Toronto’s detached real estate prices are down a tenth from peak, but condos are still moving higher. Toronto Real Estate Board (TREB) numbers show condo sale prices reached a new all-time high in October. The high was the result of more sales and less inventory. Despite the tighter market, price gains continued to decelerate to half the pace seen last year.
Toronto Condo Prices Are Up Over 9%
Toronto condo prices reached a new high in both the city and the suburbs. TREB reported a condo benchmark of $507,700 in October, up 9.56% from last year. The City of Toronto saw the benchmark hit $538,300, up 10.92% from last year. Unsurprisingly, condo prices in the city are rising faster than those in the suburbs.
Toronto Benchmark Condo Price
The price of a “typical” condo apartment in Toronto.
Source: CREA, Better Dwelling.
The annual percentage change is still very high, but continuing to decelerate. TREB’s 9.56% increase is lower than last month, and waaay lower than the 22.99% we saw this time last year. Also interesting to note how quickly gains are decelerating within the same year. Prices advanced a massive 6.85% in the first half of the year, and 2.44% in the second half. A slowing second half may be indicative of interest rates providing a little friction for prices.
Toronto Benchmark Condo Price Change
The annual percent change of price, for a “typical” condo apartment in Toronto.
Source: CREA, Better Dwelling.
The median sale price of a Toronto condo is also up huge. TREB reported a median sale price of $495,000 in October, up 8.79% from last year. The City of Toronto reached $535,000, up 9.63% from last year. The median sale price is more volatile than the benchmark, and is better used for gauging dollar flow.
Toronto Median Condo Sale Price
The median sale price of a condo apartment in Toronto.
Source: CREA, Better Dwelling.
Toronto condos saw the average sale price move higher as well. TREB saw an average condo sale price of $562,523 in October, up 7.5% from last year. The City of Toronto’s average sale price was higher at $603,153, up 8.6% from last year. Much like the median, average sale prices aren’t useful for determining how much a condo costs. Instead, they’re a better indicator of dollar flow as well.
Toronto Average Condo Sale Price
The average sale price of condo apartments in Toronto, and the suburbs.
Source: CREA, Better Dwelling.
Toronto Condo Sales Rise Over 5%
Toronto condo sales also increased compared to last year. TREB reported 2,127 sales in October, up 5.5% from last year. The City of Toronto represented 1,519 of those sales, up 2.8% from last year. Remember last year experienced a huge drop in volume, so the gain isn’t as great as it might seem. Sales are still 22% lower than they were in 2016, and 4% lower than 2015’s number.
Toronto Condo Sales Vs. New Listings
The number of condo sales, vs newly listed condos per month in Toronto.
Source: TREB, Better Dwelling.
Toronto Condo Inventory Is Down Over 3%
New listings of Toronto condos increased compared to last year. TREB reported 3,401 new condo listings in October, up 1.25% from last year. The City of Toronto represented 5.33% of those listings, up 5.33% from last year. Growth in the city was faster than in the suburbs.
Toronto Active Condo Listings
The number of condo listings available for sale in Toronto.
Source: TREB, Better Dwelling.
The rise in new listings wasn’t enough to bring total inventory higher. TREB reported 3,702 active condo listings in October, down 4.41% from last year. The City of Toronto represented 2,470 of those listings, down 3.09% from last year. Yup, there’s actually less inventory than last year.
Toronto condo prices are printing new highs, but the deceleration is worth watching. Despite tighter inventory, prices gains are half of what they were last year. If price growth gets lower, Toronto’s large number of negative cashflow condo investors may reconsider their strategy.
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What do I care if a negative cashflow investor needs to sell? It’s not like their desperation is the same as mine.
Just like the desperation of buyers that were willing to over leverage themselves had no impact on driving the value of your condo? I’m guessing you skipped the class on demand curves.
Because there may be a lot of them. In that case, you could see many identical units coming on the market at the same time, driving prices down, and driving the price of your unit down as well.
Granted, if you don’t sell you don’t “realize” a loss, but if you are highly levered it will be challenging for you to move until prices rise again.
I love that from 2012 to 2016, prices move 5%. Then all of a sudden, prices double, and people are like “this is normal. Yup, I’m an investment pro because I bought bitcoin at $10,000.”
“They mistook leverage for genius” – Steve Eisman
“Once you have eliminated the impossible, whatever remains, however improbable, must be the truth.” – Spock (Star Trek)
“Booty, booty, booty, booty, rockin’ everywhere”
— Bubba Sparxxx
The benchmark is historically inflation adjusted, so that seems like a normal market. You would have seen about a 2% increase plus 1.23% CAGR. The next two years prices jump 56%. Anyone that thinks that’s normal, stable, and rational… are the people on the other side of the bubble that usually get hit the hardest.
bull trap! 🙂
The comments section awfully quiet up in here! Rising rents, prices still up ticking… where are the bears? Make any excuse you want, whatever it takes to make you feel better…. having to pay higher rents and never being able to get on the property ladder.
Tick tock, BD4L
Higher rents, but the owner of the condo renting them is losing $1,000 per month on the rent. Makes sense. Toronto is the only place in the universe where landlords will subsidize rents forever. It’s like Singapore’s government subsidies, but with idiots.
I sold my detached last year and am renting for about $60k less per year than the costs on carrying the mortgage, excluding principal contribution. If leverage for housing is the only leverage you can access, you’re not rich enough to be giving advice on how to make money.
As long as you’re unlevered yield + expected growth > mortgage rate, then you’re technically not losing money if you’re in it for the long run.
Realistically rents can only increase as much as incomes increase, or else people will leave the city. Incomes have not risen very quickly, producing a “cap” on how high rents can go before people will choose to live elsewhere.
If properties cannot produce the necessary rental incomes to support prices, there is no point in owning them besides outright speculation. The fact is that rental rates in TO (can’t speak for other cities) do not support the current prices, and lead to cash flow negative properties. If people want to lose money everyone month, I personally do not object to their desire. This also applies to the opportunity cost of owning a fully-paid off rental unit as those funds could be re-allocated to other more profitable assets.
Condo prices continue to inch up because it is the last frontier of affordability for those still wanting into the market, but once prices start to tip the other direction and speculative gains dry up everyone will be rushing out.
You assume all investors have mortgages or loans. Many do not. Units held free of debt are not cash flow negative today.
I am not assuming that, as I wrote: “This also applies to the opportunity cost of owning a fully-paid off rental unit as those funds could be re-allocated to other more profitable assets.”
I am not suggesting that RE is always a bad investment, as lots of people have made lots of money. I am merely suggesting that RE can be overpriced in the same way equities or any asset can be. In the case of RE, where things are incredibly illiquid, it is important to cash in while you can and move onto other assets. If you really want a 4% yield (which is about where TO rents are right now), you can buy equities with the same yield that don’t require you to be a landlord.
4% in depreciating currency (CAD is down 5% YTD against USD). So parking your money in plane USD would do better. Add 3% of some supersafe yield on top and it becomes twice as good.
I agree with MH below. If you’re all in US$s with super safe yields you’re making easy money–about 8% betw. the currency strength and the interest income—while you sleep. That’s also been my strategy this year. Keep in mind, the Cdn Petrodollar is going to keep dropping like a stone until oil worldwide gets fixed….and that’s a long way off with all the geopolitical unrest out there. If Canada gets an oil recession/depression, housing is going to get very shaky.
You give an average person too much credit. You really think most people are going about rebalancing their portfolios across different asset mixes depending on where we are in the biz cycle????!? For many, a house will be their largest asset class. Very simple to understand…. buy now and in 25 years, fully own a house that has appreciated substantially with a 100% guarantee (unless you can think of a 25 year period where housing prices have dropped). Sure equities could do better but how many people understand equities enough to invest in them completely?
I guess you didn’t get the memo on the 1989 housing bust in Toronto. Took nearly 22 years for the prices to come back, adjusted for inflation. This time, it’s much, much worse.
But go ahead, convince people that condos will be worth 5 million in 10 years.
Honestly, I am totally freaked out by Toronto’s RE market
Wife and I are in a rent-controlled condo paying only 1600$ for a downtown 750sf 1br w/parking. We’re planning on having kids, but need at least a 2br dwelling to have room for a single child. Even though our combined income is 220k pre-tax, I’m dreading the day we have to go out to the market to either find a bigger rental or buy. With the way rents are I don’t want to deal with a constant flow of rent increases or evictions so landlord can re-rent higher. Buying is also ridiculous in terms of price-to-quality of RE out there. Derelict 2br shacks (aka world-class Toronto real esate) with shit-stained walls go for 600k anywhere that’s still considered as “in the city”. The other option is to move to burbs and have my spouse suffer a daily 1.5 – 2hr commute (I work remotely).
If there’s no major change in the coming year, we’ll probably move to US. Luckily I’m in tech and work for a US company remotely, so I have the option of moving on a TN visa. Can’t justify buying in this city.
This forum seems to be populated by people worried about having missed the boat. As I’ve said before my kids (mid 20’s) think they missed the boat.
I live in the west end in and around some amazing neighbourhoods. I see many houses occupied by an aging population of normal Canadians whose houses were purchased in, like, 1975 for $40,000. It’s surreal to them that their houses were briefly worth $3,500,000. I don’t think they care that they may *only* be worth $2,000,000 now. It’s still surreal.
I think that when they move on and their debt laden kids get their mittens on the free-and-clear real estate they will be happy to liquidate to the first bird-in-the-hand so they can climb out from under their own debt. Especially in a market where houses threaten to sit on the market for a year or more.
The siblings will divvy up $1,500,000 and rid themselves personal debt, especially in the face of rising rates. Boom. Somebody got a deal, everybody’s happy. Real estate prices plummet or just become *realistic* again.
I’m interested in knowing what the debt load of the average homeowner is in the GTA. How many houses are free and clear? I’m betting the debt load is way lower that I think, and lots of houses are free and clear.
Keep up the good work BD!
I’ve always struggled with the impact of the impending boomer wealth transfer but I think you’re spot on. My biggest concern is a debt laden society that inherits vast sums of cash resulting in a circle jerk of asset bubbles with all our dollars spent servicing debt. Like Hamsters on a wheel. I can make the pants. Tick tock. BD4L.
I think they will pay off debt because getting out of debt is harder than getting into it, and that is something best appreciated in the rear view mirror.
you think these kids will sell down 25% just so they can get out of their debt and not wait a year??? LOL.
With this type of thinking from the normal crowd here, it’s no wonder people on this site think housing is going to drop like a rock.
We’ll see.