Toronto, Ontario - July 4, 2019 – The Toronto Real Estate Board released its monthly MarketWatch statistical update on the Toronto & GTA residential real estate market today showing sales numbers generally pretty healthy and average prices up by reasonable amounts - though, in the case of average prices, solely on the back of the “higher density market segments” [read, “lower priced”..."high density" referring to everything except Detached homes in the Report] as the Report notes. Prices are, obviously, still very high by historical standards. In the case of Detached houses, prices are simply out of reach for the majority of people - particularly when the impact of the OSFI mortgage “Stress Test” is factored in.
Overall, including all home types and all TREB areas, 8,860 transactions were reported via the Board’s MLS® system, a 10.4% jump from last June. The average price of those sales was $832,703, up an even 3%. All figures herein are year-over-year comparisons unless otherwise noted.
Inventory somewhat constrained; market pretty balanced overall
The number of homes available for sale continues to be relatively limited, though that appears to be normalizing. Incoming Board president Michael Collins references “the constrained supply of housing” though doesn’t elaborate on cause[es]. Many cite a “housing shortage” - implying, simply, “we gotta build more”. But there are other factors at play, including an increasing number of homes owned by investors who rent them out through AirBnB® [or otherwise]. This is turning into a pretty significant problem which more and more jurisdictions are acting to curtail.
Where the premise of “AirBnBs” began as a homeowner renting out a room or an auxiliary suite in their own home, it’s largely morphed into investors buying and renting out entire homes - many of those being Condo Apartments in prime areas - and often those investors own multiple units. They can easily compete with the hotel industry in many cases: They don’t have to worry nearly as much about things like regulations or employees or licenses or even taxes. More on this issue in an upcoming post…
Total Active Listings [TAL] stood at 19,655. That represents a fairly significant 5.7% drop from last June...and “twenty thousand homes for sale” might sound like a lot...but measured in terms of Forward Inventory, it’s relatively low at 2.23 months [calculated by dividing the TAL by the month’s Sales]. Last month we were at two months even. A year ago it was 2.58 months. In March of 2017 - the market’s most recent peak, depending on which stats you’re looking at - we were at an incredible “just under 3 weeks”.
The “Absorption Rate” [Total Monthly Sales/New Listings] gives an indication of how fast the market’s “absorbing” new inventory. That stood at .56 [.51 a year ago; .41 two years ago].
Jason Mercer, the Board’s Director of Market Analysis: “Buyers started moving off the sidelines in the spring, as evidenced by strong year-over-year price growth throughout the second quarter. However, because we saw virtually no change in the number of new listings, market conditions tightened and price growth picked up, especially for more higher density home types, which, on average, are less-expensive than traditional detached houses and therefore provide more affordable housing options under the new OSFI stress test regime.”
In Metro Toronto, 995 sales of Detached homes were reported in June, up 13.6%, at an average sale price of $1,332,639, down 1.6%. The balance of the Greater Toronto Area saw 3,230 Detached sales reported, up 20.3%, averaging $922,367, off .7%.
Condo apartment sales were actually flat-to-negative: In “The 416”, 1,497 units sold, down 5.6%, at an average of $636,606, up 5.1%. “Out in “The 905””, 587 sales were reported, up marginally by 2.7% averaging $483,893, up a respectable 7.7%.
Like most, I don’t much like being wrong...so I largely gave up trying to “predict the future”...particularly from the standpoint of what the GTA residential real estate market’s going to look like in the months and years ahead. Too many variables. Especially this market which seems as crazy as the weather. So I get a little “negative gratification” sometimes when “The Big Guys” get stuff wrong...as they often seem to…
Some of you no doubt remember a number of years ago when many were pointing to the “over-building” and - therefore - “glut” on the horizon of the Toronto Condo Market. Even as recently as a few years ago RBC said the Toronto Condo market was in a “high risk zone” in terms of overbuilding.
Well, don’t look now but my trusty “on the ground TO Condo market intel source”, in response to my simple, “What’s the bottom line on the TO Condo market now...particularly downtown…” offered:
"...roughly half of transactions are offer date. Still coming in around 50% of listings [selling] at or over asking…”
[Translation: They're selling on or before the date the Seller has asked that offers not be presented before, "bully offers" not withstanding...and they're selling at or over asking price.]
So much for gluts. Then again, maybe the glut was absorbed by those investors referenced earlier. Who knows? I’ll stick to reporting stats rather than trying to predict them. Much safer…
Regardless, as can be seen in the additional chart at the very bottom of this post, Detached sales still account for nearly 50% of the market. Condo Apartments are about a quarter.
“As I start my term as President of the Toronto Real Estate Board, I am proud to say that the Greater Toronto Area continues to grow, in terms of employment, population and overall diversity. As people are attracted to our region from all around the world, they obviously need a place to live. Over the next year, as demand for ownership and rental housing continues to grow, my hope is that we will see more movement from policy makers on two fronts: alleviating the constrained supply of housing and providing more flexibility around demand-side policies, including the OSFI two percentage point mortgage stress test and allowable amortization periods on insured mortgages.” - Michael Collins, new TREB President, in his inaugural MarketWatch release.
It took no less and no more time to sell the average residence last month at 21 Days on Market. That’s still pretty quick by historical standards, though that can be a little difficult to gauge since often listings are terminated before expiry, often coincident with a price adjustment [aka, “Reduction”] but sometimes just to “freshen it up a bit”.
Until next time, thanks again for reading… Enjoy the weather. #Finally
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