While some segments of the market are doing better than others, overall the City of Toronto has fully recovered from the market declines brought on in April by the Ontario government’s Fair Housing Plan and the implementation of the 15% Foreign Buyer’s Tax.
Seven months have passed since the changes were announced and the Toronto real estate market has come to accept these government measures as part of the cost of buying a property in the city.
Unlike downtown Toronto, the outlaying areas of the 905 region have not yet rebounded as it continues to be plagued with sluggish sales activity.
The average sale price for a City of Toronto property in November was $802,220 up 1.5% from this time last year when it stood at $790,457.
In year over year comparison, detached house sales lost some ground as the average sold price in Toronto now stands at $1.276M down 5% from last year’s $1.346M. However, the average sold price for a semi-detached house is $905K which is almost unchanged from November 2016 when it was $906K.
Condominium units continue to be the strongest segment of the market. The average sold price for a condo in the City of Toronto is now $555,396 up 18% from last year’s $471,256. Average days on market stayed the same as last year at 21 days.
The residential resale market has now returned to the place it was a year ago, before the market’s irrational run-up that began in January of this year only to be stopped in its tracks by the provincial Fair Housing Plan.
Although the market will continue to recover in 2018, it is not anticipated that we will see the frenzied spring market of this past year with its out of control sold prices.
Since the spring we have seen 2 quarter point interest rate hikes by the Bank of Canada and the announcement by the Office of the Superintendent of Financial Institutions that commencing in January 2018, uninsured borrowers (borrowers who put down more than 20 percent of the purchase price of a property) will have to demonstrate that they can afford their mortgage payments at either the 5 year average rate noted by the Bank of Canada or 2 percentage points higher than whatever rate they were able to negotiate with their bank.
Simply stated, borrowers will have to show more income to qualify for a mortgage than they did in 2017.
Overall sales of residential resale properties have shown an impressive improvement compared to the months following the Fair Housing Plan announcement.
There were 2,978 properties reported sold in the City Of Toronto. This compares to 3,376 properties reported sold in November last year, a decline of only 13%. Notwithstanding this negative variance, it compares very favourably to the massive negative variances in June, July, August and September.
Another positive sign of market recovery is that sales are occurring as quickly as they were last year at this time. At only 21 days on market, sales are still brisk by historical standards.
The large negative variances in sales in the months mentioned above, (June, July, August and September) and an increased number of properties coming to market have increased the supply of properties available to buyers, with the exception of condominium apartments.
Due to their price point, condominium apartment demand has remained strong, resulting in tight inventory. At the end of November, there were 5,430 properties of all types available to buyers in the City Of Toronto. This compares with only 3,558 last year, an increase of 53%.
It should be remembered that the 3,558 properties available last year was a critically and dangerously low supply. That was made evident by the explosion of the irrational resale market that we experienced between January y and April 20th of this year.
In November, 4,881 new listings came to market, a 20% increase compared to the 4,073 new listings that came to market in 2016. There is no question that buyers have more choice compared to last year. This is another factor that militates against a repetition of last year’s frenzied spring market.
Going forward, what we do not need is any further government intervention in the market place, unless it is designed to stimulate the supply of housing, particularly purpose built rental units.
The provincial government ’s politically motivated decision to move to universal rent controls in Ontario may win the liberals the next election, but it will have a devastating impact on the rental housing market and will only hurt those it was “designed” to help – tenants.
The market is moving towards balance, with more choice for buyers, and price increases now consistent with inflation and wage growth. The market will further stabilize with the new mortgage stress testing. Government should let market forces control the residential resale market, just help with supply.
Victoria Boscariolis a real estate agent in Toronto Canada with Chestnut Park Real Estate Limited Brokerage. With over 20 years experience, Victoria has been helping people successfully buy and sell condos and houses in Yorkville and downtown Toronto. As a Certified International Property Specialist (CIPS) she has worked with Buyers from around the world moving to Toronto from China, Russia, Brazil, India, South Africa, United Arab Emirates, Jordan, Cyprus, Italy, Germany, The United Kingdom, Australia and the United States. By building an international marketing strategy for every property she puts up for sale, Victoria's listings of Toronto homes and luxury condos get global exposure that attract qualified buyers from around the world.