Toronto

Teranet: Toronto Real Estate Prices Continue Declines, Lowest Rate of Growth Since 2014

Teranet - Toronto Real Estate Prices Continue Declines, Lowest Rate of Growth Since 2014

Toronto real estate prices continued its rollercoaster pattern. The TeranetNational Bank of Canada (NBC) HPI shows prices declining in February. The decline comes just one month after breaking a down pattern in January. Even though the city’s price growth is still very high, it’s at the lowest level in over 3 years.

About The Teranet-National Bank HPI

The Teranet-National Bank HPI is a different measure of real estate data, that relies on property registry information instead of sales. Many misinformed agents refer to this as a “delayed” measure, but that’s not the case. The use of registry data means that the information is “late” compared to the MLS, but it’s more accurate.

Using registry information means only completed sales are included. In contrast, the MLS uses just sales. In a hot market, few sales fall through, so the MLS is definitely a faster read. In a cooling market, sales can start to fall through, as some buyers look for a way out while prices drop. This is often not reflected in MLS data, since a transfer occurs 30 to 90 days after a sale. They each have their trade offs, and neither is better or worse than they other. If you’re really into housing data, it’s best to check both to get a real feel for the market.

Toronto Real Estate Prices Decline 0.15%

Toronto real estate prices resumed declines. NBC analysts observed a 0.15% decline in prices for February, bringing the 12 month change to 6.19%. Home prices in the city are now 7.34% below peak pricing, obtained in July 2017. This month’s decline is after the small uptick in January, which broke a 5 month losing streak.

Source: Teranet-National Bank Index. Better Dwelling.

Underperforming National Prices, Price Growth Tapers

Toronto is underperforming the national index, and is seeing the lowest rate of growth in years. The Composite 11, which tracks major cities across Canada, saw a decline of 0.13% last month –  slightly better than Toronto. The monthly decline tapers the Composite’s 12 month change to a 7.54% increase. This is more than a point higher than the current annual gain seen in Toronto.

Source: Teranet-National Bank Index. Better Dwelling.

Speaking of the annual gain for Toronto, it hit a new milestone. This is the eighth consecutive month we’ve seen the 12 month price increase taper. Prices in Toronto are now experiencing the lowest rate of annual growth since August 2014. Now, don’t mix this up – a 6.19% gain is still very high. The observation is to highlight how exuberant buyers have become over the past few years.

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Photo: booledozer.

33 Comments

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  • Reply
    Ian 2 years ago

    The dive in growth is surreal. Still hard to believe that prices rose so quickly for just a year. Textbooks will document last year as true mania.

  • Reply
    SH 2 years ago

    Composite prices don’t matter. There is no “composite home.” Condos are going up, and are ripping higher with double digit gains. Only detached homes are dropping, which are likely to recover and exceed condo prices. What are the odds of condo prices getting close to a detached, without detached prices rising?

    • Reply
      Ham 2 years ago

      In the same vein of thought: what are the chances for condo prices keep increasing if detached prices keep dropping?

      • Reply
        Al Daimee 2 years ago

        Condo owners who see houses within reach will move to houses, thus fuelling demand in that sector while increasing available inventory of condos. This should give condo price growth a break and buyers need that much needed relief.

        Also, the historical average annual price growth in Toronto over the last 35 years is just over 6%, so this last year is now just normal growth overall. However, try to buy a house in this market and it still doesn’t feel balanced in most 416 areas.

        • Reply
          Joe 2 years ago

          Average growth is absolutely meaningless in this environment, to be more accurate you need to look at the big picture, which is the average before the rates were slammed down and follow the median and you will get the actual growth with rates that are not propping up the entire industry. The last 9 years is an absolute anomoly due to government propping up the industry to avoid having the GDP crushed, and prices will be returning to historical median over the next few years.

        • Reply
          Willy 2 years ago

          If you don’t know why it still feels unbalanced I’ll explain it to you in numbers:
          Year 1: appreciation is 6%
          Year 2: appreciation is 9%
          Year 3: appreciation is 20%
          Year 4: appreciation is 35%
          Year 5: appreciation is 6% which seems balanced with historical averages but when you do the average for those last 5 years which included a bubble the average will come out to around 15% which is way over the historical average and thats why it doesn’t feel balanced as of yet. So bubbles are not good!

          ;

        • Reply
          Beh G. 2 years ago

          What’s driving condo demand Al is that the buyers (millennials) are already stretched and can’t afford more expensive detached homes. Another factor driving condo demand is baby-boomers down sizing their “overhoused” units.

          So far, both of these factors have increased demands for condos while either reducing demand or increasing supply for detached homes – this is all confirmed by data.

          It’s not a surprise then that condo prices are still going up in lieu of the increased [temporary] demand. But in the long run, this will continue to erode prices for detached homes which will eventually put downward pressure on condo prices.

          Why will it not work in reverse (i.e. as detached prices get closer to condos, that doesn’t put pressure on detached prices to go up again?) Because neither of the two groups we named (over leveraged millennials and down-sizing boomers) are going to move back into detached homes.

          There is a major demographic shift happening in Canada with “overhousing” being major issue which is going to play out in the next 5 years. Good further reading on this:
          https://www.theglobeandmail.com/real-estate/toronto/torontos-low-rise-neighbourhoods-losing-density-as-overhousing-spreads/article38285466/

      • Reply
        Joe 2 years ago

        Your just doing this to toy with people. Cold nights in Moscow?

        • Reply
          SH 2 years ago

          Cold morning in Toronto! It’s a fair question I think. Rents are increasing in Toronto very rapidly, it’s not like condo owners are going to sell to begin renting. It becomes a worse and worse deal every day to try and rent.

          Unless there’s wide scale defaults, condos are positioned very defensively for growth.

          • MH 2 years ago

            Defensively for growth, eh?

            You guys are soaring to new lows trying to spin it. You should write a book about investing, this wisdom belongs to humanity.

          • Grizzly Gus 2 years ago

            To Infinity and Beyond!

          • Bluetheimpala 2 years ago

            No they are not, rents are at historic highs. It is harder to be a casual landlord with more and more rights being given to tenants. I know of an investor that can’t buy because she cannot get the rent required to carry it but the tenant cannot be removed. I think there is a greater likelihood of rents coming down over the next 12-18 months, again based on economic fundamentals. More demand for cash flow. Investors need something coming in. You can’t cheat fundamentals only hold the dogs back.

          • Alistair McLaughlin 2 years ago

            As high as rents are, they are at historic lows when compared to home prices. That is, price-rent metrics have never looked worse for owners. That’s not positive for future prices. In fact, it’s a huge negative.

          • Beh G. 2 years ago

            ‘It becomes a worse and worse deal every day to try and rent.”

            Really? You can rent $2M homes in some of the cities best areas for around $4,500 a month, some times even less. Let’s do an analysis of the monthly costs for rent vs. purchasing and living there for 5 years, based on prices being flat over the next 5 years with a 20% down payment:

            Purchase: $4,300 (interest expense) + $700 (property taxes + $1,200 (LTT spread over 60 months) + $1,900 (commission expense on sale spread over 60 months) = $8,100 total cost per month x 60 = $486,000

            Rent: $4,500 (rent) – $1,000 (minimal interest income on down-payment in a GIC) = $3,500 total cost per month x 60 = $210,000

            You’re telling me a savings of $276,000 plus added mobility and liquidity and less investment risk is a bad deal?!!!

        • Reply
          Bluetheimpala 2 years ago

          Keep’em honest. There are no bad questions, only trolls who live in the darkness. Come next month I don’t know if I will be able to tolerate even an inkling of stupidity. Nice to see Al D joining the circle jerk,welcome back!

        • Reply
          Ham 2 years ago

          It was a rhetorical question flipping around the logic of the original comment.

  • Reply
    Sal 2 years ago

    It is difficult to understand the market because we do not know how much cash or debt people are using to buy condo. In my opinion the condo buyer most are people sold detached and downsize. When this money from the top will end then condo market will adjust particularly Vancouver where the gap between wages and real estate in unsustainable.

  • Reply
    Cat 2 years ago

    It’s simple economics they are simply unaffordable, I have three kids all make a good wage 100tho plus that can’t/won’t buy in this high price market and anyone that helps there kids to buy in this market is insane.I bought a house in 1990 took 9 year’s to get back my money,house’s don’t always go up.

    • Reply
      Bluetheimpala 2 years ago

      Thanks for your comment. This is a common problem. Unfortunately many parents did help which will amplify the issue. We’re going to get double ducked with two cohorts loosing massive amounts of equity that will take 10+ years to recover.

  • Reply
    Bluetheimpala 2 years ago

    April-June will be telling. My take away is we’re still up YoY but the r-squared is negative. Unless the delta swings then the story by the mid summer will be prices are down from the 12MR. Narrative will be positive until last year’s gains are wiped out. Tick tock

    • Reply
      Grizzly Gus 2 years ago

      Then the RE industry will tell us to forget about 2016 and 2017. “If we compare todays prices to 2012 and then divide by 6 thats actually really strong annual appreciation! The last few years were not normal. This is what the market needed. Its actually better this way. Families now have an opportunity to buy an affordable home they want. A balanced market, just hopefully it last and we dont go back to huge gains YOY again…….. there is a ton of pent of demand after all”

      • Reply
        Dennis 2 years ago

        There is a lot of pent us supply.
        2 days ago I told you guys of realtors listing houses but not on treb and if they are able to sell them, then they fake a list for 1 day to and sell over asking.
        One happened yesterday.
        Details
        28 Fenwood Hts, Toronto
        List price: $999,000
        Sold to list price: 101%
        Sold – $1.00 million – over asking of course

        Contract date: 2018-03-08
        Contract expiry date: 2018-06-08
        Sold date: 2018-03-10

        This home was on the market in the fall for $1,290,000 and did not sell.

        TREB stats
        Days on market 1 day
        Sales to list price 101%

        Real Stats
        Days on market: 150 day
        Sales to list price: 76%

        This are real facts you can look up or ask you realtor about.
        Don’t lose all your hard earned money.

        • Reply
          Bluetheimpala 2 years ago

          Thanks for the recon o the ground Dennis. And remember there is still a lot of bad money in the market too… If they can’t sell in the next 45 days, take another 10-15% off. I’m not catching that falling knife. It will be interesting to see what the spring brings. Tick tock.

          • Dennis 2 years ago

            I had lunch with my friend to happens to be a bank manager at a credit union yesterday. He told be that credit is so tight.
            After what happened to Home Capital, Laurentian Bank and reports from various International organizations they are not lending.
            He also said we may have another situation this spring where buyers may walk away from purchases that are made in March, April, May as appraisals may come in below what clients paid. This is specific to low rise housing.

        • Reply
          Tim 2 years ago

          More boots on the ground. Nice work D.

          • Beh G. 2 years ago

            Ditto. Always good to get these comments in between data release dates. Keep ’em coming Dennis.

      • Reply
        Bluetheimpala 2 years ago

        Lol…the number jockeys will do what they need to do to survive. They will be calling the bottom each month and then be ‘shocked’… I can see this shit storm eroding faith in the RE industry completely. Final nail in the coffin.

  • Reply
    Cat 2 years ago

    I don’t think there is a lot of buying demand,from what I’m hearing and seeing I think they all rushed into it already, thinking they would lose out.

    • Reply
      Bluetheimpala 2 years ago

      Agree and we still have another month of extended credit. Once the bad money is flushed we’ll have a much better idea of market.

  • Reply
    Cat 2 years ago

    All you have to do is look at the new listing around T.O. shooting straight up highly specd. Two month’s ahead of spring peek,the future will bring housing in line .

    • Reply
      Bluetheimpala 2 years ago

      It will take longer than a few months. Keep your eyes open and don’t trust any agents. Talk to people, observe what is going on and read BD. I didn’t know the market was messed up based on a bunch of analysis, that came later… Everything seemed out of whack so I started doing my own research and then found Stephen and the property possee.

  • Reply
    Chris Bodnar 2 years ago

    Bless you mofo’s. My current lifestyle requires a house – expanding family – but I’m not looking for low-rise semi or detached until fall or perhaps 2019, mostly do to the comments and education provided by this site. We’re going to make it work in a condo one more year and see what happens when cash is king again.
    Anyone else new here, appreciate the depths of knowledge on display here in the comments as well as the articles. A lot of it is based on experience that predates at least my generation.

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