This time last year saw record-breaking sold prices for City of Toronto real estate. In February 2017 the market was driven by a collective market hysteria that was simply unsustainable. Record low interest rates, an extreme lack of properties for sale and 30% year over year price increases fuelled a belief in Buyers that if you didn’t buy now you would be permanently shut out from ever owning property in the City.
Jump to February 2018 and now the climate is quite different because of government intervention. We’ve had 3 interest rate hikes, a 15% tax for foreign buyers has been introduced and a more rigid stress test now applies for borrowers applying for conventional mortgages. So its not surprising that we are seeing major declines in market factors when compared to this same time last year.
Yet despite all of these blows to the market, real estate in the City of Toronto has held up fairly well. Properties still sold in only 22 days and the average sold price was $806,494, a 6% decline from last February. This is much better than the overall Greater Toronto Area which experienced a 12.4% decline in the average sold price.
There were 2,013 reported sales in February in the City of Toronto. This is a 31% decline compared to the 2,900 sales reported last year. But comparing this year’s sales against last February is like comparing the Toronto market against a fictional metropolis that no longer exists.
Last year’s results were extraordinarily driven by a never before seen market delirium, a delirium that crashed with the announcement of the provincial government’s Fair Housing Plan and the implementation of the foreign buyers tax.
The biggest drag on average sale prices was the decline in higher priced property sales. This is not surprising and expected. In last year’s frenzied market, 212 properties sold having a sale price of $2 Million or more, most of them being detached properties. This February only 99 properties in this price point were reported sold, a 53% decline. A decline of this magnitude, representing more than 5% of the entire market, will have a powerful, negative impact on the market’s average sale price.
Again it is not surprising that this decline has occurred. Detached property values had reached stratospheric, unsustainable levels. Last year the average sale price for a detached property was approaching $1.6 Million in the City of Toronto and more than $2.5 Million in City’s central districts. This year average sale prices have been reduced to $1.282M and $2.027M respectively.
These are prices that are beyond the reach of most Buyers, particularly with the increase in mortgage interest rates and the new stress testing. Given the impact of these factors we can anticipate further softening of prices for sales of this property type, or at the very least a plateauing.
Semi-detached sales are also in decline compared to last year but to a lesser degree and for different reasons. Across the City of the Toronto the average sale price for semi-detached properties still came in at $986K, and at more than $1.235 Million in Toronto’s central districts.
Sales of all semi-detached properties took place in only 19 days and at 103% of their asking price. These are not statistics emerging from a market that is in trouble but rather the opposite.
In Toronto’s eastern districts, particularly those closest to central Toronto, all sales took place in only 13 days and for sale prices approaching an astounding 110% of the asking price. These numbers point to strong demand and a very limited inventory.
The supply of resale condominium apartments is approaching crisis levels. In February, only 201 new condominium apartment listings came to market, a 7.4% decline in the number of listings that came to market last year.
The City’s condo market effectively finds itself in exactly the same position as last year at this time, except that prices are almost 11% higher. The condominium apartment that one could buy last year for $515K will now cost Buyers $570K.
In the central districts of the City, where most Buyers would prefer to locate, the average sale price is now an amazing $645K. Last year the average sale price was $577K. All condominium apartments sold on only 22 days and for 100% of their asking prices. Ironically in Toronto’s central districts, where prices are highest, all condo apartments sold in only 21 days and for 101% of their asking prices.
The Toronto real estate marketplace now sits where it would have been without the provincial government’s intervention, constrained by the weight of, what is now clear, unsustainable prices.
Going forward sales will pick up as Sellers come to the realization that except for the most desirable properties in the most desirable areas, sale prices achieved last year are no longer realistic, particularly with higher mortgage interest costs.
Basic economic factors of employment growth, increasing wages and a strong economy are very positive and therefore demand for housing in the City of Toronto will remain intense.
When prices align with Buyers’ financial capabilities the market will once again begin to grow, but prices will remain in check, especially if we see further increases in mortgage interest rates, as anticipated.
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.