Toronto Market Report May-June 2017

24 May 2017

Toronto Real Estate Market Report May-June 2017

Sales Commentary

We have delayed this Report to wait for mid-month May sale numbers from TREB. It confirms what we said previously. The market peaked in terms of prices, and it looks like it peaked in terms of sales as well in March! While April sales were 3.2% lower than for April of 2016 at 11,630 units, they were also down 3.5% from March of this year! Peak sales months are usually May and June each year.

For the first half of April, we averaged 435 sales per day. Over the last half of April, it was 345. For the first half of May, the sales number was 359 per day. Based on seasonality, this number should be higher but it also supports the view that we are not in a market correction but rather a temporary slowdown.

We have always maintained that our market, in terms of prices, is governed by the supply of listings. Prices skyrocketed starting last November when we had no listings. In April, we had 21,600 new listings; 33.6% more than for April of last year and our ‘active’ listing supply is now 3% higher than last year. Mid-May numbers confirm this trend. New listings for the month are running 47% over the same period in 2016. TREB is now reporting year over year price increases of 20-25%. Remember it was 30% in March. That means the market has given back about 5% of these increases.

The real challenge for buyers and sellers in this market is that the market is very uneven between market segments. In some areas prices are down by 10% and in others they are flat. Again, that depends on listing supply. There is no doubt that some buyers, with these uncertainties, have decided to wait. Others see a real opportunity to find their ideal property without multiple offers. The second factor to consider is that all properties were selling at the start of the year. Today prime properties are holding their gains and the less desirable properties are dropping in value. More than ever, one needs an expert agent to navigate today’s market.

For the condo market, condo sales in Toronto in April were 7% higher than for April of last year. Downtown, condo sales were up by 6% and in Humber Bay Shores they were up by 30% (a testament to the growing popularity of this neighborhood) over April of last year. In contrast to the overall market, new condo listings downtown were 5% lower than for April of 2016. “Active’ listings were at just a one month supply. The result is that prices for condos remained strong and multiple offer sales still exist. 

Toronto New Listings and Sales

Monthly with Three Previous Years for Comparison

Toronto MLS Sales April 2017Toronto New Listings 2017

These chart plots monthly MLS® new listings and Sales for the current year and the previous three years. The recurring seasonal trends can be examined along with comparisons to previous years for each month. Source: Toronto Real Estate Market


HUMBER View Estates: 5 Mariner Terrace

This month we are back to tracking prices of individual units in specific condo buildings. That is the only way to get a true picture of price changes in the market. We looked at 5 Mariner Terrace, part of the Harbour View Estates, in City Place. Squeezed in between the Rogers Centre and the Gardiner Expressway, it was first registered in 2006 and stands 37 stories high. The one bedroom unit with parking we tracked has sold four times since 2007. The first sale was for $268,000; the second in 2011 for $351,000; the third for $340,000 in 2013; and the last in April of 2017 for $499,000. At just over 700 sq.ft., the final sale price works out to $710/sf. The compounded appreciation rate was 6.4% over 10 years. But over a two-year period, the unit declined in price and it was only in the last year that it saw major appreciation. The lesson for all is that real estate is a long term hold and not short term if one truly wants to get good returns. The second unit we tracked was a two bedroom, two bath unit with parking on a higher floor. It also sold four times over the 10-year period: first in 2006 for $390,000; in 2010 for $430,000; in 2011 for $490,000 and in April of 2016 for $510,000. This unit, although preferable to the one bedroom, only appreciated at 3% over the period. Why? We are missing the price jump from November of last year. In 2016, this 986 sq.ft. unit sold for $517/sf. At $700/sf it would sell for $700,000 today which would equate to the same 6.4% appreciation rate over the period. Currently, there are no units for sale in a building with over 500 units!

Rental Commentary

The introduction of Rent Controls to all residential units as of April 20 will have a significant impact on both landlords and tenants. In the short term, tenants may feel secure knowing that rent increases are controlled (currently at 1.5% per year) but in the long term, there will be fewer units available for rent. There will be minimal new apartment buildings and many condo investors will decide to sell rather than rent. Consider new condo buildings that are nearing occupancy. In the past, many owners rented their units at below market to start because there were so many hitting the market at one time and they wanted them occupied. The idea was to raise rents to market a year or two later. Now investors will be listing at market value from the start as there is no way to catch up on rents with these tenants. Long term, investors want tenant turnover to keep rents at market level. That favours smaller units. Tenants in bigger units tend to stay for longer periods. At a point in time when we want to encourage developers to build bigger sized condos, Rent Controls will have the opposite effect.

A year ago, studios were leasing for $1425 per month. Today the average rent is $1550. Last year we had over 700 one-bedroom units leased. This April, the figure jumped by 5% to 744 units leased downtown. A year ago, the entry point for one-bedroom units was $1670 and today the average is $1725 – an increase of 3% - in line with carrying costs for taxes and condo fees but DOUBLE the new guidelines. Do you see a problem? 

The entry point for the two-bedroom market (no parking and no den) is now at $2500 – up from $2250 a year ago and a reflection on the increased demand for bigger units. The high end of the two-bedroom market is pushing $3200 per month. The three-bedroom market, if you can find any, since only 12 were leased, in April averaged $3600. 

Number of Sales by Area for April 2017

This map shows the number of sales and median price for residential homes for April 2017 by municipal breakdown.