Toronto Real Estate Market Update May 2013

The month of May produced statistics that continued the string of strong resale activity in the Toronto market place. Notwithstanding that May of this year did not exceed last May’s sales results, in historical terms May 2013 was an outstanding month. May of last year was the pinnacle of the 2012 market. Following May, and especially after the introduction of the more restrictive lending practices by the Federal Minister of Finance, the Toronto real estate market softened, and remained soft for the remainder of 2012.

In May the Toronto Real Estate Board reported 10,182 residential sales. This compares very favourably with the 10,544 properties that were reported sold in May 2012. This represents a mere 3.4 percent decline. As reported in previous up dates the market is not uniform, with some sectors outperforming others.

Up until May, the high end market was lagging, as compared to last year. This May the high end market ($1 million and higher) has made a resurgence. This May 702 properties in this category were reported sold. This compares with 668 that were reported sold in 2012, an increase of 5 percent. At the very high end ($2 million or more) 120 property sales took place, an increase of 20 percent compared to the 100 properties in this category that sold last year. Until this month high end buyers appeared hesitant to enter the market. Their perception of value and the exorbitant and offensive combined land transfer tax no doubt were responsible for the hesitation. It is too early to tell if this resurgence is due to reduced asking prices or pent up demand, or both.

At the other end of the market, the condominium apartment sector continues to underperform, but not nearly as poorly as has been forecast. Last year 1,632 condominium apartments in the City of Toronto sold. This year 1,499 were reported sold, a decline of 8 percent. The decline was more dramatic in the 905 region, with sales down by 16 percent. Despite these declines, averages sale prices remained strong. Average sale prices for condominium apartments in the 416 region increased 1.2 percent to $372,768, and even in the 905 region, where sales were very slow compared to last year, prices moderately increased by 0.9 percent.

The total number of active condominium apartment listings is also not unfolding as forecast. In May in the City of Toronto there were 5,003 active listings. This compares very favourably to the 4,930 that were available in May 2012, an increase of only 1 percent. If the average sale price for all property types continues to rise, condominium apartments, being the least expensive housing form in Toronto, could see a resurgence, particularly if the available listing base stays low.

At the end of May there were 22,677 active listings. This represents a 10.8 percent increase compared to the 20,462 residential resale properties available for sale in 2012. This number of available properties represents 2.8 months of inventory. In May of last year there was only 2.2 months of inventory. Notwithstanding this increase in supply, the available inventory remains historically low, and still in the range of a seller’s market. In the City of Toronto (416 region) the available supply is slightly higher, coming in at 2.9 months of inventory. The eastern trading areas remain the most active with only 2.2 months of inventory with sale prices on average exceeding the asking price, in some districts coming in with a sale to list ratio of 103 percent.

Sales in May continued at a very brisk pace. In the greater Toronto area all properties sold in 23 days. In the City of Toronto sales were achieved even quicker, in 22 days. As has been the case, sales in the eastern districts took place at a blistering pace, taking only 18 days for all properties on average to sell. The condominium apartment market remains the slowest. In the greater Toronto area all sales were achieved in 32 days. The same sector in the City of Toronto was faster, all sales occurring in only 30 days, another sign that the condominium apartment market is healthier than forecast.

It is not surprising that the average sale price continues to rise. Over 10,000 sales on average taking place in only 23 days will put pressure on prices. In May the average sale price for all properties sold came in at $542,174. This is a 5.4 percent increase compared to the average sale price of $514,567 achieved in 2012. Average prices in the City of Toronto continue to rise as well. A typical home in the City (416) now costs $600,791. The most expensive properties in Toronto are detached homes in Toronto’s central districts. The average price for properties in these districts is $1,335,879, and they all sold in only 19 days.

Going forward I anticipate that the market will slightly moderate, but not to the extent that it did in the second half of 2012. Rising inventory levels should ease the pressure on buyers, enabling them to purchase properties other than in competitive situations. Ultimately rising average sale prices will make some of Toronto’s real estate unaffordable, resulting in some moderation of sale prices. This scenario is likely to play out as we head into the last part of 2013. Over the next few months I anticipate a strong market, with month end data showing positive variances compared to the same month last year.

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