Real estate property price trend in Toronto
Updated January 9, 2020
The Toronto real estate market recovered significantly from 2018, when a decade-low level of sales was reported. Number of sales in the Greater Toronto Area increased by 12.6 percent from 2018, and was in line with a median sales of the decade. The activity started slow, but recovered in the second half of the year, supported by strong economy and falling mortgage rates.
While the sales were strong, number of new listings was lower by 2.4%, and that, combined with increased sales, contributed to an increase in average prices. The average selling price for 2019 was $819,319, or 4% higher than $787,856 recorded in 2018.
In Toronto, sales of detached houses increased by 38.0% vs. 23.0% increase in the 905 area. Semi-detached home sales were up by 8.6% in 416 area and by 13.8% in the 905 area. Townhouse sales increased by 14.2% in 416 area and by 21.1% in 905. Similarly, condo sales were up 5.1% and 11.4% respectively.
At the same time, detached house prices increased in Toronto by 19.5% (and in 905 area by 7.7%). All other property types also saw an increase in price - In Toronto prices of semi-detached houses increased by 6.9%, townhouse prices increased the least, only by 0.4%, and condo prices were up by 10.3%. In the 905 area price increases were: 7.7% for detached houses, 7.0% for semis, 11.1% for townhouses and 11.9% for condos.
Average time required to sell a listing fell from 31 days in 2018 to 20 days in 2019. A new statistic, created by Toronto Real Estate Board in March 2019, combines time on the matket for properties that were listed more than once by the same brokerage before eventually selling. That increases the accuracy of this important information, although it doesn't take into account the marketing time when the listing expires or is terminated and the property is subsequently listed by another firm and sells. But, taking that information into account, average property time on the market in the GTA area in 2019 increases from 20 to 28 days.
In summary, in the first three months of 2019 on a year-over-year basis, number of sales was either marginally higher (January), lower (by 2.4% in February) or the same (March). In April sales took off and the numbers are higher than in the previous year between 10.4% and 22%. Both new listings and existing listings inventory were lower, on average, than in the previous year. In April, May and July new listings were higher, but for the rest of the year new listings were lower, culminating in November and December with a difference of 18% in the negative. Active listings were down throughout the year, with an exception of January, when active listings inventory was 0.6% higher on a year-over-year basis. Average prices were up, in the first 8 months by a small amount; more in September, October and November; and by nearly 12% in December. The time necessary to sell a property fell down as well.
Table below shows the percentage changes through the year in the GTA, as compared to 2017, for sales numbers, new listings taken, existing listing inventory, average price and average time on the market.
Out of 13,757 freehold listings sold in the City of Toronto in 2019, 1,286 were sold for full price, 5,124 sold over asking and 7,342 sold below asking. The lowest, 43%, was paid for a detached 2-storey house at Kingston and Brooklawn in Scarborough, being sold under Power of Sale. It was listed with an asking price of $1,950,000, and sold on the day it was listed, at the beginning of March, for $848,000. The highest, 195%, was paid for a detached 2-storey house close to Runnymede, south of Bloor, listed with an asking price of $799,000 and sold in 7 days for $1,555,000.
178 freehold homes sold on the day the listing was signed, 411 in one day, 533 in two days, and 517 in 3 days.
19,393 condominium apartments were sold in the City of Toronto in 2019, njust slightly more than in the previous year. Out of these, 3,050 sold for full asking price, 5,232 sold above asking and 11,111 sold below asking. The lowest, 71%, was paid for a 2 bedroom unit at Queens Quay and Sherbourne (assignment sale), listed for $998,000, and sold for $710,000 after over 3 months of marketing. Seven units sold for up to 80% of asking, 137 between 81% and 90%. The highest, 151%, was received for a medium size two bedroom renovated unit at Pape and Danforth, listed with an asking price of $499,000 and sold in 5 days for $751,000.
184 condo units sold on the day the listing was signed, 588 sold in one day, 804 in 2 days and 828 in 3 days. It would be fair to guess that at least 184, and very possibly nearly 2,400 units were sold without review of the Status Certificate.
The following factors affect our real estate market.
- Interest rates have been very low for a number of years, keeping the real cost of purchasing a house, townhouse, condo apartment or loft reasonable. These rates were declining over the course of the year.
- On January 1, 2018, a new minimum qualifying rate was required for all mortgages, including the ones where the down payment is 20% or greater. Buyers were required to qualify for a five-year benchmark Bank of Canada rate, or the contractual mortgage rate plus 2%, whichever is greater. In the past only insured mortgages (where down payment was under 20%) were subjected to "stress test". For the first time in 3 years, however, on July 19th, Bank of Canada lowered the qualifying mortgage rate from 5.34% to 5.19%.
- Change in mortgage lending rules in the recent past reduced the amount of loan for which the first time buyers with low down payment would qualify. Most recently introduced change requires a down payment of 10% for the amount of mortgage over $500,000. Buyers need to have 5% down for the first $500,000 and additional 10% of the loan sum above that amount.
- Properties selling for over 1 million no longer qualify for government insured mortgage.
- Young people, immigrants, and foreign investors are still fueling the demand, while older generation stays longer in their homes.
- Ontario economy is robust, and buyer confidence is fuelled by strong economy and low borrowing costs.
Ontario Greenbelt Aliance urges the province to expand the existing greenbelt and freeze urban boundaries to protect agricultural land and water sources in the Golden Horseshoe. Freezing urban boundaries contributes to the rise in land value.
New Ontario Fair Housing Plan (FHP) was introduced on April 20, 2017, imposing a 15% non-resident speculation tax.
New Toronto Land Transfer Tax was introduced in 2009, and Harmonized Sales Tax came into effect in July of 2012. The later does not have a great impact on purchases of resale homes, other than adding to the closing costs, but will be felt by buyers of new construction.
Using average house prices on record since 1953, corrected for inflation (for comparison purposes we brought the historical data up to today's equivalent values), I produced the following graph. The average prices are courtesy of TREB.
On the graph below you will see three 'spikes' in house prices, and three 'dips'. Straight line denotes the trend. Three times, in 1974, 1989, and 2017, when the average prices rose steeply above the trend line, a 'correction' ensued. We can also see a small correction as a result of late 2008 and early 2009 market conditions. The correction after the peak of 1974 was not deep, but was decade-long lasting. The correction after the 1989 peak was much deeper, but lasted shorter (7 years). In 2012 the price line crossed again the trend line, and the rate of price gains accellerated, culminating in another peak in 2017, and a short-lived correction (only one year).
Each correction led to a period of stable prices, especially when these prices were corrected for inflation.
The rate of price gains between 1996 and 2013 was considerably lower that the one which led to the 'bubble burst' of 1989. Last three years rise is steeper, but, at 17.31% for 2016 and 12.71% for 2017 it is still less than a half of the 36% yearly increase that happened in 1987, and the 33.3% increase from 1974. The drop in average price in 2018 is slightly larger than that in 1993, but considerably lesser than the one in 1991 and 1992. 2019 average price increase of 4.07% (when inflation is taken into account) is moderate, and fuelled largely in insufficient supply of properties available for sale.
At the beginning of 2012, when the average house price reached $497,130 (which, corrected for inflation, amounts to $556,264), the price line has crossed over the trend line. The increase rate, initially moderate, was steeper between 2015 and 2017. The brief correction which happened in 2007 - 2008 was more of leveling off the prices, similar to the period between 1957 and 1960. After that brief correction the prices continued to rise, and the increases were quite substantial since 2010. The latest correction in 2018 resulted in a price drop (again with the inflation adjustment) by 4.3%. That price droop was just about erased by last years's price gains.
When the prices rise faster than the trend suggests, the market eventually slows down. Whether the prices become stable, following the trend line, or actually drop, seems to depend on the speed with which the price increases happen. The steeper the angle of the curve representing house prices, the more likely is a price 'correction'.
While the recent rise in real estate prices in Toronto is quite significant, the year-over-year changes in prices (not corrected for inflation) have lately been much more moderate than in previous years (see graph below). You will also notice that the largest single decrease in price was approximately 8%, while the largest increase (in 1987) was around 36%.
If you are interested in more detailed information about the market in a specific area, please call Marisha Robinsky, real estate sales representative, Forest Hill Real Estate Inc., Brokerage, 416-755-0123.