Toronto

Toronto Real Estate Sales Down 22%, Inventory Soars 136%

Toronto Real Estate Sales Down 22%, Inventory Soars 136%

Toronto real estate is off to a cool start in 2018. Numbers from the Toronto Real Estate Board (TREB) show price growth tapered in January. Generally speaking, the market saw declining price growth, more inventory, and a decline in sales.

Toronto Real Estate Prices Are Up Over 5%

The benchmark price of a composite home, which is a typical home in the GTA, is still up compared to last year. The benchmark price across TREB is now $743,200, a very slight decline of 0.04% from the month before. This works out to 5.16% higher than the same month last year. In the City of Toronto, the benchmark price is now $794,200, a 0.03% rise from the month before. This represents a 10.31% increase compared to the same month last year. Prices are still substantially higher than last year, but it’s worth looking at it in the context of growth.

Source: TREB, Better Dwelling.

The benchmark price is still a lot higher, but it’s growth is tapering quickly. A 5.16% increase in prices is what you would normally expect from a “booming” market. However, it is falling very quickly from the peak growth of 31.26%, achieved in April 2017. Negative price growth isn’t out of the cards. Especially in the detached market, where price growth is now below inflation. Long term buyers should average out the peaks and troughs, and shouldn’t worry about a single year. Short-term speculators, good luck.

Source: TREB, Better Dwelling.

Toronto Average Sale Price Dips Back Into Negative

The average sales price across TREB fell back into negative territory. The average sale was $736,783 in January, a 4.1% decline compared to the year before. We briefly dipped into negative growth in November, but this drop is larger. This looks scary for prices, but doesn’t mean what most people think.

The decline in average sale price isn’t an indicator of prices per se, but an indicator of dollar flow. Wealthier buyers tend to lead the market. A rise in average sale price typically indicates a healthy flow of upgrades. A decline in average prices, typically indicates less well heeled buyers are taking control of the market.

Source: TREB, Better Dwelling.

Toronto Real Estate Sales Declined Over 22%

Sales across TREB are showing substantial declines. TREB reported 4,019 sales for January, a 22.53% decline when compared to the same month last year. Breaking that down, 1,517 sales were in the City of Toronto – a 20.32% decline compared to last year. As always, keep those numbers in mind, but they don’t mean anything unless you look at inventory. A decline in sales can still mean higher prices, if there’s a decline in inventory. That wasn’t the case, but we don’t want you jumping to conclusions.

Source: TREB, Better Dwelling.

Toronto Real Estate Inventory Is Up Over 136%

The big story is inventory, which is substantially higher than last year. New listings across TREB added up to 8,585 new listings in January, a 35.62% increase compared to the year before. The City of Toronto represented 2,776 of those new listings, which is actually a decline compared to the same month last year. New listings are piling up faster in the suburbs, but that doesn’t mean inventory is scarce.

Active listings, which are the total number of listings available for sale, are much higher. TREB reported 11,894 active listings, an increase of 136.27% from the same month last year. In the City of Toronto, active listings reached 3,460 in January, a 55.15% increase. Despite the decline of new listings, more inventory is carrying over from the month before. More inventory and less sales, gives buyers a lot more choice – which also means lower price growth.

Source: TREB, Better Dwelling.

More inventory and less sales makes it harder for prices to go higher, so the tapered growth is expected. This is about to become even more complicated, as TREB’s latest homebuyer survey shows less people plan on buying in 2018. To make that even more complicated, the same survey shows even more people are planning on selling. A quarter of those planning to sell also have no immediate plans to buy again. This could add to the potential mismatch of buyers and sellers.

Once again, long-term owners shouldn’t be too worried about the declines. The windfall they made, should ideally balance over time to more moderate gains. Short term investors looking to flip soon, should be cautious with the headwinds the market faces. In addition to more people looking to cash in, there’s the mortgage stress tests, Ontario’s new landlord regulations, a flood of new construction scheduled to complete, and rising rates —  all pointing to potential near term downside. We even learned this week, that Canada is seeing fewer wealthy immigrants than expected.

If you’re a buyer on the other hand, lots of selection and decreased competition.

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25 Comments

  • Reply
    David Z. 4 months ago

    You just can’t expect prices to rise every year people. A good return on real estate is about 4%. Toronto averages about 7%. After getting a 30%+ year, there just had to be a negative return. It’s impossible not to. Despite what greasy agents are telling people.

  • Reply
    Justin Thyme 4 months ago

    Presales housing prices in Toronto just tanked.

    Houses that are not yet built are going for $90.000 less than the price of the same equivalent house someone is moving into today,

    The ‘futures’ market for houses.

    Developers are panicking. They NEED cash flow and sales on the books.

    • Reply
      Chuck 4 months ago

      I knew pre-sales were going to be rough, when all developers tried to rush into this tiny window.

      https://betterdwelling.com/city/toronto/toronto-will-see-17000-pre-construction-condos-go-sale-next-2-months/

      Developers are normally very controlled (and even probably discuss staggering sales through BILT events), but this was very weird. I know the article says it’s about half a year worth of housing, but in actuality it’s a full year if you exclude temporary residents.

      • Reply
        bluetheimpala 4 months ago

        Great comments guys and I couldn’t agree more. Developers are the canary in the coal mine because the big guys they aren’t looking 2-5 years but 10-20 years down the road. Their entire business is about understanding future values so they don’t overpay now and then have to write it off later (as we know, they all pool resources/planning so they always end up ahead…another canadian oligopoly woot!).
        Unlike some stats that are blended/skewed/laggy if right now the same unit has been reduced 15% to a native buyer (what is the discount for multiples to a foreigner, 25%?) then we have some actual real-time data to support a potential downturn.

        Thyme will tell.

      • Reply
        L 4 months ago

        On the contrary, most of the 17,000 condos were absorbed during period; aside from a couple overpriced projects, most did well. Also @thyme, which developments are you seeing this $90,000 gap (are you referring to low rise)? For the most part, in the past year, pre-dev condos prices have been higher on a $PSF basis than existing units in similar locations.

        • Reply
          bluetheimpala 4 months ago

          TorStar’s lead online article over the weekend was about home builders already dropping their prices by 10-15%. The example was East GTA, Pickering if I recall…yes Condos are still messy. Will have to wait and see.

          • John 4 months ago

            Mattamy Homes development in Whitby. Though there are about 8 developers on that swath of land and significantly more units ready to presale than anyone wants you to know.

            I’ve heard estimates of 25,000 single family homes between the 401, Lakeridge Rd., 407 and Brock Rd.

            Grab a coffee and a box of timbits and drive the area. It’s a reasonable estimate.

        • Reply
          Justin Thyme 4 months ago

          You will not get a lot of traction around here,

          Most people on this site are quite savvy.

          Numbers pulled from a hat usually don’t get much attention.

        • Reply
          Neo 4 months ago

          New detached 36′ lot homes in Milton are going for $200,000 to $300,000 less than they did last Spring. So it is definitely happening.

          • Tommy 3 months ago

            Of course they are. We are in the dead of winter. Prices are lower in winter and at their peak in the spring.

  • Reply
    Zheng 4 months ago

    I know the benchmark price is “the most accurate,” but it’s still a load of crap. It’s seasonally adjusted, so it averages out high sale months if I’m not mistaken. The benchmark is going to fall off a cliff in June, once the ridiculously high sales are no longer included in the calculations.

    Prices are falling FAST. Just watch for any number of properties with declines.

  • Reply
    Justin Thyme 4 months ago

    ‘The Toronto Real Estate Board said Tuesday the average selling price of a detached home in the 416 area code was $1,283,981 in January, a decline of 3.9 per cent from the same month a year earlier.’

    From http://www.cbc.ca/news/business/treb-january-data-1.4522047

    What gives? Who’s data is incorrect?

    Down 3.9%, not just from the previous month, but from the previous YEAR.

    • Reply
      Omer 4 months ago

      These are the composite numbers, so they would be balanced with the detached numbers. i.e. detached is crap right now, and condos are still relatively high for growth.

      If I recall, I believe I’ve seen separate reports for condos and detached. Not sure if BD publishes them later in the day?

  • Reply
    bluetheimpala 4 months ago

    The narrative from the real estate industry is NOW we know April 2017 was an anomaly (funny, they were saying it was ‘the new normal’ last year…) so OF COURSE prices have to come down but just a bit and the second half 2018 will be really strong and make up any declines. ALL of the fundamentals indicate a strong 2018 overall.
    We’ll have to see how Q1 + Q2 pan OUT…on a side, I don’t think I understand how CAPITALIZING words for emphasis WORKS.

    • Reply
      Justin Thyme 4 months ago

      I guess because ‘air quotes’ have lost their appeal. Used to be, ‘air quotes’ were used for emphasis. Italics works but we can’t use it HERE.

  • Reply
    Justin Thyme 4 months ago

    ‘Thompson, a bus driver, bought her two-storey, detached house as a nest to share with her husband, her children and grandchildren.

    ‘She says she paid $955,000 for a 2,749-sq.-ft. detached house. Last month Mattamy began selling the same model on a similar lot for about $859,000 in Queen’s Common Phase 2.

    “I wish I could walk away from it because it’s just too much money,” Thompson said.’

    From https://www.thestar.com/business/real_estate/2018/01/29/how-a-softer-housing-market-has-crushed-pre-construction-home-buyers-dreams.html

    Mattamy is Canada’s largest seller of new homes.

    Please tell me again why people just HAD to buy back then, because prices WILL go up, ALWAYS?

    And for those people buying pre-sales today, for future move-in, there is absolutely NO guarantee that the house will not be worth less by the time they move in.

    ‘Sam Shoulda Bought Then’ has now become ‘Sam Shouldn’t Have Bought Then’, and even ‘Sam Shouldn’t Buy NOW’.

    • Reply
      Professor of real estate 4 months ago

      I love the bus driver story. We need fools like that to buy real estate so the savy investor can make money. The home prices came down because of drastic government intervention not the free market. All they did is make all young people renters for a generation. Home prices will steadily increase after they take a pause for 2018. Too many fools out there still believe real estate will fund their retirement. Mortgage payments to bring principle down is the fools way to force them to save. without the mortgage folks would just spend all their earnings on crap. Bottom line is that we need fools and idiots – they are the backbone for savy investors to make money.

      • Reply
        bluetheimpala 4 months ago

        God I told myself I wouldn’t do this. Every time I try to stop people like you drag me back in…this is so trolly mctrollington…

        First off, Canadians who were swept up in this garbage are not idiots or fools, they got caught slippin’ to put it in street terms.

        Second, you may be a pro or just stumbled into it but this comment is subversive and while appearing negative is promoting home ownership and FOMO…you should be ashamed and you are definitely naive…like Liam Neeson…I will find you and make you pay.

        Third…well there isn’t a third. In general, leave that shit at home. We don’t play politics or hate here. Sure we attack like hamsters in a cage, mainly trolls and stupidity, but like hamsters we’re all cute and soft. My cage name is Peanut.

        BD4L

        • Reply
          Justin Thyme 4 months ago

          The worst thing about trolls is that they think everyone is as ignorant as they are.

          The second worst thing about trolls is that they are sometimes correct about the first thing.

          The third worst thing about trolls is that they bring out the worst in us, and turn us into the second thing.

        • Reply
          professor of real estate 4 months ago

          Come on! you are too serious. Are you saying the bus driver lady is not an idiot? Most Canadians got ‘swept up’? Is this a joke? These Canadians were greedy and think they can make easy money without doing jack by flipping houses or taking out equity and buying more investment properties. Most would call this gambling. Since savy investors are the house then the house usually wins. There is no hate here. If you are a greedy gambler why should you get a bail out? You seem intelligent but you have a bit of a comprehension problem. I was making a point about the fact that most folks go into real estate without any real knowledge. They think they understand real estate better than the stock market therefore they inadvertently make money by paying down their mortgage vs. renting and investing the rest in stock market. Your last paragraph is an embarrassment. You control content on the comments section?I”m spicing it up! Most folks on this site just complain about high prices and hope and pray for a correction. I provide real info into the thinking of a pro who has made multi-millions in real estate investing while you provide cute and sarcastic comments that add up to zero dollars in real estate knowledge. I think people come to this site to learn somethingl

        • Reply
          Nav 4 months ago

          You have become my new favourite poster!

        • Reply
          John 4 months ago

          This troll is peddling very hard. I think business is slow and he needs more commissions before his financed Benz gets repo’d.

          People come here to discuss facts and data. Contribute meaningfully or go back to Facebook to drum business for your friends and family.

    • Reply
      YYZ 4 months ago

      4 letter – FOMO

  • Reply
    question guy 4 months ago

    there is no free market in RE in the GTA.

    suggesting government tinkering NOW means no free market ignores CMHC altogether.

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