Toronto

Affluent Toronto Suburb Sees Largest Real Estate Price Drop Since 2008

Affluent Toronto Suburb Sees Largest Real Estate Price Drop Since 2008

An affluent Toronto suburb is seeing prices drop, and it’s worth taking note. The Oakville-Milton area is west of Toronto, and is one of the most densely populated areas in Canada. Recently prices have been soaring in line with the city, but according to the Canadian Real Estate Association (CREA) there was a major shift in May. Last month the Oakville-Milton region saw the largest single month price drop in almost 9 years.

Who Cares About The Burbs?

I know, right? But there’s actually a really good reason to watch suburban prices if you’re trying to understand urban prices. In a scorching hot market like Toronto, anything you can drive to becomes a speculative play. When the market cools, professional real estate investors don’t just go to a beach and come back when the market starts to warm up again. Instead they do a flight to quality, which is often called a “Main and Main” strategy.

A Main and Main strategy is when they stop investment in the suburbs, and look for property in the most important districts (i.e. the intersection of two main streets). Consequently, price drops in the suburbs can be a first indicator of a changing urban market. In case you’re wondering why investors would buy anything at peak, it’s because it becomes one of the very few opportunities to nab strategic locations.

Composite Prices Dropped The Most In Almost 9 Years

The composite price of homes in the Oakville-Milton area showed a big month over month decline. The benchmark price fell to $760,100, a 3.09% decline from the month prior. This is the largest monthly decline since December 2008. This comes alongside declining sales, which dropped 43% from the same time last year. Prices are still up bigly from the same time last year, about 23.93%. Not even close to a real estate correction, but the large price drop is something to keep an eye on.

Source: CREA.

Detached Homes Drop 4.73%

The detached market showed the largest declines. The benchmark detached fell to $817,800, a 4.73% decrease from the month prior. Detached prices are still 21.2% higher from the same time last year, so most buyers didn’t exactly lose any money. Worth mentioning that over 77% of detached homes sold last month were over $1 million. We said affluent, didn’t we?

Source: CREA.

Condo Apartments Rise 5.8%

Condos actually had a big month for price increases, bucking the trend. The benchmark price rose to $463,100, a 5.8% increase from the month prior. This represents a 35% rise from the same month last year. While you may not think of Oakville as a condo rich suburb, the rise in density is making it an increasingly popular option.

One month isn’t a trend, but it’s worth keeping an eye on the burbs to see if they send up early signs of a change in market direction. Maybe there’s still a ton of buyers stuck in traffic on their way there?

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Photo of Oakville’s traffic via Martin Cathrae.

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19 Comments

  • Reply
    Frustrated Canadian Taxpayer 4 months ago

    When will the Canadian government admit that money laundering is playing a role in the housing bubble in the Grater Toronto Area? How come I can’t withdraw over $5,000 of my own cash from a bank account which my payroll is deposited in without the bank employee covertly reporting my transaction to FINTRAC, but a foreign money launderer who could have earned that money from ISIS for all we know, is able to pay cash or a corporate number to overbid on these crapshacks in Toronto?

    • Reply
      Alex 4 months ago

      And how about getting mortgages bringing fake pay stubs to the bank? What is the problem making T4 just the document proving the personal income and stopping all this mortgage fraud that driving the market up and upper?

      Why can not Revenue Canada compare stated income that people state to the bank when they come there to get a mortgage and reported income that the same people report to Revenue Canada next year? I can promise them a lot of work
      catching this crooks that do not pay any taxes or state fake income to get the mortgage.

      • Reply
        George 4 months ago

        You do not just report income. Banks ask you for NOA and T1 for the last 2 years and a lot of other documents.

        • Reply
          Alex 4 months ago

          They are not. Just 3 pay stubs. And banks not a biggest problem. Subprime organizations like Home Capital gave away most of their loans without proper income check.

  • Reply
    James 4 months ago

    “BIGGEST PRICE DROP SINCE 2008! OMG” – proceeds to post a price graph with a tiny little blip, lol.

    • Reply
      Neo 4 months ago

      You don’t understand how this works do you? Home’s before this housing bubble took off grew long term at a rate of 2 to 5% a YEAR? I know we’ve lost sight of this fact since 2015 since prices went parabolic but a 3% in one month which is supposed to be a busy month seasonally is really bad. June will be worse and so will July and August as those are traditional weak months to begin with. If buyers don’t come back in September to bid prices up again then it’s game over. Sentiment and psychology has changed and that is what this market is built on, not fundamentals.

      • Reply
        Frank 4 months ago

        As far as people have jobs, interest rates are low prices will not crash. There can be correction but not crash. There is lot of people who wants to buy, they are just waiting what happen. Once they realize no crash is happening they will come back and so prices but in slower pace. It looks like this stupid government doesnt like people to have equity in house. Everybody who wish fro crash to buy house must understand how economy depend on construction. After crash there would be no jobs and those who want to buy house will be lucky to have enough money to pay for rent . We need correction, balanced market but not crash.

        • Reply
          Neo 4 months ago

          The government goosed this pig by keeping interest rates too low for too long and with misguided policies like 0% down payments and 40 year amortizations. You can’t have it both ways. They interfere on the way up and can’t just sit there when the prices go parabolic. That isn’t sustainable. Houses aren’t supposed to be traded like futures contracts in the stock market. You aren’t guaranteed profits every few months to eternity. Houses traditionally go up 2-5% a year not 2 to 5% a month. They track income growth and inflation not speculation.

          All low interest rates do a pull demand forward. It is supposed to be temporary in the face of a recession not last 10 years. Crash is the wrong word to use. Even in the last correction in 1989 it took until 1996 to bottom out. I expect the same thing here not a violent plummet like the US. It won’t matter though we are still in for a long recession either way. That is how the excesses of a debt binge are purged. We are due as we haven’t had a real one since 2008 and they usually occur every seven years.

  • Reply
    Danuta 4 months ago

    Please continue report pricing change month over month as this indicates the true trend.

  • Reply
    Aslam 4 months ago

    Very good information for new home buyers.let us wait and watch. Expect it to fall further.

    • Reply
      Frank 4 months ago

      House is not stock. People will hold to their houses if they dont have to sell. I see people trying to sell because prices are high. Once they realize no good offers are coming they pull houses off the market. Why should I sell my house for cheap. I have job, wife has job and I need place to live. Economy is good, interest rate low , everything is working for homeowners even if sentiment changed. People think more I wait more I save. That might be true but not for long. So far fundamentals are more important in house market no sentiment. This is not day trading of stock.

      • Reply
        Neo 4 months ago

        You are ignoring the amount of speculators driving this market to these obscene levels. They are the ones that are overleveraged with multiple homes and looking for the exits all at the same time.

        • Reply
          Darren 4 months ago

          ….and what will happen once they will all exit? (if what you say makes sense)

          3 months from now it will become quiet on the market, and those who wanted to buy a home will have a rude awakening, they did not get a deal on a home at 50% of its value. Market will rebound, again will be 1 home on the street, a few buyers who like that property … story goes on. We are not in 1986 anymore, immigration is at a different level, nearly 80,000 immigrants settle in GTA every year, amount of wealthy newcomers are in need to buy, invest, lease, build.

          Real Estate investments are risky and market at times takes a wrong turn (as it recently happened), and if one has no guts to take a risk, use the equity of an existing home, invest, cash out and live mortgage free ever after, then one should stop crying and do things he is comfortable with. End of story.

          • Neo 4 months ago

            The fundamentals are not strong. Wage growth this year has been the weakest it has been for decades. We are on the precipice of being taxed to death. Immigration is a red herring. Even using your 80,000 immigrants number you have to look at households not individuals. That would be 20,000 households and they aren’t all showing up with suitcases of cash. That is just a misnomer propagated by real estate interests. Yes, there are millionaires but they want to live in Toronto for the most part not pay $1,000,000 for a cookie cutter house on a postage stamp lot in Milton. There are 115,000 houses sold in the GTA every year. That is a lot of homes to absorb at these current prices whether they are immigrants or already live here.

            Three months from now it will not be quiet as far as inventory. There will be another pop in inventory from people selling in the Fall. Inventory right now is WAY too high because homeowners are not accepting that they will not be getting March/April prices. Once those people finally throw in the towel and clear the inventory prices will return to Jan/Feb levels going into September. At that point we will see where we really are.

            Yes, real estate is a risk and people have lost sight of that in the FOMO environment. You know what we didn’t have in 1986? HELOC’s. They didn’t even become a product until 1990 and now account for over $200 billion. 40% of people aren’t even making payments on them and 25% are just making interest payments. That only works if the price of your house only keeps going up in value. Banks are now appraising homes are 15-20% less than they were 2 months ago. Credit is being restricted and Alt-lenders are being more careful about loan originations. Interest rates are also going to finally be going up the end of this year and even more going into 2018. The US has already raised rates 3 times and will be doing do 4 more times by the end of 2018.

            All we’ve had in this market is greed. We haven’t seen the fear part where people expect prices to go down. The herd mentality works both ways.

    • Reply
      Darren 4 months ago

      Agree with you on the most part, well said. We should see a clearer picture in the Fall, once inventory clears, and I am sure it will as there are still many buyers who want to relocate, following the crowd and awaiting the right moment. Prices will be at January-February levels, it’s inevitable, but still higher than where they were last year. This phase will pass. The surplus of 1.2 billion from land transfer taxes will not happen this year. I don’t even think budget will even get their average of 1.8 billion. Why wouldn’t our government use this extra income and invest into local economy, roads, more subways?

      • Reply
        Neo 4 months ago

        I was only referring to the Oakville/Milton area when I mentioned returning to Jan/Feb levels. All GTA markets will have varying degrees of a correction. Right now North Toronto is experiencing a housing crash. Newmarket, King City, Markham, etc. have already wiped out the year’s gains and are accelerating down at an alarming rate. They also rose the most relatively and had the most hot speculate money in those areas. Once I saw those areas start to turn so violently I knew the overall correction had begun. Brampton had a delayed reaction but they are now rolling over as well. I know for a fact there is a lot of mortgage fraud in that city. We just don’t know yet how far the rabbit hole goes but individual depths of corrections will vary across the GTA.

  • Reply
    Mo Quraishi 4 months ago

    Neo you are spot on, sentiment controls the market. This correction will play out similar as it did in the early 90’s. (So far it has been)

    I recommend checking out the Toronto Star archives. I went back to articles from 1985-1990 and read most housing related articles. There are common themes and parallels to this parabolic rise. As a matter of fact in 1987/88 articles were published with the following;

    1. Housing will never fall due to immigration
    2. Strong asian buyers and foreign buyers will not stop buying
    3. We have not caught up to NYC, London etc.

    The above are examples of the exact same rhetoric that was prevalent a few months ago. Furthermore, all the precursors were the exact same in the mid 80’s. Oil crash (due to oversupply, exactly like the crash in 2014/2015), interest rates being cut, housing rising at unsustainable levels.

    I have studied this market and do an sentiment analysis on all markets, all signs have been pointing down for a while, but timing is key. Now we will see the initial price decline followed by an increase in prices months/ or a year later, but since we are measuring average price the future price gains will not be apples to apples, as there will still be low volume. So the average price will be skewed with less participants.

    To summarize, there will be an initial decline (already started), followed by a small rise (people thinking all is good again), followed by further decline. I think we have a similar pathway to 1989-1996, slow, steady, and frustrating.

  • Reply
    Erick 3 months ago

    If the prices drop then the banks need to reappraise all properties in that area quickly so they can demand additional equity to keep the lending ratios accurate.

    Let’s push the banks to act quickly to correct imbalanced lending ratios before these NINJAS start losing their homes.

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