Toronto condo prices are falling, according to the country’s biggest real estate board. Though people are bidding over ask, and inventory is tightening, paradoxically. That’s what the Toronto Regional Real Estate Board (TRREB) data shows for July. The mix of indicators all adds up to a balanced market, but the picture of where it’s heading isn’t so clear
Greater Toronto Condo Apartment Prices Fell $3,200 Last Month
Greater Toronto condo apartment slipped a little lower. TRREB reported the benchmark condo apartment price fell to $639,400 in July, down 0.5% ($3,200). Compared to last year, the price of a condo apartment is 8.1% ($48,129) higher. Still a heck of a gain on an annual basis, but the monthly drop took a big honkin’ chunk of profits with it.
Greater Toronto Condo Benchmark Price
The price of a “typical” condo apartment across Greater Toronto.
Source: TRREB; Better Dwelling.
Price growth is slowing across the region, as the annual rate of gain tapers. Last month’s annual growth of 8.1% was much smaller than the 9.0% ($53,275) seen in June. Growth only recently began accelerating, lagging the rest of the market. It’s interesting to see it already begin to roll back.
Greater Toronto Condo Benchmark Price Change
The annual percent change of TRREB’s benchmark price for a condo apartment.
Source: TRREB; Better Dwelling.
Don’t read that incorrectly. The gains are still exceptionally large. Whether it would have been profitable for an investor is another story. At current rental rates, with all costs associated, many of these units would be negative cap. That is, they would cost more than the actual rent collected from a tenant.
Condo Prices In The City of Toronto Are Falling Even Faster
In the City of Toronto, the trend was amplified even further. The benchmark condo price fell to $659,600 in July, down 0.6% ($4,100) from the month before. Compared to the same month last year, prices are 6.45% ($39,966) higher. The decline was over 10% of what’s left of the annual change in price.
That said, it shouldn’t surprise anyone to see that led to a tapering of growth. Annual growth was 7.4% ($45,730) in June, so the rate has dropped a full point in a month. Smaller prices tend to destroy FOMO, leading to less urgency to buy. This can become a self-reinforcing feedback loop, slowing the market further. Worth watching out for!
Condo Prices Are Falling, But Buyers Are Paying “Over Ask”
Anecdotal evidence to support a “hot” condo market is supported by data, it just doesn’t mean much. The average condo apartment sold for 101% of its asking price — true across TRREB and in the City breakdown. Half of Toronto condo apartments also sold over the asking price. Though the benchmark still fell, despite the exuberance demonstrated by condo buyers.
Toronto Condo Inventory Is Balanced But Tightening
Part of this would have to do with absorption, which is surprisingly healthy. The TREBB sales to new listings ratio (SNLR) for condo apartments hit 62.2% in July, up almost 3 points from a month before. When the SNLR rises above 60%, the market transitions from a balanced to seller’s market. That’s when prices are expected to rise, but it needs to stick in that range for a few months.
In the City of Toronto, the ratio was just a little lower — still in balanced territory. The ratio increased to 59.1% in July, rising almost 2 points over the same period. A balanced market is one where it’s considered priced right, but it’s all relative. When you’ve been in a hot market for years, a balanced one can feel cold and lead to prices sliding a little lower.
Toronto condo buyers are exuberant and willing to pay more than sellers are asking for. But that appears to be entirely due to them thinking the market is hotter than it is. A healthy supply inflow is reaching buyers, which hasn’t happened in a long time. Price growth is also moderating, with units selling cheaper than a month before. For some reason, many people are paying over the list price.
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