Toronto

Toronto Real Estate Sets A New Record…But It’s Not The Good Kind

Toronto real estate makes a sharp turn. Prices growth is slowing, sales are dropping, and inventory is hitting highs.

Toronto Real Estate Sets A New Record...But It’s Not The Good Kind

Toronto real estate set a new mutli-year record, but not exactly one it wants to advertise. June numbers from the Toronto Real Estate Board (TREB) show a huge number of sellers are lining up with inventory, but buyers aren’t really there. Generally speaking, the market saw slowing price growth, a huge drop in sales, and multi-year highs of inventory.

Benchmark Prices Are Up, Average Sale Prices Are Down

The price of homes across the GTA remain high, but they definitely aren’t growing at the same rate as before the province’s cooling measures. The benchmark price of composite homes, that’s the price of a typical home with luxury bias removed, is now $810,700 – a 25.3% increase from the same time last year. In Toronto proper, that number was $829,500, a 24.22% increase. While the number is in no way crashing, that’s a conservative increase by Toronto measures.

Source: TREB.

One of the more interesting things being discussed is the decline in average sale price. The average sale price for June was $793,915, a massive -8.10% decline from the month prior. Although that’s still a 6.3% increase from last year. Worth noting this is the first time since 2015 that the average price saw two monthly declines in a row. Average price can decline for a lot of reason, most notably a shift to lower priced units. Looking at the total dollar volume however, gives some additional insights. Dollar volume dropped to $6.33 billion for the month, a 33% decline from the same month last year. So it’s clear that less buyers showed up to the party this month.

Toronto Sales Are Down 37.3%

The number of sales across the GTA are on the slide. There were 7,974 sales, a 37.3% decline from the same month last year. Toronto proper saw 3,139 of those sales, which is a 31.4% decline from the same time last year. The bulk of the declines were seen with more expensive detached units, where sales declined by 45%. The least declines were seen in the condo segment, where sales declined 23.4%.

Source: TREB.

Toronto Listings Are Up 15.9%

Inventory has been building from historic lows, and that trend continued through June. New listings hit 19,614, a 15.9% increase from the same time last year. Active listings, which have the tendency to be artificially low, hit a multi-year high. June ended with 19,680 active listings, a 59.6% increase from the same time last year. This is in addition to an estimated 10,090 terminated listings, another multi year high. Good news if you’re a buyer, there’s plenty of selection. Bad news if you’re seller—your buyer has plenty of selection so you may need to be more competitive with pricing.

The market was showing signs of softening demand before the provincial government rolled out the Fair Housing Plan. However, new rules do tend to impact buyer psychology, and stimulate a wait and see response. Vancouver real estate experienced a similar lull after the BC government introduced cooling measures, before resuming hitting all-time highs just a few months after. Will Toronto take the same path? We’ll have to wait and see.

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33 Comments

  • Reply
    Icei 3 months ago

    Toronto is in the mids of a major correction. These real estate stats are as gruesome Sales plunged year/year by 37% last month. Worse, the level of deals collapsed 21.6% compared to the previous month. That means active listings continue to pile up – with a stunning 60% more properties currently for sale than just one year ago. The average house value was off 6% in May and down again in June – this time by 8%. The perfect storm is here along with mortgage rate increases. But it gets worse. The bank regulator, Office of Superintendent of Financial Institutions, this week hammered on houses selling for more than $1 million. Borrowers who have over 20% to put down (required for seven-figure houses) must pass a mortgage stress test – just like people applying for loans covered by CMHC. If you can’t qualify for payments at a 2% above the current rate there will be no loan. The regulator is also tightening up on the practice of bundling mortgages which sub-prime guys like Home Capital do to avoid the cost of mortgage insurance. If prices can drop 14% in the last 60 days, they can sure do that again in the next two months. The price decline will then result in similar which brought the US middle class to their knees. And than it took 3 years to entirely roll out, bottoming in 2011-2012. The last time Toronto saw this was in 1989 when market imploded. The recovery period was 14 years afterwards. If you think soft landing. . . .I wouldn’t hold my breath, this blip may be, will wipe out middle class Canadians just like it did in US in 2008.

    • Reply
      David 3 months ago

      Good comment, though I would add that the new stress test is not yet in force, and I wonder if the banks will “allow” this to come to pass or use their powers of persuasion to get the regulator to hold off? After all, the Banks like measures that kill the competition (the bundled loans at HT, EQB) but they don’t want to kill the goose……what do you think?

      • Reply
        Neo 3 months ago

        David,

        What we are seeing is an organized demolition of the housing market here from all levels of government and BOC. Banks have already tightened lending standards to the point of starving off new credit which is exacerbating the decline.

        Regardless, banks win on the way up with higher prices and on the way down with a record number of debt slaves and higher interest rates. Things go to badly they get bailed out. Rinse. Repeat.

        • Reply
          Milan 3 months ago

          I would not call it demolition. When individuals do not have theirs own sens of responsibility somebody has to intervene to save them from future huge problems.

          • Neo 3 months ago

            Milan,

            What I meant was this is all very coordinated.

            The BOC is going to raise rates next week.

            The provincial government introduced cooling measures in May.

            The Federal Government has already done there tightening policies that were introduced in the October but were not fully implemented by banks until March.

            The CMHC has seen a 40% reduction in new mortgages since in the first quarter of this year.

            The banking governing body the OSFI is now talking about making people with even 20% down that are buying million dollar homes to qualify at 2% above the current rates.

            The banks themselves are restricting credit and appraisals are coming in far lower than there were 2 months ago.

            They are trying to coordinate a soft landing because people lost their collective minds this Spring and things really became unsustainable. Whether it stays a soft landing or a hard one will depend on the mentality of the herd. The herd psychology goes both ways. FOMO can turn into catching a falling knife and expecting prices to be even lower. We will find out more in September.

    • Reply
      Tommy 3 months ago

      There is nothing exceptional about the stress test. It’s a test that any astute lender would apply to a borrower even if it wasn’t the law. That along with emergency funds for rainy days are a given for people buying property. If these factors are not considered by a buyer, the buyer has no business buying property and cannot blame anyone if and when holding the property becomes unaffordable.

      Likewise, a 0.25% interest rate hike is abysmally small. It equates to around an extra $12/month per $100k borrowed. News articles make this sound like the end of the world yet it’s a non-issue.

      Prices declining from an insane peak means very little. Returning to double digit gains over 2016 is nothing to scoff at. The 30% year over year gains seen in the first quarter were unsustainable. Even if the year over year gain ends up being 10% – 18%, that’s a significant increase.

      The Toronto of 1989 is unlike the Toronto in 2017. The once middle-of-the-road blue collar city has doubled in population, has become a global hub for investment, commerce, entertainment, and remains cheap by the standards of other global cities.

      Unlike the US crash in 2008 which resulted from nationwide banking loan scandals, the Canadian housing market is bigger than just Toronto, and there is no equivalent banking issues in Canada.

      • Reply
        Shakingmydamnhead 3 months ago

        Yes, just like Vancouver, the place to be if you want to make your mark on the world. Forget New York, London, Hong Kong, people. Vancouver and Toronto are where it’s at.

      • Reply
        Must Read 3 months ago

        Buddy calm down…if you are failing to sell houses now just start selling insurance. Thats what most realtors have started. I understand your pain. But Toronto is no where close to NY, London or any other big hub. I have no idea how can some one call Toronto a world class city with only 2 Subway tracks.
        Coming back to what you are saying Toronto a “Financial Hub”. If this govt will not increase interest rates aggressively no body will invest here. Canada is already loosing its competitiveness due to low interest rates.
        I have answers to all your arguments but i think time will give you better answer. Just wait for Nafta re-negotiation and New Ontario wage law. Un-Employment levels will play another role in housing market.

        • Reply
          Tommy 3 months ago

          Canada is losing it’s competitiveness due to high taxation. Low interest rates are a worldwide phenom. I don’t mind interest rate hikes – those who bought more than they can afford will be effected, nobody else.

          Toronto is not NYC and that’s why house prices here are a fraction of that in NYC.

          • Must Read 3 months ago

            Of course those who bought more than they can afford will get effected. Just FYI- most houses sold in past few years are consuming 50% or more income of house hold so there will be a lot of people get effected.
            Taxation is just an excuse, it is never a problem for investments. Canada welcomes investors and businesses. Every business knows what to show in their expenses.

  • Reply
    Dan 3 months ago

    Everybody is so focused right now on average prices… Average price can go down just because there is more sales in lower end properties (condos). “Average Price” is unreliable indicator especially in uncertain market conditions. Take a look at “page 25” of monthly TREB report which shows benchmark price. Benchmark price is much more reliable indicator which takes into account many other aspects that “average price” does not (like number bedrooms, washrooms, lot size, renovations, etc) . So in City of Toronto (not GTA), benchmark price in April was $817,000, in May it was $830,300, in June $829,500. If those numbers are not “made up” then I don’t see any fall in prices at all. If average price is lower, it just means that most of the sales happening in affordable properties vs. luxury houses . I think it’s not surprise to anyone that average price is skewed right now by larger volume of condo sales.
    Here is the source for benchmark prices(page 25) :
    April: http://www.trebhome.com/market_news/market_watch/2017/mw1704.pdf
    May: http://www.trebhome.com/market_news/market_watch/2017/mw1705.pdf
    June: http://www.trebhome.com/market_news/market_watch/2017/mw1706.pdf

    • Reply
      Michael 3 months ago

      I agree that benchmark prices are more accurate, and I believe Kaitlin actually wrote that when last month’s decline happened.

      There’s a number of Realtor’s pitching misinformation about average price being what you should watch. It’s unfortunate that these sleeze bags would rather lie to tell people what they want to hear in order to try and get free media attention (and treat it as advertising). These will be the same people during a correction explaining it’s an excellent time to buy.

      That said, there is a drop in demand. A double digit gain from last year is no where near a crash though.

      • Reply
        Milan 3 months ago

        That’s correct. I believe that Realtors are responsible for GTA Real Estate crisis. They are pitching misinformation not just to gain media attention, but main reason is to brainwash people in order to get profit (huge number of pre sold houses and condos are bought by realtors in order to sell them wit huge profit, double ended Real Estate agents, nontransparent biding wars and many other dirty tactics)

    • Reply
      Neo 3 months ago

      Dan,

      I don’t know which part of the GTA you live but from where I live all categories (towns, semis and detached) are down from their peak in April by $100,000 to $150,000 depending on the property. It is complete foolery to try to tell people prices are higher in June than they were in April for anything selling regardless of this voodoo sales mix benchmark nonsense. You would be completely naive to believe it was so.

      • Reply
        Tommy 3 months ago

        Neo, the prices may be down in your ‘hood but if the houses are not selling then they will not be included in sales stats. A lot less houses are selling but of those I’ve seen, plenty are still selling at or above asking price. Likewise, condo prices continue to rise and sell like hotcakes. The rise of sales at the lowest end of the market is pushing up benchmark prices for everything else, just like it has in Vancouver.

        • Reply
          Neo 3 months ago

          Tommy,

          Prices in North Toronto are already down substantially. It is irrefutable. Above asking prices means nothing because it isn’t above “original” asking price in most cases. That number can be easily manipulated like the days on the market number which agents like to play with as well.

          Have a look at median price declines not the average price declines on Zolo.ca for Newmarket, Markham, Richmond Hill, Vaughan. In many cases they have already wiped out those 30% gains for the year and are now negative for the year. A lot of people need to get their heads out of the sand here and face reality. My “hood” has actually held up much better than most GTA areas but the trend is not your friend here either. This has nothing to do with with sales mix here as the median is also crashing in many areas.

          I know exactly was the selling prices are in my area. This isn’t speculation on my part. There are websites that give this information in real time. Actually selling prices are down $100,000 to $150,000 from there highs. Inventory has leveled off but is still twice as high as it was last year this time and sales are down substantially from last year. I’ve said this before, if things don’t turn around in September you can stick a fork in this market.

          • Tommy 3 months ago

            I understand where you’re coming from, Neo, however the benchmark stats say otherwise. Prices are still up when controlling for the luxury market, and certainly up over last year’s prices in every month thus far. The train may come to a stop – growing supply creates its own gravity and tends to pull things down over time.

        • Reply
          Milan 3 months ago

          Yes, the sales of lowest end condos are still high. That’s logical because they are still affordable and people need to live somewhere.
          However this is definitely not healthy real estate market and this has to be fixed.

      • Reply
        Dan 3 months ago

        Neo,
        It really depends on neighborhood. Suburbs are down 100k, but some neighborhoods in Toronto are still climbing up.
        Here are few examples where average price is up:

        https://www.zolo.ca/toronto-real-estate/niagara/trends
        https://www.zolo.ca/toronto-real-estate/cliffcrest/trends
        https://www.zolo.ca/toronto-real-estate/junction-area/trends

        Again I don’t think that average price is “good indicator” but as you see some neighborhoods are much better than others

  • Reply
    Captain Obvious 3 months ago

    The price of a tear down in Toronto is not available to 98% of income earners in the country? As long as prices hyper inflate while wages from low income to the highest wage earners grows by 2 to 5% in the past 10 years like it has while zero econ growth follows, and housing debt fueled price hyperinflation is caused. It is will obviously collapse as does any debt fueled household. Not rocket science folks. No PHD needed. And No Toronto is not the most desirable city on earth, that is pure fake advertising, it has a 3rd world infrastructure, the highest income taxes in North America, negative business growth and pure debt fueled real estate non sense. And immigration is not what you think it is. Immigrants moving to toronto, may be able to buy a home, but they can not get a job which is sufficient to pay for their mortgage and cost of living. Pure lies…if you make 200k you are taxed at 50 percent, you keep 100 ie 8k pm, basic cost of living will be 3-4 plus a mortgage and ppty taxes and you are short 2 to 4 k..1 percent of Canadians earn 200k or more the rest earn less. Pure nonsense.

    • Reply
      Captain Obvious 3 months ago

      Lastley, there are about 50 cities in the world which are far more desirable than Toronto in which one can easily live comfortably and not stressed out indebt up to their eyeballs working to death, in their 1.3 mil rat/ mold infested hole called a home in neighbourhoods that look like a gheto. Pure con job city. I walk around and not a single soul has a smile and look like a week away from a heart attack…it is very sad.. Thanks Tory you piece of garbage.Not to mention the city is unwalkable 9 months out for 12. I laugh at people who have pools, on which you can make use of 2 month out of the year and a back yard you can make use of and sit outside and enjoy your self 2-3 months out of the year! If i am wrong please enlighten me.

      • Reply
        Milan 3 months ago

        I would like to ad one more important thing. Not just useless swimming pools and back yards but the houses itself are useless, because huge number of house owners use houses just to sleep there because they must to work hard all day long to earn money to pay their mortgages

      • Reply
        Tommy 3 months ago

        You’re right about everything except the 50 better cities part. Like London and NYC, Toronto has crumby weather but it is where people live to make money. They use that’s money to vacation and/or retire in some of the 50 other unnamed cities with nicer weather, cheaper standards of living.

    • Reply
      Tommy 3 months ago

      That 2% of income earners you speak of is more than enough to support current house prices in Toronto. Refer to https://betterdwelling.com/city/toronto/how-many-people-can-support-million-dollar-toronto-real-estate-prices-a-lot/

  • Reply
    Joseph 3 months ago

    Long story short. You believe that prices will rise 30% or more in a year , but not the other way around ?

    Here is the story from turkey

    One day, Nasreddin Hodja borrows a cauldron from his neighbour. When returning it, he thanks the neighbour and puts a small cauldron in it. The neighbour wonders what the smaller cauldron is about. Hodja tells the neightbour that his big cauldron gave bitrth to a smaller one, so the neighbour is glad. After a long while, Hodja asks his neighbour to lend his couldron again. The neighbour willingly agress to give it. However, this time there is no word of either Hodja or the cauldron even after a long time. Finally, the neighbour decides to broach the subjest one day.
    -“Hodja, what’s happened to my cauldron?”
    -“My dear neighbout, it’s been ages since then and your cauldron has died. I was wondering how to break the bad news.” Hodja says sadly.
    Furious at this, the neighbour asks:
    -“What on earth are you saying? Would a cauldron die? It’s not alive; how could it die?”
    Hodja quips:
    -“You believed that it gave birth, so why can’t you accept that it is dead?”

    • Reply
      Tommy 3 months ago

      A 30% correction is unlikely as Toronto is merely playing catch up in term s of real estate prices. Yes, the 30% increase in a single year was unjustified by fundamentals, so a correction of even 15% is possible. However, would a radical correction of 30% make housing more affordable for most people? In other words, going back to 2016 house prices hardly turns the affordability issue on its head.

      Toronto is not unique among international cities to have housing prices far beyond median incomes. In fact, this is an indication that Toronto has arrived as a global city.

      Anyone hoping that prices will somehow be sliced in half so they can scoop up a house will be waiting indefinitely.

  • Reply
    Frederick Ferguson 3 months ago

    How exactly does anyone believe that the already record consumer debt ratios in Toronto can continue growing at 5-7% YOY. There are clearly track limits for debt service even without the immenent monetary tightening.

    • Reply
      Tommy 3 months ago

      Presumably the same way it has in other major cities worldwide. Property becomes a game of chess played primarily by existing property owners. They continue to trade on and upward. Some do this repeatedly and grow their empires while others sell and lose their foothold in the market forever.

      This level of control already occurs in the condo market. Many of the units in the condos being built now will never hit the market for resale. Many are purchased during preconstruction and are immediately turned into rentals upon completion.

  • Reply
    Phil 3 months ago

    I found some more real world discounts that have started to come up yesterday and today in Burnaby and Vancouver: http://futurodiem.com/vancouver-real-estate-bubble-pop/

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