Photo by eugene aikimov - @@eugacc

As the days get longer and the weather hotter, the Toronto housing market seems to be taking some pause. The month of May saw modest gains in the average sale price but a closer inspection of the numbers shows there's still a fracture between our neighbours in the GTA and the City proper. 

As usual, we got our President and CEO, Chris Kapches' take on what's happened over the month. Text version below or hit the link to check out the YouTube video. 

There were no surprises in the May resale figures for the Toronto and area residential market. The three themes that emerge are that the city of Toronto resale market continues to strengthen (416 regions); the 905 region continues as a drag on the overall market, and the high-end of the resale market ($2 Million plus) has yet to return to anywhere near its early 2017 performance.

The City of Toronto has almost returned to the way it was performing last year. The average sale price for all properties came in at $861, 970. Last year at this time it was $899,000. The number includes condominium apartment sales which, significantly, continue to represent the most affordable housing available in Toronto, and accounted for more than 56 percent of all properties reported sold in May.

All properties (including condominium apartments) sold in only 16 days, and impressively, sold for 101 percent of their list price. In the eastern districts located closest to the central core (Riverdale, Leslieville, Beaches) all properties sold in just over 8 days, at more than 110 percent of their asking price. These are some remarkable statistics that are generally ignored by the daily newspapers and articles related to the Toronto and area marketplace.

The data emerging from the 905 region is not as impressive. Notwithstanding the size of the 905 region, only 60 percent of all reported sales (7,834) took place in the region. The average sale price of $805,320 was more than $55,000 lower than the average sale price of $861,970 achieved in the City of Toronto.

What is troubling about the 905 region is that 73% of all available inventory is located in the region. In May there were 20,919 properties available to buyers, but only 5,797 in the City of Toronto. As a result, the sales to list ratio in Toronto was 56.5 percent, but only 46.8 percent in the 905. The months of inventory in the 905 is 2.6, while only 1.9 in Toronto. All sales in the 905 took place in 20 days, but only 16 in Toronto, and not surprisingly, all sales in the 905 took place at 99 percent of their asking price, but at 101 percent in Toronto. Given this discrepancy in market performance, it becomes extremely deceptive if the Toronto and area resale market are analyzed as a whole, and not as two distinct marketplaces.

In May 233 properties having a sale price of $2 Million or more was reported sold. This compares very poorly with the 427 similar properties reported sold in May last year. This represents a 45 percent reduction year-over-year. The explanation for this decline is many-fold. Last year, on the obsessive belief that house prices would continue to skyrocket, high-end average sales prices reached unsustainable levels. Since then there have been three mortgage interest rate hikes, and banks are now applying more restrictive stress testing on all properties. The 15 percent of foreign buyers tax is playing some role in this scenario, but less significant than the provincial government’s perception.

All of these factors have had a strong psychological impact on buyers. They are clearly waiting to see if prices will continue to fall at the high end. That hesitation has resulted in the sharp drop in sales in this price category. However, as May’s results for the City of Toronto indicate, the market is improving which will have an ameliorative impact on the psychological hesitation of buyers in this price category.

Inventory levels are becoming a concern, particularly in the City of Toronto. Last year there were 5,779 active listings at the end of May, a period of severe inventory shortages. This year there are only 5,797. Although the difference is marginal, it represents a pattern that has been emerging. Declining inventory will lead to rising prices and hyper-competition for good properties in desirable neighbourhoods.

Condominium apartment inventory is also declining. Last year there were 2509 active listings at the end of May. This year there are 2552. Again, the difference is insignificant but a declining pattern is emerging. This is very concerning because condominiums apartments remain the most affordable housing in Toronto, at least for the time being. Prices for condominium apartments have been increasing. The average sale price for condominiums apartments in Toronto is now $602,000 and a stunning $671,000 in the central core. Considering that 64 percent of all apartment sales in Toronto are in the central core, affordability is now becoming a concern, even for condominium apartments.

Looking forward to June, it’s possible to see a marketplace that once again can be favourably compared to last year. The initial impact of the Ontario Fair Housing Plan measures will be history and next month’s chart will look much smoother than the one below: 

PHOTO BY TIM GOuW

The words of the month for April was recovery and supply. In the City of Toronto, we're seeing numbers coming closer and closer to last year's all time highs due to a lack of supply in many areas of the city. But we're not quite there yet, and appear to be only entering our recovery phase from last year's correction. 

Our President and CEO Chris Kapches breaks it down below; check out the video or read along. Be sure however to check out the chart of the average sale prices for the GTA from the past year, so you can get a sense of where we've been over the last year and where we appear to be headed. 

TORONTO REGION
REAL ESTATE MARKET REPORT

The Toronto and area residential resale market continued its recovery in April. For the fourth consecutive month, the market has shown improvement in both the growth of average sale prices and the number of properties reported sold. In April 7,792 residential properties were reported sold, and the average sale price for all properties reported sold in the Greater Toronto Area came in at $804,584. In January, the average sale price had slumped to $735,754. In four months, Toronto’s average sale price has increased by almost 10 percent.

The market has not recovered to where it was in April 2017, but it is showing signs that it might, particularly in the City of Toronto (416 region). The reason for this recovery is obvious. The fundamentals that drove the frenzied early 2017 resale market are unchanged: strong employment numbers, a growing economy, migration to the greater Toronto area, and insufficient inventory to meet buyer demand. With more than 100,000 people migrating to the Toronto area annually, the supply-demand scenario is no longer in balance. It’s a testament to the strength of the Toronto resale market that it has continued to recover notwithstanding three mortgage interest rate hikes and new more rigid stress testing for mortgage qualification.

In the City of Toronto, the average sale price came in at $865,817 for all types of properties sold, including condominium apartments. The cost of a detached property rose to $1,354,719, while semi-detached homes came in at $1,021,986. These numbers are starting to approach the numbers that the market was producing last year. Year-over-year sale volumes are down by 34 and 16 percent respectively, but in the case of semi-detached properties, this is a product of supply and not demand. In some of Toronto’s trading area, there were no reported sales of semi-detached properties. That’s because there were no listed properties for buyers to buy.

The strength of the market is profoundly demonstrated by the short time periods that detached and semi-detached properties remained on the market. All detached properties sold in only 17 days and for an amazing 101 percent of their asking price. All semi-detached properties sold in an eye-popping 13 days and for a startling  106 percent of their asking price. These numbers are only slightly short of what was happening last year.

Condominium apartment prices have risen consistently, even through the downturn in the market following the announcement of the Ontario Fair Housing Plan in April of last year. In April, and for the first time, the average sale price for all condominium apartments sold exceeded $600,000 coming in at $601,211. In Toronto’s central core, where more than 67 percent of all sales take place, the average sale price reached $667,345. Toronto’s most affordable housing form is rapidly becoming less affordable. Not only did condominium apartments sell with growing average sale prices, but they all sold in only 16 days and at 101 percent of their asking price. In the central core, they also sold at 101 percent of their asking price and in only 15 days.

Condominium Apartment sale prices are, like other housing forms, being driven by a severe lack of supply. At the end of April, there were only 2,130 apartments available to buyers, a little more than one month’s supply. Last year at the height of Toronto’s frenzied market there were 2509 condominium apartments on the market, a year-over-year decline of available inventory of more than 15 percent.

The high-end market has been the only laggard in Toronto’s resale market. Year-to-date only 600 properties having a sale price of $2 Million or more have been reported sold. Last year 2221 had been reported sold, a decline of more than 73 percent. This market sector is, however, also improving. In April the negative variance, as compared to last April, was only 48 percent.

The Toronto and area marketplace is beginning to send out two powerful messages. Firstly, the foreign buyer’s tax that was part of the Ontario Fair Housing Plan was directed towards a non-existent enemy. There were no hordes of foreign buyers buying Toronto real estate. There were no barbarians at the gate. That has been subsequently verified by not only the provincial government but by other sources, namely the Toronto Real Estate Board and CMHC. Secondly, the Toronto resale market is being driven by local, domestic forces. That being the case, governments should abandon any attempt to engineer the marketplace and focus on measures that will help the increase of supply.

Prepared by: Chris Kapches, LLB, President and CEO, Broker

Happy New Year! We are continuing the initiative started last year. Each week The Glenn Team provide highlights from the weekly CP office meeting to provide a balanced overview of the Toronto and GTA markets and relevant issues affecting real estate markets. Meetings are overseen by Chestnut Park's CEO and Broker of Record, Chris Kapches, LLB, who provides weekly analysis and commentary. Additional input is provided by the CP Toronto office Realtors who give a day to day, real life perspective of the local markets.

As we move into 2018, we've been a bit slow on the uptake given the seemingly relentless strain of viruses going around. Whether it's the result of extreme cold or too many holiday revelries, we encourage everyone to stay warm and healthy this new year! Now onto the meeting...

REWIND & FAST FORWARD - 2017 into 2018

To begin this recap, we have a recap! Chris thought it best to review some of what affected 2017's market as we go into 2018. Canada was the top performing country in the G7 with an annual growth rate of 3%. Consumer activity drove the majority of growth throughout the year; though is expected to slow in 2018. Economists are estimating anywhere b/w 2-5%, with 2% being the more realistic expectation. Unemployment is now below 6% nationally having created around 79,000 jobs, but Canada is still behind the U.S. (4.1%), Japan (2.8%), Germany (3.6%) and the U.K. (4.2%); there is anticipation those unemployment numbers will continue to drop. The downside there is that lower unemployment will lead to hikes in Interest rates. Canada is currently the most indebted nation in the world, with 170% debt to household income, so some adjustment to prices in the housing market would be helpful to most.

There is another rate hike by the Bank of Canada anticipated and the new stress test has officially been implemented. Given both of those factors, some economists speculate about 10% of the buyers in Toronto to drop out of the market. Chris doesn't share this sentiment given many buyers have had to qualify at the stress test rates prior to January 1st. The new stress test is unlikely to impact housing volume but likely will impact sale prices. If a buyer with 20% down was approved at $800K in 2017, the same buyer today may only be able to get $650K. Buyers may start offering less for less or seller’s may find they need to lower their price point, but anyone purchasing properties over $1.5M are unlikely to be affected given the downpayment required for such properties. What IS likely to be affected is the condo market, as condos remain the most affordable property on the market, regardless of lack of inventory.

Uncertainties that for 2018 include NAFTA talks and the upcoming election in Ontario. Both will play key roles in shaping the economy and subsequently, our housing market. Overall, however Chris felt that there was nothing seriously bad on the horizon for the housing market this year but given it is a year of uncertainty in certain areas and that last year saw what he called “most incredible oscillation in real estate” and a “very, very tumultuous year”, we should expect to see decent sales and more normalized sale price increases.

 

DECEMBER MARKET STATS

December is typically a "boring" month stats-wise as the market tends to die down with people getting into holidays. What we do get however are the stats for the year. This year saw a high total for number of sales reaching coming in just over 92,000 for the GTA, about 2% below 2016's highs of 113,000; the most sales ever seen in TREB's history. The bulk of those sales took place prior to May, after which, the drastic drop in activity and prices took place. Our total for 2017 ranks in the top 4 number of sales over the course of the TREB. For December, the average sale price came in at $735,000 across the GTA ($741,000 in the 416), with 4930 sales total. That's an increase in both the average sale price and sales volume year/year. The average sale price for detached properties in the 416 was $1,250,000 (-2.8% yr/yr). In the 905, the average was $910,000, further echoing the disparity b/w both markets. Semi-detached properties averaged $903,000 (+11.5% yr/yr) and condominiums came in at $532,000 (+14.1% yr/yr) in the 416. Given these numbers, clearly buyers are still unwilling to pay the high prices some sellers still demand for detached properties and are moving to more affordable property types; a trend no doubt to continue into 2018. All properties sold in 27 days or less, which remains a fast market pace. 

The number of high-end properties (over $2M+) for the month came in at 116, including 7 condominium apartments, so some condos are now inching up to that $2M+ range as well. Toronto's East end seems to remain the strongest area for price and time to sale, with all properties being sold for 100% of asking or more. Other areas of the city are not going for 100% of ask so it’s likely sellers will be pricing properties to sell as opposed to expecting a flood of buyers to pay the big prices we saw at the beginning of 2017. Overall, the data for December is very positive. There is a strong likelihood that the media will report huge drops in prices when January’s numbers come out and may paint a negative picture of the market but that’s only due the the over-inflated prices from the early part of 2017.

Here's a handy infographic developed by Chestnut Park's marketing team giving a summary of the December stats. 

PERIODIC PIECE

Changes to the Condominium Act in the late part of 2017 introduced the requirement of condominium boards producing a Periodic Information Certificate. This PIC is much like the summary retained in most Status Certificates without the attachments. It provides general information on the property, who the property management for the building is, the number of units leased in the building, directors of the corporation and addresses to contact them. It also gives details regarding insurance amounts for the building along with deductibles and financial Information to get some stance of the financial stability of the corporation, ie. the amount of expenses, liabilities and any foreseen costs coming up, or what the increase to the reserve fund will be going forward. Lastly, it details any legal action or party to judgements the corporation has. This document should be issued every 6 months to condo owners, so if you live in a condominium currently and have yet to receive one, you should contact your property manager to inquire. This is a helpful document for anyone thinking about selling their unit or simply interested in how their building is doing in a general sense. 

Are you finding these meeting recaps useful? We'd love to hear from you! Feel free to leave a comment below or get in touch directly!