The big news this month is that the average house price in the GTA has gone up. According to the Toronto Real Estate Board Market Watch for September, it’s at $775,000 – the first time in the last four months we’ve seen an increase. The average peaked at just over $918,000 in April, but when the new legislation around foreign buyers came in, the market took a hit. So, September’s increase is a good thing – it feels like we’re turning a corner.
A handful of core neighbourhoods are pulling up the numbers
However, while the GTA average has gone up, it doesn’t mean house prices in all neighbourhoods have increased accordingly. In Toronto’s high-demand areas like Riverdale, High Park, Leslieville, Bloor West and others, things are looking good. Demand is high and we’re starting to see multiple offers on properties again. But in Peel, Durham and York regions, it’s a different story.
905: more inventory, slower sales
Those areas have had a huge influx of inventory, and it’s going to take some time before it balances out. For example, in September 2016, Ajax had 78 active listings, but last month, they had 197. That’s an increase of 162%! Mississauga is the same, moving from 460 listings to 771. There are a huge number of properties sitting on the market, creating a buyers’ market and impacting prices.
Buyers are watching – and waiting
Why are prices so sluggish in the 905? People just aren’t buying at the rate they once were, and there are a few reasons for that. When prices were really high in the spring, a lot of buyers took themselves out of the market – they just couldn’t afford what was out there. So why haven’t people started buying now that prices have dropped? They’re watching to see if they’ll drop even more.
As a result, properties are taking longer to sell. This time last year, the average number of days on the market was 16, but now it’s up to 24. And the higher numbers are in the neighbourhoods with bigger inventories.
Sales are still happening, of course – it is the GTA, after all. But they’re definitely down. By this time in 2016, the GTA had seen 9,830 homes sold. This year, that number is 6,379 – a drop of over 35%.
People aren’t buying before they sell
This market changes the conversation when you’re deciding whether to buy first or sell first. A year ago, most people would have bought first, confident that their current home would sell quickly and for the best price. That’s no longer a certainty – and it’s another reason for the higher inventory and longer time spent on the market.
Is Toronto like Vancouver?
A lot of people look at the downturn in Vancouver as a blueprint for what’s happening here. And if you’re looking at things from that perspective, we’re on course for a rebound, with growth across the board in the next three to six months.
But the GTA isn’t exactly like Vancouver – we face a couple of different issues. The first is that the Chinese government is trying to control the flow of currency out of their country, and they’ve placed monthly caps (and other restrictions) on how much individuals can take out. So that limits a group that normally has significant buying power.
Another issue is the impending change to mortgage rules currently being considered by the Office of the Superintendent of Financial Institutions (OSFI). They are proposing a stress test on all mortgages – not just insured ones. Buyers will have to qualify for a rate 200 basis points above what’s being offered. So, if you’re pre-approved for $800,000 at 3% today, you have to show you’ll be able to carry it at 5%.
The proposal is a good thing: it’s being put in place to ensure people don’t stretch themselves too thin. But it will push out people who are on the cusp – and keep other buyers on the sidelines as they watch and see if the new legislation will affect home prices or influence buyer confidence.
The new rules should be finalized by the end of the month, and be implemented within three months.
Got questions? We would be happy to fill you in on whatever you need to know. Let’s talk!
