Welcome to our Market Update – a recap of stats for the month of May 2018.
We’re right in the middle of the busiest time of year for real estate, and the numbers are looking good. Things have been going strong since early January, and we’ve seen five consecutive months of month-over-month average house price increases. It’s important to look at the monthly stats rather than comparing the market year-over-year. As we’ve mentioned before, the first half of 2017 saw unprecedented price appreciation – what we’re seeing now are normal (and more sustainable) increases.
Average prices are up. According to the Toronto Real Estate Board’s Director of Market Analysis, average selling prices are at or above listing price for all major home types. Yes, some agents under list to drive demand, but based on what we’ve seen in person, houses are going at or above what we think they’re worth. And of course, neighbourhoods like Leslieville and High Park are hot as ever, with bidding wars and bully offers resulting in average sales of 25% over asking.
The number of homes being sold is down. That’s not the sign of a soft market – it’s the result of a supply problem. These days, fewer people can afford to move due to rising interest rates and the new “stress test” mortgage rules, so fewer homes are being listed. And the lack of inventory is driving up prices of available properties.
Condo Sales Show No Signs of Slowing Down
Condos weren’t affected by last year’s market correction; average prices are up 6.5% over last June. This market is driven by first-time buyers as condos are the only way for them to enter the market. One-bedroom units are getting multiple offers and selling fast, usually for over asking. But surging condo prices mean the price gap between condos and houses are shrinking, which may mean people will start looking at houses again. Why spend $400K for a one-bedroom in the core if you can stretch yourself and spend $650 for a house in Milton or Mississauga?
The 905 is Picking Up
As people realize they are priced out of the Toronto market, they’re turning to the 905 – more and more are coming to terms with the fact that they can’t swing a house in the Junction – but a house in Mississauga near the GO train is within reach. So, we will definitely see prices and demand pick up.
More Buyers are Poised to Enter the Market
According to recent stats from TD, mortgage pre-approval applications are up 700%! That means an unprecedented number of people are getting ready to buy, which tells us the market will stay strong in the months ahead. The government intervention in April 2017 caused many buyers to re-evaluate their plans – a ‘wait and see’ approach prevailed. This increase in mortgage applications is a further sign that buyer confidence is back.
What the Ontario PC Win May Mean to the Real Estate Market
Our new Premier – love him or hate him – has made a couple of promises that would benefit buyers and sellers. He’s against the municipal Land Transfer Tax, for one. Toronto buyers get hit twice with this tax – once at the provincial level, and again municipally. It’s a big cost you have to pay on closing, which means buyers have to save more, and may have to delay buying – or forego it altogether. Other municipalities are hoping to generate revenue the same way, which would impact affordability in areas outside Toronto. However, if Ford gets rid of the tax, it will make Toronto homes a little more affordable.
Another thing to watch for is Ford’s stance on the Green Belt around Toronto – his initial campaign involved opening it up for development to increase buildable land, but after a negative public reaction, he changed his position on the issue. This doesn’t mean it won’t come up again. And an increase in buildable land will certainly impact the Toronto market.
Cancelled Developments – What You Need to Know
If you’re looking at buying into a pre-construction project, now is a good time – the chances of it getting cancelled are slim, and sales have been healthy. So, what about all the stories about projects getting cancelled around the GTA, leaving buyers stranded? Those are developments that were sold in 2013-2015. They tended to be priced around $600 a square foot. But with rising construction costs, developers realized that rate wouldn’t cover their costs, and pulling out made better fiscal sense than moving ahead. This wasn’t an indicator of a weak market – it was a direct result of escalating costs.
Current projects have taken those issues into account. Right now, most are selling at $1100-1200 a square foot, which makes better business sense because it offers plenty of margin for them to move forward. The demand for new units is strong – there are a number of projects where demand vastly outweighs available units.
So…the market is healthy and only getting stronger. Want to know more? Let’s talk!
Read the full Toronto Real Estate Board Market Watch Report here.
