Toronto real estate is seeing more inventory, but that didn’t stop buyers from paying more. Toronto Real Estate Board (TREB) numbers show condos reached a new record for prices. Despite the increase, condos sales declined, and inventory continued to increase. Here’s what you need to know.
Toronto Condo Benchmark Reaches New All-Time High
The price of a benchmark condo apartment hit a new all-time high. The benchmark price across all TREB regions reached $469,800 in January, a 19.88% increase from last year. The City of Toronto proper saw a benchmark of $492,800, a 21.52% increase from last year. This is the second month in a row that Toronto condos have printed an all-time high.
Source: CREA, Better Dwelling.
The massive price increase is “cooling,” but we use that term generously here. The 19.88% annual increase is tapering from an all-time reached in May 2017, when prices increased 30.5%. For context, the median annual increase since 2005 is only 4.99%. Double digit increases don’t exactly speak of a cold market, but expect price gains to continue trending lower. Typically a period of high growth should be balanced with a period of low growth. That would be the healthy thing for the market to do, and reduce that “exuberance” the CMHC is warning about.
Source: CREA, Better Dwelling.
The median sale price is also making a huge jump, but not nearly as high as the benchmark. TREB reported a median sale price of $450,000 in January, up 16.2% from last year. In the City of Toronto, the median sale price reached $490,000, up 16.6%. The change in median sale price is best used as an indicator of capital flows. Not necessarily how much you’ll pay for a place.
Source: CREA, Better Dwelling.
Toronto Condo Sales Drop Over 21%
Toronto condo sales are on the decline, which is somewhat expected as prices rise. TREB saw a total of 1,275 sales in January, a 21.9% decline compared to last year. Breaking that down, the City of Toronto represented 899 of those sales, a 19.8% decline compared to last year. The suburbs (a.k.a. the 905) represented 376 sales, a 26.4% decline compared to last year. Condo sales are falling across the board, but the suburbs are seeing the largest decline.
Source: TREB, Better Dwelling.
More condos are being sold in higher price brackets, and less in the lower price ranges. The largest increase of sales occured in the $500,000 to $599,999 price range. The range saw 232 sales in January 2018, a 22.75% increase compared to the same month last year. The largest declining price segment was in the $400,000 to $499,999 range. This range saw 365 sales in January, a 39.86% increase from last year. Most of the sale declines are in the lowest price range, which makes sense. More sellers are trying to push the amount they can get for their home.
Source: CREA, Better Dwelling.
Toronto Condo Inventory Rises Over 33%
Inventory is higher than last year, but less new listings hit the market in January. TREB reported a total of 2,239 new condo listings, a 7.4% decline compared to last year. The City of Toronto proper saw 1,513 of those new listings, a 10.89% decline from the year before. The decline in new listings is only part of the story, however.
Just because new listings declined, doesn’t mean there was less inventory. Active listings, the total number of listings for sale, reached 2,591 condos – a 33.14% increase compared to last year. The City of Toronto had 1,648 active listings, an 18.81% increase from last year. Despite the substantial increase in active listings, we’re still seeing about half the inventory we saw in 2016.
Mind The Foreign Income and Regulatory Pressures
Regulatory pressure around uninsured mortgages and foreign income are expected to kick in soon. OSFI B-20 Guidelines went into effect January 1, 2018, capping the maximum borrowers can borrow by up to 20%. Many of January’s buyers would have had their mortgage approved before the rules. As the year progresses, expect the guidelines and stress tests to reduce that amount of available capital for buying. This reduction will remove upward pressure on prices, especially if inventory continues rise.
New foreign income regulations from one of Canada’s largest banks likely led to a temporary increase in buying. CIBC is discontinuing the Foreign Income Program as of February 1, 2018. The bank’s mortgage specialists were encouraged to close leads before the changes, increasing January’s sales. The Foreign Income Program will be replaced with a new program more in line with OSFI B-20 goals. The new program will make it much more difficult for those with foreign income to obtain a mortgage.
What does this mean? Many of January’s sales may have been borrowed from February.
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Photo: Amber Dawn Pullin.
You’re making the assumption that prices have to come down to the median, which they do not. Toronto can sustain increases for as long as it can keep growing, and it will for at least the next decade.
Google, Amazon, etc. are all trying to get into Toronto while it’s still cheap. You should as well.
Oh??? Amazon announced they are putting HQ2 in Toronto? I must have missed that one. I bet that news goes over well in an open house.
When prices come down in an inevitable cyclical downturn, it’s never “to” the median, they always plunge way below before bottoming out.
The only thing remarkable about the real estate frenzy in Toronto, which has effected every major stable financial centre in the developed world, from Stockholm to Sydney, is that it’s by far the most over leveraged.
Please share your belief with your friends, family, neighbors and colleagues.
People…don’t feed the trolls,
Yu,
I’m not here to say prices of Condos are going to skyrocket to an average price of 1 million or come tumbling down however your assumption of Amazon HQ2 comming to Toronto because it’s “cheap” is far from the truth. If anything, that is most likely a big factor why amazon would not consider Toronto because they are looking to hire 20,000 employees, Toronto does not have a major tech industry hub, which means they have to have to hire lots of employees from outside of the the existing hubs of seattle or SF.
Why are they considering cities like Altanta, Austin or Denver? because they can attract alot of the senior talent that has left cities like Seattle and SF because they are so fucking expensive. This is a known problem with these top companies in the existing tech industry hubs. To attract the high numbers skilled experienced workers to come to Toronto, they will not sign up to re-live the same lifestyle of being the hamster on the wheel in the bay area. Not to mention the Salaries in Toronto don’t even compare to the salaries that can be made in the Bay area or in Seattle.
These are smart people that actually want to own thier house, not this glorified concept of owning a house with a lifetime of debt and the bank being your landlord
Amazon is probably going to Northern Virginia. Bezos owns the Washington Post, Amazon’s Cloud Services (AWS) has big contracts with the CIA and will seek to expand that more with the US Federal government at other agencies, Amazon needs to influence the US policy with lobbying efforts, the area has 3 major airports and mass public transportation, and the area is situated perfectly on the mid atlantic. It’s a no brainer.
Sorry, the Canadian government is probably not as invested in AWS as much as the US CIA is. Toronto is not getting HQ2, Toronto like other cities was just column fodder.
Amazon is not coming to Toronto, but Toronto is the biggest tech hub in North America outside of San Fran and NYC. But Toronto salaries are far lower.
Again northern Virginia:
http://www.businessinsider.com/amazon-drops-hq2-hint-arlington-virginia-2018-2
Amazon is not coming here……free demographic reports from the cities, worth MILLIONS……lucrative data with algorithms being used.
Man this is all you bulls have? LOL. SUCKERS
Watching poor people make the mistake of buying after a 30% increase in prices, is now my guilty pleasure. Andy Cohen needs to make a show about you morons.
Pro tip, when desperate “investors” rush into the cheapest type of asset, the market is done. Wealthy investors need to “unload,” otherwise they don’t make any money. Rest assured, they aren’t selling because they’re just so generous, they want you to make the money, instead of them.
Good insight. Why would someone sell something that is supposed to perpetually go up in value? Not only go up but a minimum 10% a year.
true story. There are actually real estate execs who sold in March/April/May of last year and now RENT. Dont give me the BS they cant afford to buy. Smart money left last year and even 2015/2016. DUMB money is still coming in. AND will want a bail out once they all realize what just happened.
Too many have too much skin in the game. Tell me a moment in history when everyone was doing something and it ended well, tell me 1. PEACE!
Tim,
I believe you are right about everything. However they may want a bail out but its likely going to be a Bail-in on depositors money in all the Canadian Big 6 “too big to fail” banks.
you can read it for yourself on page 21 “Bail in Regime”
https://www.bankofcanada.ca/wp-content/uploads/2017/11/fsr-november2017.pdf
**”Federal authorities are expected to issue in early 2018 regulations and guidelines to operationalize the bail-in regime.
Toward the summer of 2018, the Big Six banks are expected to start issuing debt subject to bail-in (i.e., debt that could be
converted to equity, if necessary, to recapitalize a bank).”**
A condo in Toronto is one of the best investments you can make. Bears have been complaining about this market for years, and calling a crash for almost 20, and it hasn’t come. People need to ask themselves, what happens if the market doesn’t correct? Because it probably won’t.
Yea, because “this time it’s different “ last worked ….. ok in 500 years, it never has
Yeah they have been complaining since about 10 years after the last crash where Toronto downtown condo’s lost over 50%.
Here’s what the media had to say back in those days. This was originally written by the Globe and Mail.
https://www.scribd.com/doc/314505251/Toronto-Housing-Bubble-1988
But this time is different.
What a great find. There is not enough land, a world class city, it will keep going up…
There is no need to invent anything, just reuse the 1988 script.
They also complain about the “Manhattanization” of Toronto…………….
The players may change but the game stays the same
Hah !… I assembled the charts and numbers for that article.
The exact same crazed uncertainty and unrealistic expectations back then.
We sure could have used Better Dwelling at the time, I def. would have swiped the great info and analysis, would have made the job much easier!
That is a good write up. Look at this when you get a chance, it’s good as well:
https://www.quora.com/What-caused-the-1989-Toronto-housing-bubble-burst
Excellent summary! Interesting that the collapse in Condo prices triggered the downturn.
The exceptionally long run up this time, sustained by government intervention with stimulus spending and interest rate suppression, seems to have resulted an even more precarious situation. Homeowners have had a really long time to build up debt against the value of their appreciating asset without any reminder that over-borrowing can have consequences.
And the big kahuna,mortgage interest rates, they only went up a few points in the late 80s and early 90s, something like 9 or 10% before peaking at 13 or 14% — not much more than a 25% increase.
At the very least we’re in for a doubling or tripling.
Our credit based economy is founded on the principal of ups and down.
This party is heading for one heck of a hangover!
Great read. Thanks!
dont quit your day job……with your “condo” portfolio subsidizing renters hoping the jig continues…….
now off to plan my next vacay – SUCKERS
This is to be expected if you believe there is a imbalance in the market due to cheap money and foreign capital (also related to cheap money but more so oversight/transparency). Both of these have been severely hampered. See the Globe article on Saturday; weird that we suddenly connect the dots between rapid asset appreciation and money laundering a week after it was made known Canadian and Chinese banks are cooperating to track $. Hmmm..wiiink…hmmmm…
Condos are the last thing that can be pumped; there isn’t anywhere else to go. I personally believe we’re seeing an inter-group asset dump which is happening in Vancouver…locals can’t get access to $$ and really can’t afford it so the only ‘market’ is to hand off to other foreigners under the belief real estate only goes up and, at a minimum, you can get your capital out of the hands of Xi (nice try,he’s calling it back soon!).
These last blips up are desperation…or the entry level for housing in GVA and GTA is $750,000 and climbing 10% a year in perpetuity and anyone who thinks otherwise is a moron. Only time will tell.
What sort of impact do you think the new Toronto AirBnB rules will have? Starting in July, an estimated approx. 7500 rental units that aren’t “primary residences” may start being added to sales or rental inventory. Perhaps just a blip, but longer term another damper on investors who figure that even if prices don’t go up, I can always AirBnB that extra house or condo.
Normally you’d expect owners would ignore and circumvent the new regulations, but neighbours really hate them, and very unlikely they won’t get reported. I remember reading one comment a while back by a condo owner: “I didn’t by this place to live in a hotel”.
It is interesting that the municipal government, recognizing the severity of the housing shortage, is starting take this kind of measure.
If markets don’t correct the problem, the social pressure will force the government to, to increase penalties, or as in New Zealand and soon be others, outright banning non-resident transactions.
Absolutely. No damned way would I NOT report a house or condo next door to me being used for short term accommodations. Who wants that? Any AirBnB should be registered, pay the appropriate taxes, and be within a person’s primary residence. If you can’t tolerate guests in your own home, then I can’t tolerate them next door. Put another way, if you don’t want to live with them, neither do I.
“If you can’t tolerate guests in your own home, then I can’t tolerate them next door. ”
Haha … well put!
I feel most ppl who post comment here always want market to crash lol…or may be too jealous that they didn’t buy few year ago when prices were 50 percent less….but it’s your fault you miss the boat no one else…I bought first condo in 2009 as investment at the age of 23 with 5 percent down payment….no help from parents…have been doing two job live on a basement for few years and never bought a car……now I have two and even market crash by 60 percent still I will not lose money…and yes I am not baby boomers…point is stop winning and learn to save money and make sacrifice…instead of hoping for market crash…that won’t help.
You nailed, it its jealousy! It wouldn’t be investors waiting to buy up after a crash. no freeking way! just plain old jealousy!
[…] Average Toronto Condo median prices jumped 34% from $335,950 in January, 2016 to $450,000 in January, 2018 as reported in an article in Better Dwelling and CREA […]
[…] Average Toronto Condo median prices jumped 34% from $335,950 in January, 2016 to $450,000 in January, 2018 as reported in an article in Better Dwelling and CREA […]