“The past is a foreign country: they do things differently there,” wrote L.P Hartley in his famous 1953 novel.
So too has been the plight of Toronto’s real estate market as of late. Past performance indicators are becoming less reliable tools for understanding the present.
Take for example the month of June where record heights were scaled, resulting in an incredible 12,000 units sold on the Toronto Real Estate Board.
This jump represented a whopping 18% year over year increase. More importantly, June sales were slightly higher than May, which is usually earmarked as the peak month of the season in any given year.
We had already predicted that if June became the peak month, this would automatically translate into a record year, 2015.
Another way to look at the numbers is to consider that year-to-date sales activity at the mid-year point usually represents between 52-55% of the entire year’s performance.
Based on a year to date sales of 54,453, we are projecting a final sales number of 100,000 units which would be a new annual record for the Toronto Real Estate Board.
The numbers tell an interesting story as ‘new’ listings edged up by 6.7% while ‘active listings’ remained 13% lower than last year. That seemingly humble point is indeed the driving force behind rising real estate prices.
The downtown condo market saw sales expand by 26% while ‘active’ listings were only 1% higher than a year ago. For the Humber Bay (Etobicoke Waterfront) market, sales were up by 38% while ‘active’ listings were up by just 3%.
These numbers suggest that the condo market is not softening but actually strengthening in terms of sales to listing ratio. A primary reason for the strong condo market is the rising price gap between prices for detached housing versus condos in the City of Toronto.
The average price of a detached house is increasing at an annual rate of 8.4% versus 3.6% for condos according to TREB’s House Price Index for June.
A quick look at mid-July numbers show sales up by 12% compared to June of last year. However, final July sales will be lower than for both May and June of this year.
More importantly, clients have been asking me about the impact of the Bank of Canada’s ¼% interest reduction on mortgage rates.
Let me be clear, the impact will be negligible. The challenge in the mortgage market is not merely the rate but that lenders are tightening lending requirements, resulting in more mortgage application declines.
The lowered interest rate has weakened the Canadian dollar rendering our real estate more attractive to foreign buyers – a scenario the Canadian Government was trying desperately to avoid.
As we draw to the last week of the Pan Am games, it’s perhaps fitting to assess what will happen to the Pan Am Village condos after the Games.
We remember the debacle of Vancouver’s Olympic Village citing the fact that condo units remained vacant after the Games wrapped up. The developers jumped ship and the City of Vancouver was left stuck with the losses.
Not so in Toronto. Among the six buildings in the Village, one is dedicated to George Brown students, two are for low income housing, a fourth is for a YMCA hostel and only two buildings remain for the resale market.
Among the 437 units which were sold between the $500 -600/sf range, I don’t anticipate absorption will be a problem, hence the city can breathe a sigh of relief.