So, what’s happening with the Toronto market?
First, let’s look to see what the Toronto Real Estate Board says in its Marketwatch:
Strong Average Price Growth in September
TORONTO, October 3, 2012 – Greater Toronto Area (GTA) REALTORS® reported 5,879 transactions through the Toronto MLS system in September 2012. The average selling price for these transactions was $503,662, representing an increase of more than 8.5 per cent compared to last year.
The number of transactions was down by 21 per cent in comparison to September 2011. However, it is important to note that there were two fewer working days in September 2012 compared to September 2011. The majority of transactions are entered on working days. On a per working day basis, sales were down by 12.5 per cent year-over-year.
“While sales have been lower due to stricter mortgage lending guidelines, we continue to see substantial competition between buyers. The months of inventory trend remains low from a historic perspective, which explains the strong price increases we are experiencing,” said Toronto Real Estate Board (TREB) President Ann Hannah.
September average selling prices were up compared to last year for all major home types. Price growth was strongest in the City of Toronto, including for condominium apartments with eight per cent year-over-year growth. All benchmark home types included in the MLS® Home Price Index (MLS® HPI) experienced year-over-year price increases, with substantially stronger increases for low-rise home types.
“Barring a major change to the consensus economic outlook, home price growth is expected to continue through 2013. Based on inventory levels, price growth will be strongest for low-rise home types, including single-detached and semi-detached houses and town homes,” said TREB’s Senior Manager of Market Analysis, Jason Mercer.
As you know by now, TREB reports its statistics year to year. So, generally prices ought to be favourable. In the September 2011 to September 2012 comparison, the increase was 8.5%. But, more importantly the short term direction was also positive. The average price was 5.24% higher in September than it was in August.
Now, for the mathematicians, that would equate to a 63% annualized return. However, real estate markets don’t work that way. Some months are positive and some are negative. It’s part of the real estate cycle and it’s quite predictable.
September historically is one of the positive months and usually a turning point. October is usually a positive month as well.
TREB points out that sales are down 21% in the month of September on a year over year basis. Is that important?
What are the year to date numbers? In 2011, there were 70,179 sales to the end of September. In 2012, there were 69,909 sales or 270 fewer than the previous year. This works out to 0.038%. That’s less than one half of one percent. All in all, that’s as close as you are going to get to a “statistical dead heat”.
April and May were particularly strong, as were the early months. You can’t have the sales early in the year and late in the year too!
Any reasonable analysis should include the expectation of a decline in sales activity. It’s already been recorded for 2012. So, you won’t be seeing it again.
TREB points out that low rise housing price growth will be the strongest. That suggests, of course, some moderation in the apartment condo prices. And, it is the high rise condo market which has been the topic of much speculation in terms of a price drop. However, the demand is still there, and apartment condos are the entry level for many buyers. GTA immigration continues at rates in excess of 150,000 annually. This places a great deal of upward pressure on the housing market.
It is clear that the apartment condo market is moving into a more balanced situation.
Don’t forget that there are still a lot of areas in central Toronto which are high in demand and will attract bidding wars due to the short supply of inventory.
Right now, the expectation is for a strong market in October.
Brian Madigan LL.B., Broker is a Manager at RE/MAX West Realty Inc., Brokerage 416-745-2300.