Greater Toronto is seeing the fewest new real estate sales for October in over half a decade. Altus numbers, obtained from BILD, show sales made a huge nose dive in October. The sales decline resulted in higher inventory, and mixed price movements.
Greater Toronto New Detached Prices Fall, While Condos Rise
Greater Toronto is a seeing new home prices diverge, depending on the type. The benchmark price of a detached home reached $1,115,284 in October, down 8.4% compared to the same month last year. The price of a condo apartment reached $775,537, up 14.5% from last year. A similar divergence is being made with resale numbers, but not nearly as large.
Greater Toronto New Home Sales Fall Almost 40%
Greater Toronto new home sales are falling across the board. There were 3,296 new home sales in October, down 39.85% from the year before. Condo apartments represented 2,805 of those sales, down 43.77% from last year. Sales haven’t been this slow since October 2012.
Greater Toronto New Home Sales September
Total September new home sales in Greater Toronto.
Source: Altus Group, Better Dwelling.
City of Toronto New Home Sales Fall Over 46%
The City of Toronto is seeing those numbers fall even faster. The City represented 2,207 of the new home sales, down 46.34% from last year. Condo apartments represented 2,133 of those sales, down 47.78% from last year. Weak sales numbers for detached homes are expected, since it’s likely due to inventory. You probably haven’t seen a whole lot of detached homes under construction in the city. Condos on the other hand…
Greater Toronto New Home Sales
Total condo apartment sales in Greater Toronto for September, by region.
Source: Altus Group, Better Dwelling.
Greater Toronto New Home Inventory Rises Over 30%
The decline in sales wasn’t related to a lack of inventory. There were 16,283 units for sale in October, up 30% from last year. Condo apartments represented 10,982 of those units, up 17.98% from last year. For reference, inventory includes pre-construction units, projects under construction, as well as completed units that are move-in ready.
The sales to active listings ratio (SALR) has fallen significantly. The ratio in October 2018 is 20%, down from 43% last year. This takes us down to a three year low for the October ratio, on the cusp of balanced. Generally speaking, analysts believe a SALR between 12 and 20 is balanced. Anything below 12, and it’s a buyer’s market. That’s when price growth turns negative, and buyers can demand more concessions. Anything above 20, and it’s a seller’s market. That’s when price growth turns positive, and seller’s can demand more concessions. Exercise caution with fast moving ratios, since they can just be making a stop over in a market before turning.
Greater Toronto New Home Sales To Active
The ratio of sales to active listings for new homes in Greater Toronto, for the month of September.
Source: Altus Group, Better Dwelling.
Toronto’s falling sales and higher inventory isn’t a great sign, but it’s not all that bad right now. Sales are just below the ten year average, and inventory is still under 2015’s number. That said, the rapid decline in prices for detached homes, and frothy gains in condos is a concern. Large price gains are typically followed with losses, to balance the ratio back to normal. This becomes more likely as builders hold onto more inventory.
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The condo pre-sale investment game is easy. When rate are being cut, you buy as many assignments as possible and flip them. When rates are rising, you don’t touch the stuff with a 10 foot poll. They’re printing gains in public, but investor sales are slashing prices. I’ll be back to flipping in a few years, theres no rush.
The price change delta is probably almost 40 points in some projects I’m seeing. With a spread like that, there’s no way to tell if the market is going to move higher. It now depends on the ability for the market to absorb public inventory at higher prices. With a 20% absorption, I’m not seeing it.
Suggesting you will be back in a few years shows you are an amateur and not a true investor.
A true investor is looking for returns, and if the market does crash, it will be more than a few years before you get better than inflation returns. However, unlike a GIC or savings account, a condo has maintenance fees, property tax, closing costs, ect. Hold it for 10 years? Now your kitchen and bathroom is out of date. Hold it for 15 years? Now your flooring and lighting are out of date.
Going to have a tenant? Hope you’re cashflow positive and prepared to deal with the BS.
Good Luck.
LOL @ anyone that thinks they can buy something after prices double, and still make a gain. If you could make a gain, no one would be selling those units to you.
Anyone that didn’t read this Toronto and Vancouver pre-sale condo sale Twitter thread probably should. Especially if your Realtor is all of a sudden pushing you into buying a new condo, and you’re trying to figure out why.
https://twitter.com/REWoman/status/1066035630684151808
Real estate is always going to be a good investment. Buying pre-sales today, they won’t be ready for 5 years. By then the market will have recovered, and will be on the upswing.
Wow, such insight!
Was your crystal ball manufactured by TREB?
Have you seen the quality of today’s builds? At some point its going to matter, builders will adapt, and 2001-202? product will sell at a discount. Everything leaks, rattles, squeaks, cracks, discolours and falls apart in under ten years. Good investment for anyone but flippers, don’t think so. More like money pits. They really should remake the film, using a GTA house built recently: https://www.imdb.com/title/tt0091541/
By that time it actually only hits the bottom at best.
https://www.ucd.ie/economics/research/papers/2007/WP07.01.pdf
No need to go as far as Ireland Xelan… to know how long it takes for prices to recover, you only need to look at Toronto after the 89 crash. It took 17 years for inflation-adjusted prices to reach their previous peak!
Back then the BOC had plenty of room to drop interest rates and stimulate demand but now they have nothing. Some areas like King City are unlikely to ever return to the early 2017 peaks. 11 years after the Spanish RE crash, some areas in Spain are still seeing price decreases!
Right. 15 years from now houses in Vancouver will be worth 15 million while incomes will get near 100k per year.
1 bdr condos have been holding up the the entire market. Once they start to turn look out below.
My favorite line, “Shiller (2006) looks at three long series of real house prices: Amsterdam from
1628 to 1973, Norway from 1819 to 1989, and the United States from 1890 to 2005.
In all cases he finds that although there are substantial and long lasting peaks and
troughs, there is scarcely any upward long-run trend in prices.”
So that means we are accounting for the industrial revolution, various periods of mass migration, the technology boom, and the rise and fall and rise again of urbanization… and yet “there is scarcely any upward long-run trend in prices.” I’m tired of this nonsense about home prices going up because Toronto is world class (no) ,in the midst of a tech boom (with the low paying tech jobs) and a mecca for immigrants (most of whom cannot afford current home prices). Let’s be real. Toronto is not special or the exception- immune to home price declines. It’s just another city like any other city subject to the same basic economic principals. The market always bites the hand that feeds it.
Some things never change, and every generation has to learn the hard way.
” It’s just money; it’s made up. Pieces of paper with pictures on it so we don’t have to kill each other just to get something to eat. It’s not wrong. And it’s certainly no different today than its ever been. 1637, 1797, 1819, 37, 57, 84, 1901, 07, 29, 1937, 1974, 1987 – Jesus, didn’t that fucker fuck me up good – 92, 97, 2000 and whatever we want to call this. It’s all just the same thing over and over; we can’t help ourselves. And you and I can’t control it or stop it, or even slow it, or even ever-so-slightly alter it. We just react. And we make a lot of money if we get it right. And we get left by the side of the road if we get it wrong. And there have always been and there always will be the same percentage of winners and losers, happy fuckers and sad suckers, fat cats and starving dogs in this world. Yeah, there may be more of us today than there’s ever been. But the percentages-they stay exactly the same.”
Toronto is a world class city and if you think there will be a major correction because price gains have been excessive in relation to income growth, you will be disappointed…
… said CIBC in 1990.
https://twitter.com/ExtraGuac4Me/status/980578764621934594
Anybody notice the Bank of Canada has quietly been buying mortgage backed securities?
It’s not typically a good sign, usually happens when those securities sour, or about to become toxic.
They become toxic, when the underlying mortgages deteriorate or on the verge of doing so.
https://www.zerohedge.com/news/2018-11-24/bank-canada-start-buying-mortgage-bonds-canadian-housing-market-cools
>> “This is mostly a reflection of Toronto and Vancouver, the two most important real estate markets in Canada,” National Bank economist Marc Pinsonneault wrote in a client note. Indeed, Toronto house prices grew 0.3% in August, but Pinsonneault says this reflects the usual rise in prices seen in spring and summer months. Strip out the seasonality, and Toronto house prices have been falling for five months. Meanwhile, Vancouver’s house price index fell 0.4% in the month, though the index is still up 7.6 per cent from a year ago. But the momentum is gone: Adjusted for seasonality, Vancouver prices have fallen for the past three months, Pinsonneault said.
And now, the Bank of Canada seems to be taking preemptive steps, just in case this localized slowdown spreads to all other markets.
There will and always has been a home to income ratio that is comfortable to all who enter the housing market. It will always be based on the law of average and not winning the lotto or a windfall from your parents estate. When this ratio comes back down to earth and can accommodate our children’s income which is far less than the boomer’s only then will you see things start to look and feel better.
By the way…a lot of boomers have leveraged their property to assist with their children entering the market…with such a gloomy real estate market upon us they too are going to feel the pinch. They will never get that money back when they need it the most, in their golden years.
I think this is very telling on where things are headed
https://www.theglobeandmail.com/real-estate/toronto/article-toronto-home-sellers-should-abandon-lofty-expectations-high-end/
CBC Artical
“Swiss investment bank UBS has deemed Toronto and Vancouver to have among the world’s biggest housing bubbles, with mispricing that’s even more pronounced than it is in expensive cities like Paris and San Francisco.
In an annual report published Thursday, the Swiss bank looked at 20 cities around the world that are considered to be financial centres, local metropolises that are hubs for their regional economies. The list includes familiar names such as Tokyo, New York, Sydney, Singapore and others, and for the most part, all the cities on the list share one thing in common — the cost of living is higher there than it is in other nearby places
Some cities were worse for renters and others presented particular challenges for foreigners. In terms of overall housing prices being far more than they should be based on fundamentals, the bank singled out six cities for having worse housing bubbles than anywhere else:
Hong Kong. Munich.Toronto. Vancouver.London.Amsterdam.
Using data about local salaries, housing prices, rental markets, mortgage debt and other metrics, the bank looked at 20 of the biggest housing markets and gave each city a score. A score below –1.5 is considered to be a depressed market, while a score in a range of between –1.5 to –0.5 is considered undervalued. Fairly valued to UBS is between –0.5 and 0.5, while overvalued is up to 1.5. Anything above 1.5 is considered to be a bubble, which the bank defines as ” a substantial and sustained mispricing of an asset, the existence of which cannot be proved unless it bursts.”
Vancouver scored a 1.92. Toronto was even higher, at 1.95.”