Here is my latest Toronto real estate market update for February 2018.
In this video I discuss what I see happening in the market as I run down the latest stats, I take a deeper dive into a recent real estate news story that’s generated a lot of buzz, and I highlight a couple of my favourite comments from the past month.
Want a pair of VIP tickets to the National Home Show and Canada Blooms from March 9-18th? Be one of the first 3 people to visit my facebook page and post a comment with the correct location of this month's video, and I'll get a pair of tickets to you.
In this update I’ll tell you what I see happening as I run down the latest stats, I’ll take a deeper dive into a recent news story that’s generated a lot of buzz, and I’ll highlight a couple of my favourite YouTube comments from the past month.
Hi, I’m Rebecca Laing, and welcome to my February market update for the City of Toronto. Our first release of stats for 2018 came in showing a market that has overall mixed performance metrics, but is healthy and resilient nonetheless. The weakest stat is total number of sales, which was down 20% compared to last year.
This one is fodder for the negative Nancies, as they will point to it being a sign of weak demand, and that with declining sales, a resumption of price decreases must be imminent. However, if you have seen swarms of potential buyers and renters in downtown condo lobbies waiting for their turn to view any entry-priced listing, or if you actually tried offering list price last week on a Playter Estates or Riverdale semi and got outbid by 200 grand, then you might think there is no shortage of demand out there, and this is turning into early 2017 all over again.
So what’s the real deal, and why aren’t there more sales? Part of it comes down to Toronto being a large, non-homogeneous market, with a myriad of neighbourhoods and housing types that perform differently. Similar to how the 905 GTA communities have been dragging down the headline numbers you see reported for the entire Toronto Real Estate Board, within the city of Toronto itself we still don’t have a lot of listings on the market that match what’s most in demand. While overall active listings continue to hover around the 3500 mark, when you focus in on hotter neighbourhoods like Leslieville, you’ll see less than a month’s worth of inventory, which puts it in the category of a strong seller’s market. Looking a bit north to higher-priced Davisville, there’s just over 2 months of inventory, which is still pretty tight. If you examine the entry level price points in these core neighbourhoods, you see lots of listings with offer dates, and average selling prices as high as 9% over asking for, say, a semi in the east end. When it comes to the condo market, activity is still hot, especially downtown, where limited active listings also continues to keep that segment very tight. In contrast, at the cooler end of the spectrum are neighbourhoods further out like Willlowdale, Agincourt, and some swaths of Etobicoke, where detached home inventory levels are more than double that of in the core, resulting in longer days on market, and sold prices for houses averaging around 95% of their list price. Across most neighbourhoods, higher priced detached homes aren’t garnering the same interest as their entry level priced neighbours. The expanded B20 stress test has given some buyers pause as they reevaluate their budgets and weigh alternative financing options. And although there are multiple offers on many listings, in most cases the premium buyers end up paying over list is in the thousands of dollars, and not the hundreds of thousands that was so much the story in early 2017. So, to sum things up, there is still lots of activity afoot in the market that does not necessarily show up in the headlines, there are opportunities out there for many categories of buyers and sellers, and the Toronto market is healthy overall, as further illustrated by the latest stats that I’m going to talk about now.
To start with, the average sale price for all homes types in the city of Toronto, was $766,616, which is up 5.3% over January 2017. For detached homes, the average sale price was $1,283,981 which is down 3.9% compared to last year, and up 2.7% compared to December. The Home Price Index benchmark price is showing minimal change in comparison to a year ago and versus December of 2017, so it’s safe to say that detached values are sitting flat. Moving on to semi-detached homes, the average was $936,623 up 3.8% over last year. Condo townhouses were at $543,793, which is down 8.6% year over year. Based on this year’s low median price but high HPI, a drop in higher-end sales in this category is likely responsible for this dip. Finally, looking at condo apartments the average sale price was at $543,279, up 15.2% over last year. While the average gain is still higher for condo apartments in the downtown core, citywide price increases in this category are moderating a bit compared the unsustainable gains we witnessed for so much of last year.
Moving on, I wanted to take a moment to talk about a recent news item about a new home builder lowering prices on pre-construction homes in Whitby. If you missed it, the gist of the story is that a buyer is upset that 1 year ago, she paid a builder $90,000 more than today’s buyers can pay for a nearly identical house. The buyer, who happened to already own 2 properties, lined up for hours at the sales launch, only to find that she couldn’t buy anything for her $600k budget, and ended up spending $900k. While this sounds an awful lot like speculative investing triggered by a fear of missing out, it also raises several other issues that come into play when dealing with pre-construction. First, savvy builders know how to create buzz at their launches, they know how to upsell, and they know how to control inventory releases such that they create false scarcity. Even when things are slower in the resale market, there are events like a couple of weeks ago where scores of buyers lined up for hours outside a builder sales office in Milton, and contributed to a prompt sell-out of a limited release of homes there.
When buyers attend builder sales centres, I wonder how many of them realize that more often than not, the reps are not governed by the provincial rules and code of ethics for Realtors, and have no duty to protect the interest of the buyers. I also wonder how many buyers realize that often they can have their own Realtor, compensated by the builder, who would have a fiduciary duty to protect their interests and explain risks. Speaking of risk, while any purchase or investment has risk, this story is a further reminder that with pre-construction, those risks are amplified and range from project delays, to cancellation, to finishes and dimensions not being what’s expected, to price fluctuations like this. Compounding it further is that in pre-construction, you’re dealing with longer time horizons for things to happen that can affect values, and since the bulk of the purchase price is financed at least until closing, risk related to price fluctuations is leveraged.
As far as this story goes, the media actually missed the boat on a much more outlandish example of a similar situation. Right now in York Region, there is a builder who is offering a discount of over a million dollars off the list price on the mini mansions they are building. Given that this is a multi-stage, multi-developer subdivision, you can bet there are buyers who have paid a range of prices, including these newly discounted prices that, happen to fall in line with the list prices from 2 years ago. Whether or not there are buyers who actually paid the extra million dollars in the interim, ultimately when spending $2-3million in the suburbs, the purchase should primarily be about deriving utility and enjoyment from living in a spectacular new home in a pleasant new community for many years to come, and not about speculative market gains.
This leads us nicely into a final item I’d like to highlight, which is a viewer comment on last month’s video. In all caps of course, the commenter stated how all the millionaires she knew from back home no longer want to invest in Toronto. The reason I highlight this is that for the last several years, we have heard about major cities around the world struggling with housing prices being driven up by foreign investors, speculators, and money launderers who want to park money in what is viewed as a safe asset. This year New Zealand is going so far as to completely ban the sale of homes to foreign buyers, as they feel that the excess demand from foreign buyers has made home ownership unaffordable for residents. As far as Toronto goes, the data we have is that foreign home ownership falls somewhere in the low to mid-single digits. It’s not a significant proportion, but still enough to have an effect on marginal demand. With last year’s foreign buyer’s tax and swings in the market, it’s possible we have now lost a good chunk of this marginal speculative demand, particularly when it comes to the resale freehold segment. To be clear, this is different from immigration, and I completely encourage and welcome those from abroad to move to Toronto, become residents of our great city, and thereby further contribute to its growth and vibrancy. However, if the Toronto market has now shed demand from foreign speculators, I feel it will ultimately be of benefit to the health of our city and local economy. This is no doubt a complicated and contentious issue, and I’m sure there are some viewers with opinions on this, so please feel free to comment below. Perhaps this discussion will also allay the concern of another YouTube commenter who somehow thought I was part of a conspiracy that manipulates the market in favour of overseas investors. As far as know, I’m not involved in any conspiracies.
And with that, we wrap things up for this month. As always, please feel free to get in touch with any of your real estate questions, and to chat about how I can help you navigate the Toronto real estate market. You can reach me directly by phone or text at 416.357.1059, or online through rebeccalaing.ca. Thanks again for watching, and until next time, I'm Rebecca Laing, Toronto Real Estate Broker.