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March 2018 Toronto Real Estate Market Report

March 2018 Toronto Real Estate Market Report

 

In March the Toronto residential real estate market clearly demonstrated its resilience. Notwithstanding the provincial government’s attempt to engineer the market, it continues to respond to forces that have nothing to do with the Ontario Fair Housing Plan. That’s due primarily to the fact that the underlying basis for the province’s measures, namely foreign buyer speculation, were unfounded. Since the implementation of the Fair Housing Plan it has been demonstrated that less than 5 percent of all purchases of residential properties in the greater Toronto area involved foreign buyers.

The real and fundamental factors driving the Toronto and area marketplace have remained unchanged: low unemployment, rising wages, a growing (albeit modestly) economy, and most importantly, the combination of low supply and continuous immigration into the greater Toronto area. Ultimately what will control the Toronto residential marketplace is the market itself, specifically the cost of housing. The Fair Housing Plan, to its credit, did act as a wake-up call to buyers, but ultimately it will be the cost of mortgage money, qualifying for mortgage financing, rising average sale prices (due primarily to a lack of supply) that will control and moderate the residential resale market.

In March the lack of supply was clearly demonstrated by the rising average sale price. March saw an average sale price for all properties in the greater Toronto area of $784,558, an increase of 2.2 percent compared to January, and almost 7 percent higher than February’s average sale price. Demand was demonstrated by how quickly all listed properties sold in March. The average days on market was only 20. That is a pace consistent with the most aggressive seller’s market. In some areas of the market, particularly in the 416 region, the days on market was even lower.

 

All detached properties in the 416 region (City of Toronto) sold in only 17 days. All semi-detached properties sold in a shocking 13 days, and in only 11 days in Toronto’s eastern regions. All condominium apartments in the City of Toronto sold in only 17 days. As hard as this is to believe, this is a pace not that different from the delirious pace of the first four months of 2017.

When the market moves at the above-noted pace, it is not surprising to see average sale prices rising. In the City of Toronto all properties, including condominium apartments, sold for 101 percent of their asking prices, coming in at $817,642. All detached properties sold for 100 percent of their asking prices, coming in at almost $1,300,000. Unbelievably semi-detached properties sold for 107 percent of their asking prices, the average sale price exceeding $1,000,000. Even condominium apartments sold for 101 percent of their asking prices with an average sale price of $590,000. In Toronto’s central core, the average sale price for condominium apartments was $656,836, not that much less than average sale price for all property sales in the greater Toronto area. Condominium apartment sales are now taking place at approximately $1,000 a square foot.

The ultimate reason for these incredible numbers is the lack of supply. Notwithstanding that the number of active listings in March (15,971) was 103 percent higher than the 7,865 properties available last year, the bulk of the available listings are located in the 905 region. Of the 15,971 available properties for sale, 75 percent are located in the 905 region. In the case of detached properties, 83 percent of all detached properties are located in the 905 region. The situation involving condominium apartments is reaching crisis proportions. In March 1,573 condominium apartments were reported sold.
At the end of March, there were only 1,854 condominium apartments available for sale, most of them in Toronto’s central core. If this rate of absorption continues, there will be almost no product for buyers. This is particularly troubling because condominium apartments have been the only affordable housing type available to buyers.

Detached properties were the only housing type that continues to lag behind the rest of the Toronto market. Sales were off, year-over-year, by more than 40 percent, and average sale prices were off by almost 18 percent. The explanation is self-evident. During last year’s delirious market, mortgage money was historically cheap and relatively accessible. Since then not only has mortgage money become more expensive – three bank rate hikes in the last year – but new mortgage stress testing for conventional mortgages makes qualifying substantially more difficult. It should also be noted that during the January through April real estate madness of last year’s average prices reached astronomical levels, levels that simply could not be sustained.

Going forward we are not likely to see much change in Toronto’s residential resale market. The key to change is more supply. There is no indication either at the provincial or municipal level that measures will be taken that would have a positive impact in this area. For political reasons governments may attempt further engineering, but any such actions will have a limited impact on the market, but are likely to have broader, negative economic impact. Without a dramatic change to Toronto’s available supply, Toronto will become one of many other cities in the world that because of their political and financial stability where real estate ownership will not be available to everyone. That begs another question: what about the rental supply?

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

– Chip Barkel, MCNE, SRES, REDM, Toronto Real Estate. Extraordinary Service. Top Results. 

Delmanor Northtown Auction Tuesday, April 10th 2:30 pm

Delmanor Northtown Auction

April 10 at 2:30 pm

 

I have donated this original oil painting “Spring Arrangement” by Toronto artist David Arathoon to the Delmanor Northtown Gives Back Iniatitive

Come out and bid and take home something very special

 

Get in on the action of a live auction! A resident Delmanor auctioneer will take your bids on your favourite items: art, gift baskets, antique, furniture, jewellery, collectibles, electronics, restaurant visits, high tea, and services offered by the Delmanor Team are some of the items going up for auction. All proceeds from this exciting event will be donated to the “Delmanor Northtown Gives Back” initiative in support of Second Harvest Food Rescue.

Tuesday, April 10th at 2:30 pm

Delmanor Northtown 5351 Yonge Street, Toronto

February 2018 Toronto Real Estate Market Report

There were no surprises in February’s residential resale data. Last year in February the market was verging on delirium. With record low mortgage interest rates, a severe supply problem, and a collective psychological belief that if you didn’t buy immediately you would be shut out of the market permanently. Under these conditions, it was not surprising that prices were increasing by more than 30% on a year-over-year basis.

It’s also not surprising that this year we are witnessing negative variances as compared to last year. Since the early months of last year, we have seen government intervention in the form of three mortgage rate hikes, a 15% foreign buyers tax, and a rigid new form of stress testing borrowers seeking conventional mortgage loans. Conventional loans are mortgages that do not exceed 20% of the value of the property. Yet despite all of this the Toronto and area residential resale market has held up fairly well.

There were 5,175 reported sales in February, a 34% decline compared to the 7,955 sales reported last year. But comparing this year’s sales against last February is like comparing the Toronto market against a fictional metropolitan area that no longer exists. Last year’s results were extraordinarily driven by a never before seen market delirium, a delirium that crashed with the announcement of the provincial government’s Fair Housing Plan and the implementation of the Foreign Buyers Tax.

Yet despite all these market shocks, all properties still sold in only 25 days and the average sale price in the greater Toronto area came in at $767,818, a 12% decline compared to last February. That decline, however, requires some clarification. The decline in average sale price was primarily driven by the decline in sales and prices in the 905 region and the decline in sales of higher priced properties ($2 Million or higher). The average sale price in the City of Toronto (416 region) came in at $806,494 and that despite the fact that the bulk of all condominium apartment sales – the least expensive housing type – located in the city of Toronto. Prices in the 905 region declined to $767,816, a substantial decline from last year when they came In at $876,000.

The biggest drag on average sale prices was the decline in higher-priced property sales. This is not surprising and expected. In last year’s frenzied market, 389 properties sold having a sale price of $2 Million or more, most of them being detached properties. This February only 126 properties in this price point were reported sold, a 67% decline. A decline of this magnitude, representing more than 5% of the entire market, will have a powerful, negative impact on the market’s average sale price.

Again it is not surprising that this decline has occurred. Detached property values had reached stratospheric, unsustainable levels. Last year the average sale price for a detached property was approaching $1,600,000 for the greater Toronto area and more than $2,500,000 in Toronto’s central districts. This year average sale prices have been reduced to $1,282,240 and $2,027,761 respectively. These are prices that are beyond the reach of most buyers, particularly with the increase in mortgage interest rates and the new stress testing. Given the impact of these factors we can anticipate further softening of prices for sales of this property type, or plateauing.

Semi-detached sales are also in decline compared to last year but to a lesser degree and for different reasons. Across the city of the Toronto the average sale price for semi-detached properties still came in at $985,902, and at more than $1,235,000 in Toronto’s central districts. Sales of all semidetached properties took place in only 19 days and at 103 percent of their asking price. These are not statistics emerging from a market that is in trouble but rather the opposite. In Toronto’s eastern districts, particularly those closest to central Toronto, all sales took place in only 13 days and for sale prices approaching an astounding 110 percent of the asking price. These numbers point to strong demand and a very limited inventory.

The supply of resale condominium apartments is approaching crisis levels. In February 1, 687 new condominium apartment listings came to market, a 10 percent decline in the number of listings that came to market last year. The Toronto condominium market effectively finds itself in exactly the same position as last year at this time, except that prices are almost 11 percent higher. The condominium apartment that one could buy last year for $515,000 will now cost buyers $570,000. In the central districts where most buyers would prefer to locate, the average sale price is now an amazing $645,000. Last year the average sale price was $ 577,000. All condominium apartments sold on only 22 days and for 100 percent of their asking prices. Ironically in Toronto’s central districts, where prices are highest, all condominiums apartments sold in only 21 days and for 101 percent of their asking prices.

The Toronto and area marketplace is where it would have been without the provincial government’s intervention, constrained by the weight of, what is now clear, unsustainable prices. Going forward sales will pick up as sellers come to the realization that except for the most desirable properties in the most desirable areas, sale prices achieved last year are no longer realistic, particularly with higher mortgage interest costs. Basic economic factors – employment, strong economy, increasing wages – are very positive and therefore demand will remain powerful. When prices align with buyers’ financial capabilities the market will once again begin to grow, but prices will remain in check, especially if we see further increases in mortgage interest rates, as anticipated.

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

Downsizing Dilemma: Who, What, Why, Where, When, & How?

Deciding to downsize your family home, after one to many decades of living, is never an easy decision. Many homeowners debate their selling decision for ages, because they have more questions than answers. Once you have the answers to these universal questions, the solution will be much easier to make. Many self-help books today proclaim the importance of finding your Why. Knowing your Why gives you a filter to make choices that will help you find greater fulfillment. So, let’s start with Why.

Why: Why do you feel it is time to move? Do you want to let go of the burden of looking after a detached house for the convenience of condo living? Condo living might mean that you can easily lock the door and travel whenever and wherever you like. Or, do you find yourself “over-housed”, only using a small percentage of your actual square footage. It can be expensive storage for your “stuff”. Also, many older homeowners find their health has deteriorated and this might mean navigating a detached house has become a safety issue or unwanted burden.

What: What kind of housing are you looking to transition into? A townhouse?
A condominium apartment? Maybe you like the “idea” of a house, but want someone else to look after the grounds? There are “life lease” communities that can provide you with both benefits. Or, maybe you are feeling isolated socially and like the idea of an independent retirement residence, where you can enjoy the company of others in your demographic and have built-in amenities and group activities to enjoy with your new friends.

Where: Where is a big one. One school of thought on “aging in place” is to stay in your own familiar neighbourhood, where you will be able to continue accessing your doctor, dentist, place of worship, and other social clubs that are important to you like your weekly bowling or bridge club. Or, have your family and friends moved off to far-flung places and this is a chance to move closer to enjoy family functions that you have been missing?

When: Let’s face it, no one really wants to move in winter. I like to look at the end game and date. When do you want to be in your new home? Then work backward. It may take a month to get your home ready to sell. After being in a home for 10, 20, 30 years or more, there are always little maintenance issues that we meant to get to, but after a while, we don’t even notice anymore. Buyers notice, so this is a good time to do those little fixes. Investing a little will mean a bigger return. So, if it takes a month to get your home ready to go onto the market, it may also take another month to sell. The average number of days on market is about 25 now, so let’s call that a month.

Closings can happen quickly, but 60 days is the norm since many buyers have a house to sell as well. So now we are up to four months: one month to prepare for market, one month to sell, and two more months to close and pick up your cheque. So Spring is a natural time to make your decision.

How: So many homeowners (myself included) have said “How will I ever move into a smaller place? What will I do with all of this “stuff” I have accumulated over the years?” Even if we can put sentimentality aside and be very pragmatic about what to keep and what to let go, complicating the issue is the fact that the younger generations often don’t want any “stuff”. They live in smaller accommodations and quite frankly much prefer experiences like travel over possessions.

Don’t worry. I work with some very talented people who specialise in helping people “right-size” their living situations. They will help you sort through what can be given away, sold, or saved for your new home.
I have heard more than one story like an old musical instrument that Uncle Joe or Dad had cherished and might possibly be worth something. Sending some of these to auction can produce some astonishing results. Like the saxophone that was initially appraised at $350, and then on closer inspection, hopes were that it might bring $2,000 – 3,000. When the gavel went down, the final price was $35,000. What a nice bonus to help start the next chapter of your life.

 

Who: Don’t try to do it on your own. Call in professionals. Even if you have children or friends you want to call on, chances are they have full schedules of commitments to their jobs, children, and volunteer activities. You didn’t amass your house full of “stuff” overnight and sorting and dispersing also takes time.

Remember also, it costs you nothing to hire a Realtor to help you buy your next home and your real estate professional will be able to provide you advice on the kind of home and its location you’re likely to be happy in. My experience is that people get far more excited (and less anxious) about the place they are going to, rather than the place they are leaving. So, find an agent you know, like, and trust, and get excited about the next chapter of your life.

– Chip Barkel, MCNE, SRES, REDM, Toronto Real Estate. Extraordinary Service. Top Results.