September 2017 Real Estate Update
Prices rise for the first time in five months but volumes remain low and listings continue to rise
Last month we suggested that it was too early to call a rebound in the Toronto housing market, and we continue to suggest the same this month. Nonetheless, signs continue to show that the market is beginning to stabilize. In September, average detached home transaction prices rose from the previous month for the first time since April when the Ontario government announced its new housing policies. Average transaction prices for detached homes in the GTA rose 4.8% to $1.015 mm from $968k in August, while average condo transaction prices rose 2.5% from August (see exhibit 2).
From a geographical perspective, the City of Toronto has shown much more resilience than outlying regions such as York and Durham Regions. For example, average transaction prices for detached homes in the City of Toronto (which includes Scarborough and Etobicoke) increased 13.8% from August compared to +4.3% in York and a decline of 1.6% in Durham. Still, prices remain below the peaks set earlier in the year, but again Toronto has fared better with prices down 14.1% (from the peak) versus decreases of 14.7% in York Region and 17.6% in Durham.
While the price rebound is a positive development, overall volumes remain quite weak with purchasing activity for detached homes being particularly soft. Condo activity continues to be stronger albeit down from last year. Active listings surged from August levels – not surprising given traditional seasonality. We would point out that while overall listings are high relative to last year, they are within historical norms. It will be interesting to see if we see a commensurate increase in buying activity in the Fall, as many have been expecting. Stay tuned!
GTA: Detached homes prices rise for 1st time since March-April
Summary of Activity: September 2017 – Detached Homes
Summary of Activity: September 2017 – Condo Apartments
Pre-construction condo market has been robust but new supply warrants more diligence
Developers have had a busy year in 2017 selling 31,749 new/pre- construction homes (mainly condos) in Toronto. This is a 2.7% rise from 2016. There are many reasons why buyers choose pre-construction to resale homes including lower near term financial commitment (typically buyers put down 20-25% in the first year and do not require a mortgage until occupancy), more choice and customization, and optionality on future prices.
So it comes as no surprise that many developers are looking to capitalize on the strong demand and prices to bring more product to the market. According to condos.ca, an estimated 17,000 pre-construction units will be coming to market in the coming months (we haven’t verified this data). Typical condo projects could take 3 to 7 years from the time of purchase to occupancy.
Presumably, population growth in the coming years should absorb the increase in supply and keep the condo market healthy and balanced. Nonetheless, we believe buyers will need to increasingly do more homework on prospective projects and the reputation of the developers. With the GTA real estate boom, numerous new developers have appeared on the scene – many without established track records in the city.
Our recommendation to our clients has and still is to focus on reputable builders with a track record of successful projects. This should be one of the primary lenses to evaluate a project. We see many great opportunities and tremendous projects coming down the pipe; however, too much is at risk for buyers to leave things to chance, as was the situation with many buyers and their lost deposits following the Urban Corp debacle last year.
A few of the projects we are following include:
* The Kingly at King and Portland by Allied and RioCan
* The One at 1 Bloor St West by Mizrahi Developments
* Peter & Adelaide Condos by Graywood Developments
* Auberge on the Park at Eglinton and Leslie by Tridel
Our full report provides our updated views and analysis of many specific neighbourhoods in Toronto (i.e. Downtown West, Lawrence Park, Forest Hill, Rosedale, Leaside, Mount Pleasant, York Mills, Bayview Village, Willowdale, etc.), as well as York and Durham Regions.
Feel free to contact us, we are always happy to help!
Our Kindest Regards,
Jenny & Justin Wu
RE/MAX Hallmark Realty Ltd.