Editor’s note: All dollar amounts are in Canadian currency, unless otherwise noted.
Condo tower in Toronto. Image courtesy of veggiefrog.
Greater Toronto area home prices accelerated during the second quarter as buyers grappled with a tight supply of residential properties for sale. The heightened competition between buyers has created a seller’s market, leading to multiple offers and pushing the median sales price up 10 percent, to $405,000 (about $424,000 in U.S. dollars), in June.
At the same time, active listings declined 24 percent from a year ago in Canada’s largest metropolis.
This report highlights real estate market statistics and trends in the Toronto metro area and includes a chart with detailed market data and commentary from local real estate professionals.
Existing-home sales in the Greater Toronto area climbed 21 percent to 10,230 in June from a year ago, representing the third best June results ever, according to the Toronto Real Estate Board.
Brisk sales coupled with a tight supply of homes for sale have fueled housing prices. For the month, the average sales price rose 9.5 percent to $476,371 (about $498,400 in U.S. dollars) from a year ago, above the June national average of $372,700 (about $390,200 in U.S. dollars) for the month.
The strong June results came on the heels of sluggish sales during the winter and early spring. Indeed, the number of transactions during the first half of 2011 was off by 4.5 percent compared to the same six-month period in 2010.
For the month, the number of active listings declined 24 percent to 18,171 from June 2010, while new listings dipped 2 percent to 14,837 year-over-year. Clearly, Toronto is experiencing a seller’s market, with buyers facing stiff competition for desirable homes for sale. Homes averaged 24 days on the market in June compared with 27 days a year ago.
"We’re getting multiple offers in almost everything we have out there. With interest rates so low, it’s just driving the market," said David Ferrari, broker-owner of Re/Max Realty Enterprises. "We would like to see a little bit more (inventory)."
Ferrari attributes the tight inventory in part to "a lot of people … doing renovations and staying put."
Relief could be in sight. Analysts anticipate the recent price appreciation will prompt more homeowners to put a "for sale" sign on their properties in the coming months.
"We should see the listings situation improve as we move toward the end of 2011. With more supply in the market, the annual rate of price growth would moderate to a more sustainable pace," said Jason Mercer, senior manager of market analysis at the Toronto Real Estate Board.
The following is the June sales breakdown by housing type:
- 4,899 single-family detached homes, up 22.3 percent from a year ago with median price of $502,000, up 9.1 percent year-over-year.
- 1,114 semi-detached homes, up 15.2 percent from a year ago with a median price of $405,050, up 8.9 percent.
- 796 condo townhouses, up 12.3 percent from a year ago with a median price of $308,450, up 10.2 percent.
- 2,480 condo apartments, up 22.5 percent from a year ago with a median price of $309,450, up 9.5 percent.
- 726 attached row/townhouses, up 24.9 percent from a year ago with a median price of $372,250, up 8.8 percent.
- 215 other residential properties such as co-op apartments, link and detached condos, up 35 percent from a year ago.
As the seventh-largest urban center in North America, Toronto is the provincial capital of Ontario and Canada’s financial and industrial center.
It is an ethnically diverse city situated on the northwestern shore of Lake Ontario, and attracts more than 100,000 immigrants from across the world annually, according to the Toronto Region Research Alliance.
By 2031, Greater Toronto is predicted to grow by nearly 50 percent, to 8.6 million people, and add 1.8 million new jobs. This translates to increasing demands for housing throughout the region.
"A lot of the newer immigrants have been coming here with money. They are buying their first homes, condominiums or townhouses," Ferrari said.
Toronto has experienced a steady housing market in a post-recession recovery. Tighter and more conservative lending practices by Canada’s financial institutions have prevented a U.S.-like housing crisis, which brought a flood of distressed properties to market.
"It’s a good, healthy market. It’s not one that is attracting a lot of speculators," Ferrari said. "They (lenders) are quite strict on the qualifications for mortgages."
In Ontario, only 0.34 percent of all residential mortgages were at least three months in arrears in April, according to the latest figures from the Canadian Bankers Association. That’s down from 0.39 percent during the same period a year ago and 0.42 percent in 2009. Nationally, the rate was 0.43 percent in April.
Canada’s economic slowdown in late 2008 flattened a decade of growth in Toronto housing prices. But the dip was short-lived, and prices started to move upward again by spring 2009.
Affordability remains a concern. Among Canada’s six major city markets, Toronto ranks second behind Vancouver as the most expensive region to own a home, according to the Royal Bank of Canada’s Housing Trends and Affordability report.
On a detached bungalow, for example, the typical Toronto homeowner pays 47 percent of household gross income toward mortgage payments, property taxes and utilities. That compares with 72.1 percent in Vancouver and 43.1 percent in Montreal.
Rising property values during the first quarter of 2011 boosted ownership costs for condos and detached homes, RBC reported.
But RBC senior economist Robert Hogue wrote in the housing trends May report that Toronto’s "affordability remains near their long-term averages, indicating to us that the cost of owning a home in the Greater Toronto area has not reached perilously high levels at this point."
Toronto metro area market data
|Population (2010 estimate)||5,741,400|
|Population growth (2001-10)||22.6%|
|Total closed sales (2010)||86,170|
|% change closed sales (2009-10)||-1%|
|% change closed sales (June ’10-June ’11)||+21%|
|Sales per population (based on 2010 population)
||1 sale per 66.6 people|
|Median sales price (June 2011)||$405,000*|
|% change in benchmark sales price (June ’10-June ’11)||+10.7%|
|% mortgages in arrears (for Ontario, April 2011)||0.34%|
|% household income needed to afford a house (Q1 2011)||45.5%|
|Unemployment rate (June 2011)||8.8%|
|Rent vs. ownership ratio (% households in 2011)
*Note: All dollar amounts are in Canadian currency.
Sources: Statistics Canada, Toronto Real Estate Board, Canadian Bankers Association, Walk Score and RBC Economics Research. Last Canadian census was in 2006.
Inman News asked some Toronto-area real estate professionals to comment on the latest market trends.
Q: What types of properties are selling fastest and slowest in your market area?
Re/Max Realty Enterprises
"Single-family residential homes continue to represent a strong percentage of the total sales in our area. Our market area has very favorable school districts, and for that reason is very attractive to growing families.
"Large lots that are suitable for building custom homes are also selling very well, as our market area is in a mature part of the city, with larger lots compared to newer subdivisions.
"The custom-built luxury homes are always a little slower to sell simply because the multimillion-dollar buyer represents a smaller part of the market when it comes to affordability."
Mary Di Felice
Re/Max 2000 Realty
"Entry-level homes are always in demand, but we have a robust market so demand is right across the board. Some areas that were traditionally not as popular or not the first pick also benefit from demand."
Senior manager, market analysis
Toronto Real Estate Board
"The breakdown of home sales by type has remained quite consistent, with single-family detached homes accounting for approximately half of total sales in a given month, condominium apartments accounting for another quarter of total sales, and other attached low-rise types (semi-detached and townhouses) making up most of the remainder.
"After a bit of a sluggish start to the year in sales, we saw a return to year-over-year sales growth in the second quarter of 2011, with sales up for all major home types in June."
Re/Max Realtron Realty
"The biggest segment of home purchasers continues to be the first-time buyers. Over 60 percent of the homes sold this year have been in the $200,000 to $500,000 price range."
Real estate agent
Century 21 Leading Edge Realty
"The fastest-selling homes are typically the ones in the lower price segment: $250,000 to $400,000. Entry-level homes are affordable to most people, and therefore garner the most interest, typically.
"First-time buyers and investors looking to invest or speculate on properties are both attracted to this price range. New condo developments in the Greater Toronto area (GTA) are proving to be very popular as well, particularly during grand openings, when deals can be had.
"Slower-moving properties exist in the east end of the GTA, particularly the larger, higher-priced units — though I’d hardly call any part of our GTA slow-moving at this point."
Real estate agent
Bosley Real Estate Ltd.
"The Toronto market is strong in general — in the central core about 50 to 60 percent is made up of condos. Proximity to the subway is always primary."
Q: Is anything changing about the demographics of buyers and sellers in your market area?
FERRARI: The demographics of the buyers and sellers in the area have remained fairly consistent and are comprised mostly of executive, professional families.
MERCER: The Greater Toronto area is the single greatest beneficiary of immigration into Canada. Newcomers remain the driver of population and have been the driver over the past decade.
While all recent immigrants do not buy a home initially, the majority generally do so at some point. This has helped the homeownership rate to increase compared to the beginning of the new millennium.
PILARSKI: New immigrants are purchasing, (and) investors from overseas (are) purchasing investment properties. Perhaps a small uptick would be "speculators" purchasing new condos.
SCALABRELLI: I haven’t seen much change in the past few years concerning the demographics of buyers and sellers in our area. Our real estate market is fueled by immigration, and has been for many years.
SILVER: We have a lot of immigration in Canada, but Toronto and Vancouver do lead the way. The interest rates are low and that is encouraging a lot of young buyers in our market.
Q: What are recent trends with prices, sales and inventory?
FERRARI: This year has seen an increase in prices, which has been totally driven by low inventory levels. Demand has been consistent, and even slightly higher than previous years. This is mostly due to continual low interest rates, as well as increased consumer confidence after a relatively quick recovery from the recession.
Increases in employment and new jobs have also contributed to consumer confidence.
MERCER: The big story this year has had to do with listings. Through the first six months of the year, listings have been lower than the same period in 2010. Because of this, buyers have had less product to choose from, which has served to increase competition.
Increased competition between buyers resulted in accelerating annual rates of price growth in the second quarter of this year. In the first quarter of this year, the annual rate of price growth ranged between 4 and 5 percent. In the second quarter of 2011, the annual rate of price growth was between 8 and 10 percent.
SCALABRELLI: This year, prices have been lofty while inventory has been low throughout the GTA. Many areas experience multiple-offer situations, particular on well-priced properties or hot areas. Buyers often need to make several attempts at purchasing a home before succeeding on something.
SILVER: Sales are up but listings are lower, which should be causing prices to rise.
Q: What worries you most about the current state of the market, and what represents a sign of optimism and opportunity for the real estate market?
FERRARI: We have a very debt-leveraged society, and in many cases homeowners continue to leverage their equity as much as possible. Therefore, even a small increase in interest rates could have a devastating impact on the ability of many homeowners to maintain mortgage payments.
DI FELICE: There are warnings that the market is overheated and poised for a market correction, but if current demand is not satisfied and interest rates remain low there are no real indicators of a slowdown.
It appears the majority of purchases are for owner-occupied units. Toronto is a tremendous city that always seems to be under construction and expansion. There is a steady influx of new immigrants, which keeps the market demand up.
MERCER: The dip in listings we have experienced and the impact on price growth is my greatest concern. With this said, stronger price growth should prompt more households to list. This is what has taken place in previous cycles.
PILARSKI: Rise in speculation levels in the new condos is a concern, but massive immigration to the Greater Toronto area, as well as desire for homeownership by young adults (in their 20s), seems to be absorbing the numbers of condominiums coming on the market.
SCALABRELLI: The low-inventory situation is the biggest concern for buyers in our market right now. There’s little to choose, and what is there you have to compete for. This presents a great opportunity for sellers to put their house on the market and net some great gains, particularly if they’re not buying something else.
This, in turn, will hopefully balance things out over the long term and provide a more healthy market for both buyers and sellers. Despite the tight market, the GTA still remains a fantastic deal when comparing real estate prices to other areas in North America.
SILVER: Low rates, high immigration and job stability are a great combination. The loss of one or all would drastically change the market
Q: Where are sellers moving to, and where are the buyers moving from in your market area? Does this represent a change?
FERRARI: In our market area, most sellers are buying up within the same area. Many of the entry-level buyers come from the higher-end subdivisions in the north part of the city.
Many of the high-end luxury homes buyers are professionals from Toronto who find better affordability for this type of home in Mississauga. This has been a fairly consistent trend.
DI FELICE: Moving back to city-core is a trend for many. Another key is the baby boomer seniors market: It’s quite active as well.
MERCER: Many areas in the Greater Toronto area contain a diversity of housing types. For example, even outside of the downtown core we have seen large nodes of condominium apartment developments emerge in some parts of the GTA, often in conjunction with a broader town center framework.
The mixture of high-rise and low-rise home types at different price points has meant that many households (if they have wanted to) have been able to remain in a similar location as they have progressed through the housing life cycle, such as from first-time buyer to move-up buyer to "downsizer."
PILARSKI: Sellers are generally staying in their neighborhoods, either buying up or down depending on their financial position. While our population is aging, people are staying at home longer than ever before. Our baby boomers are not only just keeping their homes, but purchasing secondary homes in the U.S. Sun Belt (states) of Arizona and Florida.
SCALABRELLI: Typically, the west side of the GTA enjoys high turnover, and high demand when compared to the east side. First-time buyers looking for a better deal will typically look in the east end … Pickering, Ajax, Whitby and Oshawa. Repeat buyers who want to be closer to work and have some equity saved will often go west to Vaugha, Mississauga, North York, and Toronto proper.
The biggest change for our market consists of the Toronto Land Transfer Tax, implemented in February 2008. It affects repeat buyers more so than first-time buyers due to the government rebates offered to them.
However, the end result effectively doubled the land transfer tax when repeat buyers wanted to buy in Toronto. The extra cost is now a major consideration when deciding whether to buy in Toronto proper or stay outside of the city limits.
SILVER: We have thousands of new condos coming to the market each day. There are lots of investors from Asia.
Q: How have you changed your business to mirror the market and to capitalize on market trends?
FERRARI: As listing inventory remains lower than previous years, many salespeople are shifting focus away from buyer sales and onto listing sales.
DI FELICE: (I am) trying to provide inventory. If a property is put on the market it will most likely sell.
PILARSKI: We have created a specialty of new preconstruction condo sales, and sell out many new condo projects. Many of our agents specialize in condo projects, whether it is rentals or sales.
SCALABRELLI: The market right now is favoring listing agents instead of buyer’s agents, simply due to the low inventory and amount of buyers. In a multiple-offer situation of say 14 offers on one house, only the listing agent is sure to earn his commission on the deal.
Of the 14 buyer’s agents, only one will make the sale. It’s often a crapshoot for the buyer’s agents, and it makes sense to focus your time on listings as well as buyers — not just on buyers.
Q: What are some overall economic trends you are seeing in your market area that will guide the real estate market?
FERRARI: Continued decreases in unemployment as a result of more new jobs being created, along with consistent immigration, will continue to guide the real estate market and keep it healthy.
DI FELICE: Interest rates remain low, but should they adjust to higher rates it will have a definite and immediate impact on affordability and, as a consequence, on demand.
MERCER: Affordability has been the driver of sales in the GTA. The recession was relatively short-lived. We have regained all of the jobs lost and then some. The unemployment rate is trending lower, and growth in wages and salaries is accelerating.
Alongside of this, borrowing costs have remained very low and are not expected to increase very much over the next year. This means that while home prices have been rising, these increases have been mitigated to a great degree by low mortgage rates and rising incomes.
The result: The share of the average household income in the GTA going toward mortgage principal and interest, property taxes and utilities continues to be in line with the mortgage lending standards.
The positive affordability picture in the GTA has kept buyers confident in their ability to purchase and pay for a home over the long term.
PILARSKI: Low interest rates, high immigration, stability of Canada — both economically as well as politically — will continue the trend of overseas purchases of Canadian real estate, which will in turn create demand and continued price growth.
SCALABRELLI: In the York region in particular, there has been a large influx of corporate and technology companies setting up base here over the years. This has created more demand for the York region, causing resale and new-home sites to flourish. I see this trend continuing in the area, with no end in sight.
Agent Reboot, a one-day tech tune-up for real estate agents, is coming to Toronto on Wednesday, Aug. 3.