Toronto Real Estate 2020: A Wild Year in Review

By now you have probably already heard how well the Toronto Real Estate market performed in 2020. Sales were up 8.4% from 2019, bouncing back from the slow down experienced in 2018 and 2019. The GTA’s average price rose to $929,000 – a new record, up 13.5% from 2019 and 13.1% from previous highs attained in 2017. 

However these statistics hardly tell the tale of 2020. The reality is the year was wildly volatile and 2021 could be in for more of the same. Market conditions changed so rapidly that it seemed irrelevant to write about them throughout most of the year. By the time you wrote, edited and published something with any thought, the market had already changed. 

The pandemic created an urgency to act when it came to housing. Here are the three major influences on the Toronto Real Estate market in 2020.

Housing Mattered More: While your home has always been an important space, not going to an office, restaurants, or basically anything fun you can think of, increased the amount of time we spend at home and, as a result, the importance of that space. For those whose employment wasn’t impacted, life under lockdown probably had a positive influence on their savings accounts. This, combined with a new found need for more functional space meant Buyers were both willing and able to spend more on their homes.  

Housing went from being an affordability driven purchase to a need for more and a willingness to push our budgets: our house became the place we live, work, teach, and our backyard is where we gather – at a safe distance – with friends and family. Toronto last experienced a trend correction of some magnitude in 2017. Then Buyers quickly shifted course from Buying Detached homes to more affordable condos that minimized commuting time and costs. In 2020, things changed course again. House size and property along with neighbourhood started to matter more, and people were willing to pay for it. Prices in suburbs, small town Ontario, and cottage country rose dramatically, and downtown condo prices fell.  

The Downtown Exodus and Halt to Immigration: The numbers are in and Toronto’s downtown core has fled to rural Ontario, the suburbs, cottage country, and smaller provinces. Can you blame people? Toronto’s desirable and vibrant downtown became a place people didn’t need to be and outsiders started to fear. New work-from-home measures eliminated commuting for many and the need or desire to live downtown plunged. 

As borders closed, both immigration and permanent residents slowed to a fraction of what Canada typically experiences. Further hollowing out Toronto’s core and turning Toronto’s rental market on its head. Toronto’s vacancy rate skyrocketed from its ultra tight 1% to 4.6% causing landlords to compete for the tenants they were used to turning away.

These impacts could be felt for decades. Purchasing a property is a long term decision for most people, so this could have positive economic impacts on smaller Ontario communities for some time. Toronto and other major urban centres will have to find ways to rebrand, and while cheaper rent and condo prices will help, clearly, building neighbourhoods and housing that suits our new lifestyle will be a priority. Covid will eventually pass, but its influence on how we live and work will be long lasting.  

Government Supported Close to Everything: Mortgage Deferrals, Commercial Rent Subsidies, Government Loans, CERB, Interest Rates Cuts, Bond Buying, among other efforts, left some Canadians feeling better off financially with the pandemic then without. Whether or not you support the government’s economic response to COVID, we are fortunate to live in a country that made efforts to support citizens in need. While I hope the government’s approach going forward is more targeted, unprecedented times call for unprecedented measures. 

Even with government intervention many experts were anticipating job losses and mortgage deferrals to have dramatic impacts on housing. One of Canada’s most influential housing organizations CMHC called for prices to drop 15% while the opposite actually took place.  

In a way Covid has turned decades into years. Trends like working from home, which were slowly gaining momentum hit warp speed thanks to the pandemic, allowing employers and their employees to see the pro and cons of this different arrangement. The pendulum has swung away from downtown living for now. An imbalance and shift in prices in one area creates appeal and opportunity in another. Prices increasing outside the downtown could cause condo living to look more affordable and so the pendulum will eventually swing back. Here are a few other lessons from 2020.

Lessons From 2020:  

Toronto’s Rental Market can go down! We quickly learnt that Toronto’s rental market isn’t impenetrable. Toronto experienced vacancy rates that most wouldn’t have thought possible for the city, with vacancy rates quadrupling and rents dropping in the 20% range. Though it feels like we may have found the bottom as we start 2021, investors who bought condos with negative cash flows may be regretting their investment strategy at least for another year or so.  

Don’t underestimate government intervention. The lengths governments will go in support of current systems were put to the test in 2020.  Whether or not you agree with the action taken doesn’t matter, its impact will be the same. Understanding its effect and how government is likely to react will lead to better decision making. 

Windows of opportunities aren’t going to be as wide as you think. The Real Estate market started to tumble as we went into lockdown in the middle of March. However, it only lasted a couple of months. By July the market was back with an unexpected amount of demand. Most would have expected a global pandemic to offer a larger buying window then 2 months. The lockdown this winter is actually having the opposite effect. Demand has been stronger then normal while many Sellers are reluctant to list their property. While fear should play a role in your decision making, it’s important not to let it overwhelm you. Things are not likely as bad or as good as we tend to make them seem. 

Appreciate the small and simple things in life. Having an outlet that isn’t dependent on anyone or anything else proved to be an important coping mechanism this year.  We were all forced to enjoy some of the simpler things in life in 2020 and I hope to carry this forward.

It’s a long winter and for many, our mental health is pretty fragile right now. If you are feeling low, please talk to someone, call me. Get outside, check out a new park, some great architecture, do something!

COVID-19 Real Estate: Where Are We Now?

Now more than ever, active and informed Real Estate advice matters. Toronto’s Real Estate Market went from an overheating Seller’s market to a Buyer’s market in as little as two weeks. The market started 2020 with prices skyrocketing 10% in most neighbourhoods from the end of 2019 to early March 2020. Like many industries, as the reality of COVID-19 hit Toronto, demand sunk. Real Estate has been deemed an essential service by the province of Ontario and those needing to sell rent or buy, to secure shelter or finances have been permitted to do so.  

For Seller’s, marketing their property has become more complicated. Reducing the number of people who go through a home during a global pandemic is the responsible thing to do. However, some Sellers and their Realtors have continued to under-price properties to draw multiple buyers, a strategy which has succeeded for some and backfired for others. 

As National Sales data rolled in, media outlets like The Toronto Star printed headlines like “Prices Continue to Rise In Toronto Despite COVID-19”. This headline dated March 23 did not represent the reality of current market conditions, something that is difficult for any journalist to capture in this rapidly changing environment. By the time this Blog is written, communicated and read, other changes are likely to be in place. We are surrounded by sensationalized headlines on a daily basis and this crisis is challenging our ability to think and act rationally. Even computer programs driven by data will be hampered, as programmers are unable to react in step with market conditions to retool their algorithms. As monthly and yearly sales data remains important, weekly data and anecdotal evidence will increase in importance when trying to understand what is happening right now. 

What has changed to Toronto Real Estate Landscape since COVID-19 landed in Toronto:

Pricing and Prices: My last Blog post talked about how quickly prices had increased to start 2020, in the 10% range in most cases. As COVID took hold, Toronto’s prices in most neighbourhoods and segments have begun retreating just as quickly. Average year over year price appreciation came in up 14.5% in March, but the first half of March was a different story from the second half. The average price actually dropped from February ($910,000) to March ($903,000). While in most cases sale prices in April are coming in higher than 2019 prices, February highs are not likely to be reached again this year.  

Prior to COVID, properties were typically under-listed and sold above the list price. Some homes are still selling above list, but most are selling at or below the list price in current conditions. 

Conditional Offers: In a hot market, Buyers due diligence period is condensed to less than a week, firm offers are expected and conditional sales are typically not accepted. The market shift has increased Buyers ability to extend their due diligence period. New COVID specific conditions are being used, and if the market remains in Buyers favour, conditional offers are certain to become the norm.

Virtual Selling: More Realtors have embraced selling real estate virtually, with some deals being done without the Buyer ever stepping inside the home. Virtual tours and floor plans have always been an important part of many people’s marketing and now they will play an even greater role. Virtual open houses where an agent takes a video of the property have replaced in-person open houses which are currently prohibited.  

The Rental Market: As reported in this Bloomberg Article, 30% of renters didn’t pay rent for April. Understandably the demand for rentals has plummeted. Layoffs and border closings have all but halted this market for the time being. Tenants are still required to pay rent, but evictions cannot be enforced at this time. 

As listings in the rental market continue to build with little demand, prices are falling. Many landlords who are caught at the end of a lease term or who are new to market will have a great challenge finding a tenant at the expected price. Giving tenants new negotiating power they have not seen for some time in Toronto. Tenants are reminded they are still liable for any rent commitments while landlords are encouraged to work with their tenants to create a payment plan that reflects current realities.

A year ago, I wrote about the fact that condo rental supply was increasing. In fact, Q4 of 2019 represented the 6th consecutive quarter with double digit supply increases via TREBs MLS system. This supply has been supported by strong demand to live in Toronto. Urbanation recently reported that Toronto’s vacancy rate increased from 0.8% in Q1 2019 to 1.1% in Q1 2020. A continued increase in supply, tenants inability to pay rent and a drop in demand caused by COVID is quickly changing investor’s resilience in these challenging times.  

Litigious Environment: Fast moving markets typically lead to more litigation. Some Buyers may not be capable of closing because of job losses, inability to sell their home, and some will simply become litigious because they don’t like seeing that their recent purchase has dropped in value. The fact that your purchase is worth less now, or that you lost your job, does not negate the contractual commitment you made to Buying a home. It is important to have a good understanding of what terms you need to include in your Agreement of Purchase and Sale and the extra risks associated with Buying and Selling under current conditions.

Government Intervention:

Various levels of government have taken some extreme measures to help support the Real Estate and other industries in this crisis. Mortgage Deferral, Property Tax Deferral, Interest Rate Cuts, Mortgage Purchases, Tenant Protection, are some of the moves made by various levels of government and the Bank of Canada to help and prevent the market from collapsing. 

Housing Demand and Supply

Sales:

Demand has dropped drastically in a matter of two weeks beginning in mid March. Few Buyers are motivated to purchase a property in a global pandemic. In February, year over year sales were up a whopping 45% in the GTA. In March, year over year sales increased by 12%; however, the change between the first and second half of March were notable. Sales for Toronto in April are on pace to be between 850 – 900 down over 70% from April 2019. 

Active Listings:

The market started the year under-supplied for the surge in demand that took place. Active listings in February and March were more than 30% lower than the same time in 2019. Currently, active listings in Toronto are around 3,200, down about 40% from where April 2019 finished. 

Sales to Active Listing in April is likely to come in around 25% – a Buyers Market, down from 60% when compared to April 2019. In February, Toronto’s Sales to Active Listing was 91%  

Housing Completions: 

Completions are likely to be much lower than anticipated in 2020 as many will be delayed. Increased unemployment will complicate closings as finding financing through both traditional and non-traditional methods will be challenging.   

Other:

When April statistics are referenced they should be taken with a grain of salt. The city is adhering to social distancing and quarantine measures imposed by governments which makes April 2020 nearly incomparable to any other period in recent history. What we do know is that demand has been immediately lowered and people’s ability to purchase a home has been significantly impacted. The unemployment rate jumped 2.2% from February to 7.8% in March the highest increase on record with comparable data. Bloomberg has reported that there were over 600,000 mortgage deferrals (12% of the big 6 banks) and 6 million Canadians applied for income support as of April 9th.  

The government of Canada has yet to release any statements indicating that COVID has impacted immigration. However, with international borders closed, there will be a delay in the number of new immigrants arriving in Toronto to fill empty apartments and purchase available housing. 

Mortgage deferrals and income subsidy will provide needed relief for many Canadians; however, even with a quick recovery unemployment rates are not likely to return to pre-COVID levels for a long time. When mortgage deferral periods run out, for some, mortgage defaults will become a reality and some will be forced to sell their home at a time when demand is unlikely to have rebounded. 

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Some will use the information at hand to see the worst, while others will see it as providing them the opportunity they have been waiting for. Nobody knows exactly what is around the corner.

It makes sense to look back to help understand what might be to come. Many are referencing past financial calamities for comparison. Some are making comparisons to the great depression. The COVID crisis will be challenging for most of us, but we should also try to keep some perspective when making comparisons. Prior to the Great Depression, the average Canadian certainly wasn’t taking an annual vacation to the Caribbean, grabbing Uber Eats on the regular, or even participating in organized sport. If a global pandemic forces us to shift our priorities to care for the vulnerable, reduce our impact on the natural environment, and spend more time with those who play the most prominent role in our lives, then so be it. 

Have Toronto Home Prices already increased 10% in 2020?

The Toronto Real Estate board has forecasted that Toronto home prices are likely to increase 10% in 2020. We are just 6 weeks into 2020, and in many of the city’s neighbourhoods, this price growth may have already been realized. As demand has jumped over the past 6 months, supply has trended lower. Sellers who have come to market early in the year have already set a new bar and Sellers coming to market this spring will be looking at recent sales for price justification. Buyers are out in droves in popular neighbourhoods and homes are obtaining an increased number of offers to start the year, causing sale prices to exceed listing agents expectations.  

It’s not uncommon for Sellers that come to market early in the year to see big price gains from the fall. The average sale price will normally grow in the first 4-5 months of the year, then level off at peak spring months and typically falls as we reach the summer months. You can read more about this trend in my previous blog post on when to sell your home. 

The frenzied activity is reminiscent of 2016/2017 when prices grew rapidly as inventory hit all time lows hovering around 1 Month of Inventory (MOI). That was until government regulations and a jump in listings led to a drastic change in market conditions. New inventory is needed to meet the increase in demand we are seeing in the market. Hopefully the jump in prices to start the year will encourage more people to sell. Here are some of the metrics to consider:

Sales: Sales have continued to trend higher since the middle of 2019 and TREB is forecasting 97,000 sales in 2020. A big jump from 2019’s 88,000 sales. January sales are up over 15% from last year. Lower interest rates and strong migration to the area seem to be trumping government regulations like the Stress Test and leading previously sidelined Buyers back to the market.  

Prices:  If sales are up and new listings are down, you can guess where prices are going. The limited supply is putting significant upward pressure on price. The average price in January increased 12.3% from 2019 and the HPI index is indicating a 8.7% increase in prices. 

Rental Market:  Q4 of 2019 saw supply in the rental market continue to increase jumping a whopping 36% from Q4 2018. The number of leased units increased by 11.8% as well. This is the 5th straight quarter of double digit supply increase and has led to more moderate rental price growth in the 2.5%-3.5% range. New clarity and enforcement on Air BnB regulations in Toronto could also provide a minor bump to long term rental supply.

Inventory: December and January are typically low months for inventory, but the number of listings on the market has trended lower since the summer, with the GTA currently sitting at 1.7 Months of Inventory. New listings dropped 17% from January 2019 and Active listings are down 35% in the same period.  

GTA New Condo completions are increasing. In 2017/18, completions hovered just above 15,000; in 2019, it was expected to round out closer to 20,000; and the forecast for 2020 and 2021 is expected to be closer to 30,000 units. An increase in condo completions in conjunction with an increase in purpose built rentals should provide some relief to the rental market and eventually the resale condo market. However, increased immigration and migration justifies an increase in new home supply. The supply relief is also likely to be short lived New Home Sales dropped in 2018/19 and will lead to a lower number of completions down the road. 

Rent vs Buy Analysis:  Unsure whether to rent or buy in 2020? Keep an eye out for our upcoming rent vs buy blog post covering a few different GTA neighbourhoods. In the meantime, here’s a sneak peek of rent vs. buy comparisons for a Leslieville Condo and an Etobicoke Detached. If you have a specific purchase in mind, we’re always happy to do a personalized rent vs. buy analysis, just drop us an email at andrew@relativerealty.com.

Spotlight: Montreal Real Estate

After Toronto and Vancouver – Canada’s most talked about Real Estate markets – started to sputter in 2017, other cities started to garner attention. Cities like Ottawa, Montreal and Halifax have seen both sales and prices reach new heights while Toronto and Vancouver sales declined and went into recovery mode over the past two years. In this blog post, we wanted to take a look at Montreal Real Estate to shed some light on its market and the differences with purchasing here compared to Toronto.  

Montreal is Canada’s second biggest city with 3.5 Million people living there, that’s a million more people living there than in Vancouver. Montreal flew under the radar because its real estate appreciation hasn’t been as sexy; not until recently when government regulation and insane price appreciation finally forced many Buyers to look east of Toronto. 

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Prices: If you’re feeling a bit over leveraged in Toronto, Montreal is the place for you. You can typically buy 2 homes in Montreal for less than the price of one in Toronto.  

Housing Stock: Mystery solved: Toronto’s missing middle is in Montreal. Building in Toronto has centered around tearing down Main Street style buildings and war time bungalows to erect towers and urban mansions, looking for a Triplex in Toronto is a bit like finding a needle in a haystack. Montreal’s plex stock is rather plentiful. Many Urban neighbourhoods offer a wide range of income properties to choose from: duplex, triplex and detached style homes are equally prevalent. This abundance of housing is the likely contributor to more reasonable rental rates in Urban areas and keeps house prices in check.

More Renters: Montreal ownership rates sits among the lowest of all major Canadian cities at 56% while Toronto sits at 67%, both below Canada’s average of 68%. Montreal has been a very affordable rental option for those looking to live in a big city. It seems like word is getting out about their cheap rent as the cities vacancy rate more than halved, dropping from 4.6% in 2016 to 2% in 2018. Upward pressure on rental prices is likely to continue as vacancy rates remain tight.  

Getting Around: With what feels like an infinite number of bridges and under passes in Montreal highways, traffic and construction feels equally horrible in Montreal and Toronto. However, if you live in Montreal you are much more likely to have a rail option within walking distance. While Toronto invested in street cars, Montreal stuck to subway and rail. This makes the sought-after, transit-friendly, walkable area within a 15 minute bike ride from downtown much easier to find and afford in Montreal.  

Sold on Montreal? Here are some note-worthy differences to be aware with a purchase:

Deposits: In Montreal, it’s common to purchase a home without putting any deposit down or transfer of funds until your closing date. In Toronto, you’ve got to show them the money. A 5% range for a deposit is expected in Toronto and many Buyers will offer hefty deposit to strengthen their chances against another bidder. Sometimes Sellers in Toronto will even take a lower selling price, because they are worried a small deposit signals less chances the Buyer will be able to close on the property.  

Conditional in Toronto vs. Montreal means different things: Typically financing and home inspection conditions in Toronto are written strongly in favour of the Buyer.  Allowing the Buyer to get out of the deal if needed. In Montreal, the financing condition is a standard condition which is part of the purchase agreement (not written on a Schedule like Ontario). If you say you can’t find financing, the Seller has the right to force you to use a different lender of their choice, provided you can still meet the agreed upon terms. Very different from the opt out conditions used in Ontario.   

Disclosure: In Montreal, they have a mandatory form that Sellers must fill out called a declaration by vendor. This document requires the seller to identify any known issues with the property they are selling. This type of form used to be more popular in Ontario, until a few vocal lawyers advised Sellers against it. For some properties in Toronto, it can be like pulling teeth getting an agent to answer some pretty standard questions. This is something I believe Toronto is getting wrong and Montreal is doing right. Buyers should have a right to as much information as possible to help them make an educated and informed decision.    

Marketing and Viewings: Montreal is a little more laid back than Toronto and many local agents are still adjusting to the new pace of the market. Viewing a home in its entirety is often not possible prior to offering on property with multiple units. For example, it’s common to view one unit in a duplex and then submit an offer conditional on seeing the other unit. Open Houses are less common and often only on Sundays. Much like in Toronto, finding a good agent who understands how the market is changing and who goes the extra mile to ensure their clients have every advantage possible is key.  

Till Death Do You Part: In Quebec, they have a rule for landlords that if your tenant is 70 or older, you cannot evict them. Even if it’s to take over the unit for yourself. This is how Quebec looks out for their elderly population, by ensuring they have a place to live into their old age. It does, however, pose an issue for buyers looking for a personal or investment property. Since the Montreal Real Estate market is picking up and rents are still fairly low, you may find a too-good-to-be-true property only to realize that an older tenant is paying $400/month. 

Considering a move in Montreal or Toronto? Let me connect you with a great Realtor, email me here. 

Looking for somewhere a little closer to home for your purchase? Hamilton has similar housing stock to Montreal and is working on transit improvements with a new LRT scheduled for completion in 2020. Reach out if you’d like to find out more! 

Toronto Real Estate, Where Are We Now?

As we head into the fall market, many Greater Toronto Area housing segments are hitting new price highs. Something that hasn’t been seen for a couple of years. Although the average sale price across the GTA still remains almost $100,000 below the high reached in April 2017, TREB’s GTA Home Price Index (HPI) seems destined for new heights, potentially before the year is out. The HPI is a more sophisticated measurement of home prices than average sales and is less likely to see large variances caused by outlying sales. This index tends to trail real time sales by 2 months as the data used is based on the closing date instead of the sold date used for average sales.

Want to know if your home is reaching all time price highs? Check out the chart below. Be aware that many neighbourhoods within the areas outlined below may be seeing greater variances. For instance, Detached homes in Toronto neighbourhoods like Leslieville and Roncesvalles are actually up 5-12% since May 2017 while neighbourhoods such as Bridle Path and St. Andrews remain down.

HPI Index Comparison
	May 2017		September 2019
Treb	269	821,000	266	805,500	-1.89%	Down
Detached	281	1,050,000	256	947,000	-9.81%	Down
Condo	231	465,000	274	547,000	17.63%	Up
Toronto	256	830,000	275	890,000	7.23%	Up
Detached	280	1,229,000	259	1,136,000	-7.57%	Down
Condo	232	478,000	281	578,000	20.92%	Up
Halton	280	958,000	279	900,000	-6.05%	Down
Peel	257	729,000	261	740,000	1.51%	Up
Detached	261	918,000	253	894,000	-2.61%	Down
Condo	228	394,000	274	469,000	19.04%	Up
York	308	1,052,000	254	858,000	-18.44%	Down
Detached	319	1,244,000	257	977,000	-21.46%	Down
Condo	232	511,000	233	511,000	0.00%	Even
Durham	263	615,000	243	567,000	-7.80%	Down
Detached	259	673,000	238	617,000	-8.32%	Down
Condo	237	425,000	243	413,000	-2.82%	Down
Dufferin	259	594,000	263	604,000	1.68%	Up
Simcoe	262	561,000	240	526,000	-6.24%	Down

 

Sales

Sales are bouncing back from 2018 lows. Annual sales peaked in 2016 and began their decent in Q2 of 2017. The past 3 months of sales have shown increases over both 2018 and 2017, but still well off the feverish levels of 2016. What is noteworthy is that Buyers are rushing back to the Detached home segment. The number of detached sales in the GTA have been seeing 20-30% year/year increases in recent months.

Prices

Trebs HPI index continues to tick closer to the highs reached in 2017. At 265.5 it’s just 3.5 points off the high reached in May of 2017. The average sale price of $843,000 for September 2019 was the highest September on record, but remained well below the all the time high of $918,000 reached in April 2017.

Inventory

Active Listings in September are down 15% from last year. With demand outstripping the number of new listings, inventory has been tightening in the GTA as we continue into the fall market.

Rental Market

The number of apartments listed to lease in Q3 of 2019 via TREB’s MLS system jumped 30% year/year. This is the 4th consecutive Quarter of double digit supply increases. Fortunately for landlords, demand continues to be strong as the number of leased units in the same quarter jumped 17% from last year.

What’s Coming Next?

Lower interest rates are probably the biggest factor in the GTAs market resurgence over the past 3 months. Buyers have been able to find 5 year fixed rate mortgages in the 2.5% range recently.  A big change from the 3.5% interest rate being on offer a year ago. That 1% difference makes financing your purchase almost 30% cheaper this year than it was last year. On an average $850,000 purchase, that lowers your monthly costs by about $350. It decreases the amount of interest you will pay over that 5 year period by $32,000 (assuming 20% downpayment). You can see why all things remaining the same some Buyer’s might decide to increase their budgets from this time last year.

In addition to more favourable financing conditions, home buyers are being wooed by would-be prime ministers. All parties are making election promises that will further stimulate the country’s housing sector. Policies designed to continue to try and stimulate demand in the overly competitive first time buyer price points. This is in addition to the new First Time Home Buyer program newly implemented in September 2019.

The market has shown a resurgence in recent months. A surge that is no longer driven by Buyers flocking to more affordable condo options. Lower interest rates seem to have given home buyers more confidence and have made it more affordable. This increase in demand is putting upward pressure on prices, we may see some balance maintained if Sellers see increased prices as motivation to list their Toronto home. The Stress Test and higher inventory levels are preventing the same level of enthusiams we saw to start 2017.  However, if inventory fails to increase and we don’t see a drop in demand, new price highs seem inevitable.

2018 One for the History Books

2018 is about to wrap up and save for a Christmas miracle that involves three wise (or not so wise?!) men overpaying for thousands of Toronto homes, we have a good idea of how 2018 will look in the history books. The two main statistics that have been used to define a real estate market on an annual basis are sales and average price, and this years numbers are not good. Here’s our 2018 Real Estate Review:

Year-To-Date average prices in the GTA are down 4% from 2017. Sales for the year will come in below 80,000, down from 2017’s 92,000 and way down from 2016’s record 113,000. How does this look from a historical perspective? The last time we saw the average price in the GTA decrease for the year was 1996. Sales haven’t been below 80,000 since 2008 and the last time sales decreased for two consecutive years was 1990.

Headwinds from interest rate increases and previously implemented provincial and federal housing regulations clearly had an impact on Toronto’s housing market in 2018. As governments continue to attempt to reduce the risk of high debt levels and we enter a new stage in the credit cycle, affordability will continue to be a market driver.  

Sales Year-To-Date for homes over $1M have dropped 31% while sales of homes between $400,000-$800,000 have fallen, less notabley, around 5%. In the bottom tier from $200,000-$400,000, sales dropped 37%, but it’s certainly not because of lack of demand in this price point, it’s simply that little to no inventory exists in this price segment.  

In 2009, Toronto’s market bounced back from the previous year’s sales drop as sales increased 17% and prices rose 4% that year. The 1990 situation was a bit different. Sales in the 90’s increased from the low of 1990, but prices declined for a few years before flattening and eventually recovering.

Enough of that festive cheer! Here’s what to keep in mind going into 2019:

• Inventory for urban neighbourhoods and lower priced products remain at low levels.  Levels which would typically lead to single digit price appreciation.
• Affordability is a driving factor in today’s market. New credit conditions are reducing purchasing power and impacting the number of sales.
• Sales are likely to come off the low levels experienced in 2018, but to see significant increases, we’ll need to see more inventory given affordability limitations.
• Given we experienced such a shock to the market in good economic times, the market remains particularly vulnerable to negative economic activity that could further impact demand. The good news is that the government now has tools in their tool box if market stimulation is ever needed. Although unlikely in the near future, policy adjustments could be made which would reverse or reduce the impact that stress testing and foreign buyer taxation has had on the market.

Laneway Housing Approved in Toronto

After much talk and speculation, the City of Toronto has finally approved amendments permitting laneway housing in R zones across the city which includes anywhere from Victoria Park to the East, Parkside Dr. to theWest, and as far north as Eglinton.

Those looking to create  laneway housing on their property will essentially be given the green light, so long as the rules and regulations identified by the City of Toronto are met. The amendments to the official plan and zoning by laws make laneway housing much more permissive than in the past where those looking to create this type of housing would have been dissuaded by the cost and effort to overcome the city’s original zoning and by-law restrictions. Toronto’s city planning department is also signalling that a second phase to the Changing Lane’s initiative is likely to come which will address other similar housing options like Coach Houses.  

This initiative is long overdue for a city whose vacancy rate is floating around 1%. Rather than taking a leadership role in this initiative, Toronto has followed the lead of Vancouver and Ottawa who have already allowed for this type of housing supply.

Homeowners currently on laneways should consider this a windfall. Properties that fall within the eligible criteria and homeowners with the means and desire to do so will be to able to create an entirely new income-generating suite. Those that choose to built laneway housing will add some desperately needed supply to Toronto’s rental market, which could help ease pricing pressures on Toronto’s condo market.

Are you on laneway? Would you consider having a income suite? For more info on laneway housing, click here.