Toronto real estate inventory has been increasing over the past few months, and we wanted to see what kind of sellers we’re looking at. An analysis of properties listed for sale in the City of Toronto show that over 6% were bought less than 18 months ago. While some have ask prices that might prove profitable, we estimate 1 in 3 of these listings are currently looking at a loss.
Composite Flippers Bought An Average of 209 Days Ago
Let’s start with some composite numbers, which is the aggregate of all home types. Just over 6.2% of homes listed for sale in the City of Toronto have land registry records showing they were bought less than 18 months ago. On average, it took 209 days to relist – just a touch over 6 months. An analysis of ask prices show the seller is hoping to make an average of $159,477. Totally legitimate if the properties were renovated to flip, right?
Turns out the vast majority had no improvements. Only 2.3% of listings we could find had any language indicating there was some sort of meaningful improvement. The average renovated property was asking $286,360 more than property records indicate the seller paid. The average unrenovated property was seeking an ask price of $157,215 above the purchase price. Let’s break these numbers down a little.
The above chart shows the average markup on the ask price of property currently for sale, that was bought within the past 18 months. If you’re wondering why the total is just slightly higher than the unrenovated number, it’s because almost none indicated they were renovated. Source: Better Dwelling.
1 In 3 Might Be Unprofitable, or A Loss
Yes, some are being listed for prices that would imply a loss. Just over 29% of these flips are listed below the price it was bought at. If you subtract the standard 5% Realtor commission on top of that, that potential loss jumps to a whopping 35%.
Detached Flippers Bought An Average of 220 Days Ago
The most popular short-term flip in Toronto right now is detached homes. Sellers took an average of 220 days before relisting. The short-term sellers are asking for an average of $189,284 more than property records indicate they paid. There’s a lot you can do with a detached unit, so it’s no surprise that flippers are asking a premium.
Although almost none of these flippers did anything with them. Only 0.15% of these detached homes being flipped in this time period indicated any meaningful improvement. The renovated flips are asking an average of $304,450 dollars more than was paid. Meanwhile, the unrenovated properties were asking $188,980 more than paid. If the unrenovated units sell for anywhere near ask, there’s very little incentive to have renovated.
Condo Flippers Bought An Average of 187 Days Ago
The second most popular short-term flip was condos. The average flipper here took 187 days before listing after purchase. Flippers are asking for an average of $102,735 more than records indicate they were acquired.
If you’re wondering how many flippers renovate condos, the answer is not a lot. Only 4.6% of the condos being flipped were renovated. Sellers of the renovated units were asking an average of $247,300. Sellers of unrenovated units were asking an average of $96,398 more than they acquired the units for.
A new paper from the National Bureau of Economic Research (NBER) makes the case that home flippers were the primary driver of the US housing crash. Yes, even more so than subprime borrowers. Now, it’s unclear if these Toronto sellers bought too much house and need to liquidate, or if they bought their homes with the intention of flipping. Either case isn’t great however, and the number of people flipping now exceeds the ratio of foreign buyers in the city.
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This stat isn’t mind blowing.
I am tend to be a real estate bear. But if flippers were a huge part of the speculative bubble then I would expect this number to be well north of 6%, probably above 20%…
too soon still me thinks….need….more…..blood =)
I’m always shocked how little Canadians understand market influences. It’s how all of these issues stack up. 6% are short-term flips, 6% are foreign buyers, 10% are assignments held vacant, 7% are for AirBnB inventory, 10% is the luxury market.
Now you have the rest of society competing for a segment of housing, with artificial pressure created by a butt load of factors that don’t contribute any economic value to the city. All of these things work together, which I get is too complicated for the general population to understand, but they create a big impact.
Reduce the flow of capital being spent in a city, you reduce employment. Reduce employment, you create less job competition, and employer competition for quality employees. Employer market means stagnant wages, that won’t be able to continue to push housing prices any further. This creates a cycle that most idiots will say “what happened? No one could have predicted this.” Actually, every with an MBA can and did.
This is the best comment I have seen in this blog.
I’m curious to know where you get those percentages. Not saying they’re wrong, but I don’t think any publicly available data provides those stats. Most people are at a disadvantage because market data is not available to reveal how it is manipulated.
Data in Canada is pay to play, and unfortunately it costs a pretty penny to get it through private research reports. Although I will say, more of the housing reports that land on my desk seem to be re-iterating points I’ve been reading here, and often cite articles on this site as a source.
To be honest, you can probably search for exact numbers for each of those points on this site. There’s a few pre-canned stats from government that I don’t think I’ve seen here, but those usually trail finance models by 2-3 months anyway.
It is well above the 6% they’re stating. Think more along the lines of 35% (1/3rd the market size).
Yuppies and hipsters are also fuelling the bubble…They are overpricing low-income parts of Toronto and Montreal….Why would someone from Toronto offer to pay over $500,000 for a 1-bedroom condo in low income neighbourhoods like St. Henri, Montreal or across that bridge in Montreal West?
Go away hipster, go away yuppie, go away SJW, go away “Independent” career woman! We don’t need you in our neighbourhoods! Live in downtown, but not in our communities because we do not like your snobby, uptight, racial and classicist behaviour!
Go away you Hipsters! May God collapse the real estate bubble in Toronto and Montreal so you can feel the Bern!
if over 6% (let’s say it’s 7%) is less than 18 months, then 93% were bought more than 18 months ago. so how come the average of relisting is just 6 months? Did I miss something?
Pretty sure when the author writes “average flipper here took six months” means the average of the 6% took 187 days. Someone who lives in their house for years is not a flipper, that’s just someone moving.
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