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.

MARKET STATS

As TREB has continued it's freeze on anything other than monthly stats, Chris has taken it upon himself to collect his own stats for the 416. Here's what's been happening since the start of November...

So far for the month, we've had 1,100 sales; half of which are condo apartments! That puts us on track for about 3000 sales by end of month, about 11% down from last year. This might seem bad news, but in fact this negative variance is less than last month's and lesser still the the month previous which is further indication that the market has turned around and has picked up more steam. The 905 hasn't responded as positively unfortunately; it's still off by about 30% year over year. 

The average sale price in the 416 is tracking slightly lower year over year around $780,000; a 2% increase from last year. Again, though this may seem paltry by comparison to numbers earlier in the year, Chris feels this is the most "sustainable" figure we've seen since January, as 2-3% growth would make for a much more balanced market going into 2018.

The media has begun to pick up on this positivity, with some speculating that the new stress test coming Jan. 1, 2018 has some buyers scrambling to get something prior to being assessed at the new stress levels. Others argue that we may be headed back to higher average prices, faster than anticipated due to increased immigration and what accounts to a real rental crisis in the city. Pundits of the aforementioned claim have also used Vancouver's 35% yr/yr price growth as evidence for Toronto's potential price overload, as the Vancouver achieved such highs after a long lull due to foreign buyer's tax rules. Objectors to this theory argue that the new stress test rules along with already increasing interest rates have kept this from happening thus far and will continue to do so into 2018. Unfortunately only time will tell but it's clear that Toronto continues to be on the rebound. 

CAN'T STRESS THIS ENOUGH

Diane Hanley of Hanley Mortgage Group wanted to remind CP agents of how the new stress test will affect buyers. As a reminder this stress test takes the buyer's broker contracted rate and adds 2% or uses the bank posted rate of 4.89% (whichever is greater) to see whether a buyer is capable of maintaining their mortgage payments. Under the new rules, anyone putting down 20% or more on a purchase isn't subject to the test so long as they have mortgage approval and a firm offer in place prior to January 1st, 2018. Anyone doing a refinance must also be approved before Jan. 1st and must be closing on their new purchase within 120 days of the purchase. Finally, anyone purchasing a new construction property can close at anytime but again, must have mortgage approval and a firm deal in pace prior to January 1st, 2018. If you're considering making a purchase and fall into the conventional mortgage (20% or more downpayment) category, it would be wise to consult with your broker. 

ANOTHER ONE BITES THE DUST

Buyer beware! Another condo project in Toronto, the 5th in the last year, has gone belly up. According to this Financial Post article, the developer Castlepoint Numa cited lengthy delays in obtaining the necessary approvals, building permits and, in turn, financing, as reasons for the halt. Additionally, they stated on their website that "recently, the industry has been experiencing the most significant cost increases in a decade.” That may be true, but it's also true that land value has gone up significantly since the project got underway, it's possible some developers are attempting to reap the benefits of a great market and stick it to the consumer in the process. 

Some legislators argue that better policies need to be put in place in order to protect consumers, who in many cases are buying their first property and leaving a less than favourable rental property. Unfortunately most developer contracts don't give much power to the buyer and typically can't be modified. Real estate lawyers can be costly and often can't do much either. Until better protection can be put in place for consumers in the form of insurance or fines for developers that go back to the purchasers, there is currently nothing to guarantee a buyer's purchase. 

A TRIBUNAL CALLED QUESTIONABLE

The final meeting item focused on the Condominium Authority of Ontario who recently established a Tribunal to address disputes between condo owners, other owners, condo boards and property managers. The Condominium Authority Tribunal (CAT) asks applicants (offended party) to register and attempt resolution with the respondent (offending party) via an online messaging application. This 1st stage: Negotiation, costs the applicant $25. If a resolution is not reached via stage 1, then stage 2: Mediation is entered and for an additional $50, 1 of 15 trained members of the CAT will attempt mediation of the issue. If this doesn't result in a resolution then stage 3: Adjudication is entered for an additional $125, where a different CAT representative will adjudicate the case, much like the courts, to reach a resolution. No indication of fines are addressed on the website and CAO says they are currently only dealing with records disputes, ie. documents that owners have not received from boards or management. 

The reaction to this in the CP office was decidedly negative and we tend to agree. How a tribunal made up of only 15 members to deal with issues from potentially thousands of aggrieved parties seems paltry. They must assume that most records disputes will be resolved through the system between the two parties. But that leads me to question the necessity of the CAT at all. Couldn't resolutions occur via normal communication channels or in person? Will this actually prove effective or is more money simply going to government bureaucrats? 

We'd love to know your thoughts!? Please send us an email or leave a comment below. Until next week!

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.

 

A GREAT MARKET... NO, REALLY!

The focus of this week's meeting was to focus on the positive. Which is to say, the positive market we are currently experiencing in Toronto. Chris wanted to reenforce this reality by comparing this market to the market in 2011, which at the time was regarded as being a great market. In 2011, TREB stated that "it’s a seller’s market... the results have been above average annual rates of price growth for most homes." At that time, the average sale price for the GTA was only $442,000, average days on market were about 26 and total sales numbers were 7642; very close to sales numbers for this past month. What's changed since 2011? Average sale price is now up to $780,000 (according to TREB's October numbers) and we've had a substantial increase in interest rates coupled with a lot of government legislation. And yet, despite these changes, the average days on market for October 2017 was 23 for the GTA, 3 days fewer than in 2011. Sales numbers are down from last year by about 26%, but compared to the 35% drop we had after April, we're actually slowly reducing that gap. 

The main point here is that we all need to have some perspective about where we've been and where we are now. The period from Oct. 2016 to April 2017 was, according to Chris, “not a real market. When you have prices changes of 30% year over year, clearly that's not sustainable.” Last year's average days on market was 16, which Chris says is “incomprehensible for an area like the 416 and 905 to be selling that fast.”

As stated above, there were 7118 sales in the GTA for the month of October, down from around 9000 last year, or about a 26% decline. That number was less dramatic in the 416, declining by only 21% vs. the 29% in the 905 area code. Clearly, the 416 continues to move faster than the GTA, but the pacing is still quite fast for the entire area. Chestnut Park's other on-staff lawyer Richard Steward commented that "comparators are off... every past experience becomes the new norm," meaning that many looking at the Toronto market fail to appreciate how good the market continues to be because of negative media rhetoric and because they are still comparing it to that crazy run from October 2016 to April of this year. Chris thinks the market has now regularized and is in a good place. 

FIRST WE TAKE MANHATTAN

As another point of comparison, Chris thought it interesting to look at the average days on market for properties in the Manhattan real estate market. The average days on market for this past year in Manhattan was 447! Last year, it was a heady 346 days! Clearly Toronto is not New York and property values in Manhattan far exceed many in Toronto on the whole, but the point here is that even with the "insane" numbers we're seeing in Toronto, properties are still selling in a very short amount of time, relative to major city boroughs like Manhattan, which would indicate that we're still very much in a seller's market. 

 

THE REST OF THE STORY

To finish up with discussions of October's statistics, the average sale price for detached properties in the GTA came in at $1,287,000, semi-detached properties were $948,000 on average and condos were $555,000 on average for the GTA. In Toronto's central core, where the majority of condo sales are occurring, the average rises to $620,000. Because of these higher numbers, detached property sales are down by about 1.5% Like the Manhattanites, Toronto buyers seems to becoming more patient and decisive about what they are buying; especially in the highest price point. As mentioned, average days on market came in at 23; Chris still feels that a truly balanced market would see days on market increase to the 90 day mark. Lastly, there were fewer properties over the $2M range selling this October at 208 from the 300 we saw last year. This would help account for the decline in average sale price since last year. 

TREB indicates inventory levels are around 1.7 months for the GTA and 1.4 months for the 416. Chris feels these numbers are skewed by the market rally since October, as TREB uses a 12 month running average. His numbers would put the 416 closer to 2.5 and the 905 closer to 3 months. Properties in certain areas continue to sell over 100% of asking and in some cases, in less than 18 days. There is little difference in average sale price between eastern and western districts; both being around $740-750,000. Condo inventory continues to be problematically low being less than 1.8 months, with average days on market coming in at 22 days. Clearly condos are still the hottest property on the market. As a final point, we seen quite a few price reductions in many areas of the city and even the GTA. This again would seem to point to buyers becoming more discerning in their purchases. 

 

CONCULSION

With all of the information we have above, we should really feel good about this current market. We’ve reached a stage where we can look at the market going into 2018. 80,198 total sales for the year were reported at end of October. Chris expects just over 90,000 for all of 2017. If that's the case, this would be 3rd best year of the TREB, so what’s wrong with the market exactly?

We'd love to know where you are in the market and how you feel about what's happening. Do you agree with our assessment or have a different opinion? Contact us directly or leave a comment below! 

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.

MARKET STATS

As TREB has continued it's stoppage of weekly stats, Chris has continued to generate his own within the City of Toronto (the 416), and interesting things are happening. Up to October 28th, total properties sold for the month are at 2653; last years numbers for October were 3715. Projecting to the end of October for 2017, we expect just under 3000 sales, which means there will be a negative variance of 20% year over year. That may seem like bad news but that variance is up from the -29% we saw in September, so the gap is lessening. 

In addition to number of sales, the average sale price for each of last 3 weeks has been $833,000,  $826,000 and last weeks average of $825,000. The total for October should be about $828,000, an increase of 6%. 

Chris' opinion that is there is “essentially a stabilization of the market." So long as we can stay on this trajectory, we should be good going into 2018.

Open house reports from Toronto CP agents indicate a bit of a mixed bag, with many open houses in the central core garnering lots of visitors and the same buyers at various open houses listed in similar price ranges. Agents also reported seeing more buyers who had already sold their property; practically the opposite situation from months prior to April's downturn. This would seem to indicate buyers are being much more cautious about where and what they're buying.

3RD QUARTER CONDO & RENTAL REPORT

TREB did publish it's 3rd quarter condo and rental report. Among the data, sales volume was down by 29% and new listings were down by more than 10%, from 11,000 to 9000. At this pace, condos will be in short supply in the 4th quarter and going into 2018; something we've already noted in previous week's posts. Active listings in the quarter are down a little over 1%

Despite sales being down, the average days on market for condos was 22. Last year that number was closer to 25. This would give credence to the market accelerating and as noted, there is still a supply issue. The average sale price increased by almost 25% from $415,000 in 2016 to $510,000 for the GTA. Of the 5684 sales in the GTA, almost 65% took place in the 416. Additionally, the average sale price in the 416 is higher at $542,000. The central district accounted for 66% of all condo sales in the 416 and had an even greater average sale price at $603,000. 

RENTAL CRISIS CONTINUES

Toronto continues to be in a rental crisis, with the average rent in the city going up by 11% year over year. Renters can expect to pay $1,976 on average for a 1 bedroom apartment and $1,672 for a bachelor. We, as well as other continue to question the Liberal governments housing initiatives based on these numbers. There is clearly no product available and things appear as though they'll only get worse for renters going into 2018.

KEEP CALM AND TARION  

In more positive news, the Tarion Warranty Corporation announced that effective January 1st, 2018, it will be increasing it's coverage on deposits for new construction of free-hold properties from $40,000 to 10% of the purchase price. The insurance will go from a minimum of $60,000 to a maximum of $100,000. 

Unfortunately, deposits for condominium apartments will still only be insured up to the $40,000 mark. We guess this is because most new construction for condos will fall into the $400-500,000 range.

ASSIGN OF THE TIMES

The CRA has announced that it will now force the disclosure of assignment sales from developers. In the past, there was no way for CRA to know an assignment took place as it was a privacy issue.

The CRA is now taking the position that the profit, or "lift" as it's commonly referred to, from the assignment sale will not be a capital gain but instead income. Additionally, anyone selling an assignment who doesn't declare the income and is subsequently found to have done so, will have to pay tax penalties. This means we'll likely see fewer assignments going forward, and more sales going to so-called "end-users"; where buyers intend to live in the unit. As investors are less likely to purchase units for the purposes of realizing gains prior or just after incorporation of the condo. This is potentially positive news given the inventory issues mentioned above.

NEW ZEALAND IS FOR NEW ZEALANDERS!

The new New Zealand government has announced it will ban foreign buyers from buying property of any kind. No non-residents may purchase property. The rationale here is based on low interest rates, limited housing stock and immigration rising causing housing prices to have been pushed up. Sound familiar? This is a strikingly similar situation to what's happening in Toronto. This news comes after the latest election of a new government in NZ, who feels that overseas buyers are putting too much pressure on infrastructure and housing prices. Chinese buyers account for the largest percentage of foreign buyers. 

Average sale prices were up 10.4% in most cities and 18.1% in Wellington (the country's capital). The average sale price for in Auckland is now at $1,000,000, about $881,307 Canadian. Toronto's average as mentioned is now about $828,000. With all the same pressures going on here, is this what's next for Toronto?

What's your take? We'd love to hear from you! Contact us directly or leave a comment below...