In November the Toronto residential resale market appeared to pause from the torrid pace that it has been on for the bulk of 2014. Although the market’s performance was not an abrupt change from its 2014 pattern, it did not produce the outstanding numbers that we have become used to this year. For example in October 8,552 properties were reported sold, 8 percent higher than the 8,051 sales reported in October 2013. In November there were 6,519 sales, only 2.6 percent higher than the 6,354 sales reported in November 2013.
The drop in the number of sales from October to November is not a matter for concern. The pattern of residential re-sales in Toronto is such the there is a drop in sales from October through to December and January as buyers and sellers focus on seasonal matters other than house purchases. However, the fact that this November saw an increase of only 2.6 percent compared to last year is an interesting change. On further examination the underlying reason appears to be lack of inventory as opposed to the waning of buyer demand.
If demand was waning it would be reflected in declining average sale prices. That did not happen in November. The average sale price came in at $577,936, a 7.4 percent increase compared to the average sale price of $538,347 for November 2013. The average sale price for the City of Toronto (416 region) was higher at $616,130. It was $633,078 in October. This number is somewhat deceptive in that it includes condominium apartment sales which on average sell for less than $ 400,000.
A further indication that the relative decline in the market in November was driven by a lack of inventory as opposed to demand is evidenced in the volume of sales and average sale prices for detached and semi-detached properties. In November the number of reported sales for detached homes in the City of Toronto actually declined by 0.3 percent to 904 properties, yet the average sale price increased by 9.4 percent to $935,122. The same was true for semi-detached homes. Sales declined by 2.2 percent to 261 properties, yet the average sale price increased to $667,178, an increase of 4.2 percent. Declining demand is associated with declining average sale prices, not increasing prices. The constantly increasing average sale prices throughout 2014 have vaulted Toronto into the category of having very expensive real estate even on an international level.
It is not as easy to conclude that the decline in the average sale price for Toronto’s most expensive real estate, detached homes in the central districts, is not due to some market shift. In November the average sale price for this property type declined to $1,462,895. This was the third monthly decline in a row. In September the average sale price for detached homes was $1,505,877, dropping to $ 1,498,788 last month. In November the number of properties having a sale price of $1 Million or more also declined. In November 589 properties in this price category were reported sold. A dramatic decline from the 803 properties reported sold in October. Another factor worth noting is that the number of days on market for expensive central district homes also increased in November to 24 from 18 the month before.
As discussed, inventories remain a concern, now extending even to condominium apartments. During the month of November only 8,789 properties became available for sale in the greater Toronto Area. This compares with 9,281 last year, a decline of 5.3 percent. Consequently heading into December there were only 14,717 properties available for buyers to purchase, a decline of 8.5 percent compared to the 16,092 that were available at the beginning of December 2013.
What we are also seeing is a dwindling of condominium apartment supply. In the City of Toronto, where most condominium apartments are located, 2013 condominium apartments were placed on the market for sale in November. In October 2,740 condominium apartments came to market, a decline of 25.8 percent. As a result the total number of active listings at the beginning of December was 3996, down 8.6 percent from the 4373 condominium apartments available in October.
Condominium apartment sales, no doubt due to their much lower price point, paced the market in November. Compared to a year ago, condominium apartment sales were up by 11.2 percent in the City of Toronto to 1,199 units. Average sale prices however were not as brisk. The average price for a condominium apartment in Toronto increased by only 2 percent as compared to last November. The average sale price for a condominium apartment in Toronto is now $394,225, almost 50 percent less than semi-detached homes which came in at $667,178 in November.
As 2014 comes to an end all eyes have been focused on year-to date sales. The record for total number of residential sales occurred in 2007. In that year 93,193 properties were reported sold. As at the end of November the Greater Toronto market had delivered 88,462 residential property sales. Last December 4058 properties were reported sold. Realtors in the greater Toronto area would have to produce 4,732 sales to set a new residential resale sales record. That means 673 more properties would have to be sold in December this year compared to 2013, or 16.5 percent. Based on recent positive monthly sales variances, that kind of performance would exceed historical averages by 100 percent. It is safe to say that the 2007 record will survive 2014.
prepared by: Chris Kapches, LLB, President and CEO, Broker
Chestnut Park Real Estate Limited, Brokerage | chestnutpark.com