than 10 percent. On Lake of Bays there are 131 available properties, an increase of 4 percent, and 311 in Haliburton, an increase of almost 5 percent.

With increased inventory and better weather sales have dramatically improved, matching or exceeding sales results for the same period last year. Although sales for the entire cottage region are slightly off, in the Muskoka Lakes, Lake of Bays, and Haliburton, the market’s performance has been encouraging. 651 properties have been reported sold for the entire cottage region, 37 fewer recreational properties than for the same period last year. On the Muskoka Lakes the results have been stronger. 184 properties were reported sold to the beginning of October, 2 more than last year. Lake of Bays was only marginally off last year’s pace, 81 in 2012 and 79 this year. In Halilburton the results were marginally better, 200 sales this year compared to 198 last year. Compared to the slow start of the year, these results are very impressive.

Pricing of recreational properties continues to be a hinderence to sales. The sale of cottages is rarely driven by necessity. Consequently sellers can be more leisurely in selling their cottages, often settling on asking prices the buyers do not perceive as reflecting value. Pricing of cottage properties is more complex than urban markets: location, exposure, grade, acres, water depths and access can all impact value in dramatic ways, making direct comparisons with properties already sold very difficult. But as sellers are not motivated by necessity, buyers most often seen even less motivated. As a result properties that have not been competitively priced will take a considerable amount of time to sell, with, in many cases, numerous price reductions.

Prepared by: Chris Kapches, CEO Chestnut Park Real Estate Limited, Brokerage

Collingwood Real Estate Market Update

After a brief pause in August which registered steady but not breathtaking sales, the Georgian Triangle real estate market appears to have rallied to the pace-setting groove to which it has apparently become accustomed this season, recording more sales for the month of September than any year since 2005. Some of these sales may have been spurred by the recent increase in fixed term borrowing rates and the prospect of further tightening in the lending regime, prompting some buyers to get off the fence and commit to purchasing. But rather than being a temporary and anomalous blip September’s numbers appear to be part of a broader phenomenon attributable to the Georgian Triangle real estate market being on firm ground and benefitting from the ongoing comparative value, attractiveness and affordability of property available for sale in the area. September’s results therefore build upon this year’s strong performance to date, suggesting that the Georgian Triangle is well positioned to move into the final quarter of 2013 with sustainable growth and healthy sales.

According to the Georgian Triangle Association of REALTORS® (“GTAR”) MLS® Statistic Report for September, 203 properties were sold logging a 28% increase over the 158 sales recorded in September of last year, and 15% more than the 176 sold in September 2011. While the surge in property sales was particularly concentrated in the $100-149,999, $250-349,999 and $600-699,999 ranges the strength of the market was generally felt across the board. In fact sales figures for this September were either better or equal to those for September of last year in every price category but one ($240-249,999). This month’s numbers bring year to date sales to 1644, 8% ahead of last year at this time when 1517 were recorded, and almost 16% ahead of the year previous when there were 1410 sales by the end of September. Total dollar volume for the month increased at an even higher level beating out last year’s performance by 35%, and updated year to date figures to reflect a 10% bump over last year.

New listings were up by 3% with 545 properties coming onto the market in September compared to 529 last year, bringing year to date figures to 5168, 3% behind last year’s total of 5316 at this time. With the disproportionately robust sales pace, however, inventory was down 3.5% from last year with only 2388 active listings recorded at the time that GTAR’s report was created, compared to 2476 last September, and even fewer than the 2501 active listings recorded at this time two years ago.

Not surprisingly, with sales outstripping supply, the average residential sales price year to date is almost 5.5% higher than last year coming in at $332,619 compared to $315,436 last year. The average sale price for single family residential properties for the month of September was $332,830, 3.5% more than the $321,501 average sale price last September. Measured over a twelve month period, the average sale price for this property type is up 6% year over year ($334,529 compared to $315,334) highlighting the steady price increases that have been racked up over the last year.

All in all prospects are good for a healthy fall market. Comparatively speaking, the Georgian Triangle continues to be well placed to weather changing economic conditions, including some variation in the lending environment. Given the tight market and fundamentals which support an optimistic forecast for property sales in the Georgian Triangle as we move into the final quarter of 2013, sellers contemplating putting their properties on the market would be well advised to do so, keeping in mind of course the old adage that pricing should reflect value in the property.

Prepared by Richard Stewart, VP and Legal Counsel Chestnut Park Real Estate Limited, Brokerage

Buy or Sell First?

Good question. Unfortunately, like with many good questions, there is no one clear answer. The answer really is: it depends. It depends on your personal preference, the type of home you are selling, the type of home you are buying and the current market conditions.

Option 1) Selling first (preferably with a long closing) and then buying, mitigates the risk of carrying two properties at the same time. But putting your home up for sale before having found your new home can provide uncertainty. What if you cannot find a home you like? If you are looking for an unusual home, this is not practical and you may find yourself leasing in the interim.

However, if you are clear on the type of home, the neighborhood, the price AND you find several places that meet your criteria, then putting your home up for sale first may be your option.

Option 2) Buying first, especially if you are looking for a unique property, can make the most sense. But keep in mind, if you are unable to sell your existing home within the closing period, you may be left carrying the cost of two properties. Bridge financing is available, but the term may be limited.

This option ensures you buy the home you love, but keep in mind, a unique property will be in high demand, so buying conditionally on the sale of your home may not be an option. Are you willing to buy firm (no conditions)?

As you can see, there is merit to both options. You may even find yourself selling first this time and buying first next time. Really…it just depends…

Pricing in Toronto’s Real Estate Market

When preparing to put your home on the market, the goal is (quiet obviously) to get the highest price possible. Perhaps you’ve owned your property for decades, perhaps you’ve invested time and money in improvements like interior updates, additions, or landscaping. Presumably, all the care and attention you have shown your home will be rolled into the cost value in your mind. And while this is all completely reasonable, it is advisable to avoid overpricing your home above all else when putting it up for sale.

Many home sellers reason that they’d like to set the price barrier high and negotiate down from there, but this can be a dangerous move that could cost you some great sale opportunities. Interest in your home will be at its highest when the property is first released on the market (generally within the first week). Home buyers who are serious purchasers will be ready to pounce on new inventory that is well-priced, which could lead to a swift transaction. If the list price of your home is set too high, home buyers and their agents could be discouraged to view it. Later on, as the home sits on the market, you may be required to reduce the price below value in order to drum up new interest.

Remember, the value of your home is determined by what the current market will bear; not what you paid for it originally, or how much you’ve invested in updates. Setting a fair price will attract serious buyers, and if you’re lucky, drum up enough interest for multiple offers.

Courtesy of Chestnut Park Real Estate Limited, Brokerage Blog

What Exactly Do Condo Fees Cover?

With a boom in condominium construction over the past several years, the discussion surrounding new condo owners’ associated fees is a common one. Do these additional monthly fees range from old to new buildings and from neighbourhood to neighbourhood? In short, yes.

Generally calculated based on unit size, your monthly condo fee is your percentage share of the cost it takes to run the building. This includes such things as utilities, window washing, garden maintenance, snow removal, security/concierge, parking, etc. A percentage of this will be allocated to a contingency fund, reserved for unforeseen issues with the building such as roof, heating or plumbing repairs. Your building’s management is, by law, a not-for-profit company and therefore fees collected must cover building maintenance and contingencies, and not a penny more.

In certain buildings, utilities can be controlled and calculated on a per unit basis, in this case, condo fees cover common maintenance only. Your building’s amenities package also contributes to your monthly cost and fees will vary based on whether you have access to things like a gym, pool, rooftop patio, 24-hour security, or indoor parking. As you can certainly imagine, a building with a variety of amenities is more costly to run. That being said, new buildings tend to have lower condo fees than older buildings as their recent construction is often much more efficient.

The idea is for fees to remain on par with what it would cost you to own a home of a similar size, price range, and neighbourhood. Toronto condo fees average between $0.50 and $0.70 per square foot. The per square foot total is an important calculation to pay attention to. If you’re comparing two or more buildings when looking to purchase a condo, always ask for a list of services that condo fees cover to aide in your decision.

In some buildings, it is possible to opt-out of certain services (eg. parking), however it’s always good to keep your re-sale value in mind. Even if you don’t require a parking space, it will likely be an attractive feature when the time comes to sell.

Beware of pre-construction condos that offer monthly fees much below $0.50 as there have been reports of builders setting rates low in year one to entice buyers, and then subsequently raising fees significantly in years two, three and four. That said, it is absolutely normal and expected for your building to re-visit the maintenance budget each year and adjust your fees accordingly.