Real Estate Cheat Sheet: Toronto sales are down, prices are up and what it all means
Toronto’s housing market has been as hot as this week’s weather, but new data from the Greater Toronto Realtors Association suggests that the oft-predicted and much-feared cooling of Toronto’s market could finally be here. It seems that Canada’s new, stricter mortgage rules and a raft of bubble warnings have made buyers more cautious—well, that’s what pundits think, anyway. Here’s a breakdown of the most important numbers and what they may mean for Toronto homeowners:
• According to the GTRA, Toronto sales were down 13 per cent in June compared to June 2011—which was the biggest drop in sales in the entire GTA. The Toronto Real Estate Board claimed that the land transfer tax is hindering Toronto’s market, sending homebuyers to the 905 (a point it has tried to make on at least one other occasion). However, Torontoist had doubts that the land transfer tax is to blame, sardonically observing, “It’s an interesting theory, given that the land transfer tax took effect February 1, 2008—quite the delayed reaction, it would seem.”
• Sales are lagging regardless of housing type. Even sales of detached houses, the Holy Grail for Toronto buyers, slipped nine per cent compared to last year.
• Condo sales in Toronto’s core had the largest slump, dropping 18 per cent. Even more worrisome, Craig Alexander, chief economist at the Toronto-Dominion Bank, told the Globe and Mail the new figures don’t entirely capture all the new developments still going up in the city. Once those condos hit the market, Toronto could well have a glut, sending prices plummeting. Indeed, other brokers and agents also say that demand in the pre-construction market is significantly less than in the market for existing units.
• There may be fewer sales, but prices in the 416 continued to climb, with the average selling price in June at $554,077, up from $511,591. However, that trend will likely reverse in the coming months, according to CIBC deputy chief economist Benjamin Tal. “We know that prices tend to follow sales by about three to five months,” he told the Canadian Press, meaning Toronto home prices could fall come autumn.
• GTA REALTORS® Release Monthly Resale Market Figures [Toronto Real Estate Board]
• Duly Quoted: Ann Hannah, Toronto Real Estate Board [Torontoist]
• Cautious buyers send Toronto condo sales plunging [Globe and Mail]
• Housing sales cooling in Toronto, Vancouver; analyst predicts prices will fall [Canadian Press]
(Images: Toronto skyline—Seekdes (Mike in TO); bubble—Rhett Maxwell)
. However, Torontoist had doubts that the land transfer tax is to blame, sardonically observing, “It’s an interesting theory, given that the land transfer tax took effect February 1, 2008—quite the delayed reaction, it would seem.”
• Sales are lagging regardless of housing type. Even sales of detached houses, the Holy Grail for Toronto buyers, slipped nine per cent compared to last year.
• Condo sales in Toronto’s core had the largest slump, dropping 18 per cent. Even more worrisome, Craig Alexander, chief economist at the Toronto-Dominion Bank, told the Globe and Mail the new figures don’t entirely capture all the new developments still going up in the city. Once those condos hit the market, Toronto could well have a glut, sending prices plummeting. Indeed, other brokers and agents also say that demand in the pre-construction market is significantly less than in the market for existing units.
• There may be fewer sales, but prices in the 416 continued to climb, with the average selling price in June at $554,077, up from $511,591. However, that trend will likely reverse in the coming months, according to CIBC deputy chief economist Benjamin Tal. “We know that prices tend to follow sales by about three to five months,” he told the Canadian Press, meaning Toronto home prices could fall come autumn.
• GTA REALTORS® Release Monthly Resale Market Figures [Toronto Real Estate Board]
• Duly Quoted: Ann Hannah, Toronto Real Estate Board [Torontoist]
• Cautious buyers send Toronto condo sales plunging [Globe and Mail]
• Housing sales cooling in Toronto, Vancouver; analyst predicts prices will fall [Canadian Press]
(Images: Toronto skyline—Seekdes (Mike in TO); bubble—Rhett Maxwell)){kind=link}
i hate toronto land transfer tax. does anyone know, where the boundaries are for it? if i live in scarborough do i have to pay? I DAMN right better!!
The seller does not pay for any land transfer tax. A first time buyer does not pay the Toronto land transfer tax, only on their second, third, etc. purchases. When they do have a subsequent purchase, they would have built up equity on their current property to cover the taxes and realtor commissions.
Great theory that you can build equity to offset the land transfer tax, but that only happens when real estate values increase. I am going to bet that real estate values will be stagnant or decrease going forward… then you will have to pay the land transfer tax on any subsequent home. So far only sales are decreasing and not prices, so it just might take longer to sell a home, until a glut of new condos hit the market… then the storm begins in a few months when they have to heavily discount the units to pay construction loans that have been called by the bank.
The bigger issue is that the city of Toronto is heavily dependent on the land transfer tax to support city services. With slower sales you can expect to see taxes (property/sales/etc.) increase as the city does not have the back to challenge the city unions or the willpower to cut any services.
The June home prices for deals that closed and the money actually changed hands are for sales that were made prioir June but actually closed in June. This is when the REB reports the figures, whenthe money changes hands. So in reality ,prices are already dropping for sales made in June that don’t close for 30-60 -90 days or more.
Just like the usual BS from the REB’s across the country.Likely the same people that release used car sales figures. Wanna buy a Hummer?
The Toronto LTT may be unfortunate, but the tax mill rates in Durham Region mean that in 2 years in the same purchase price, you would recoup the LTT in Toronto, but in DR continue to pay the higher taxes. We are moving this week to TO from Oshawa and the taxes to live where we bought, vs right across the boarder into Pickering, were over $4000 less in TO on the exact same purchase price. You need to look at the whole picture when evaluating….the real estate commissions, HST ON THAT!, the laywers’ fees….moving is costly regardless.
I hope in coming future sales will drop dramatically …could be 25%. it happens in australia where even govt is offering $25000 for first time home buyers and 10,000 for others…here even govt is forcing to reduce price so certainly home prices will drop from 15 to 30%….
Prices will reduce in coming months by 30%….
How reliable is the data coming from GTA Realtor association? of course they will tell you the price is up!
As long as home owners can pay their bills, the prices won’t go down. And even if I had a condo and I wouldn’t be able to pay my bills, I’d rent it out and move to a cheaper place.
For almmost 10 years the nay sayers are calling for the death of Toronto real Estate market. Stop it! You live here, embrace it and hope for the best.
Fabulous The Market is slowing down! Better for buyers to take their time and make informed decisions!
What about Toronto city council having all those units pay a LEVY when constructed like Peel or Halton? What is the Toronto Lot Levy? a Paltry $13.6k Other are triple if not more. Now the Market is slowing and where will TO council get its money?
http://www.toronto.ca/finance/pdf/dev_charges_sched_feb_1_2012.pdf
They are also talking about cancelling or reducing the TO land Transfer Tax. Lets See!
Amar – So you’re saying that prices will go down to the level last seen in Q2, 2005? In my best Dr. Evil voice, “Right….” To go back to the long term, 15 year average, prices need to come down 4.4%. That is a realistic number and argument. Saying prices will flatten while inflation catches up, realistic argument. Saying prices will drop by the 3 TIMES the amount the dropped in 2009 or by more than TWICE the amoun they dropped in the catastrophic 1989 bust is, well, not a realistic argument (if you can call a proclamation an argument…).
Hi, I have two personal points to share:
First, as we all know, the new Fed’s mortgage rules will definitely discourage first time home buyers’ entering the market. These buyers will either buy cheaper or wait longer to save more down payment to be qualified for the mortgage.
Second, Condo price is too high for a typical investor. To be reasonable, most investors would put down 20% of home value as down payment to avoid the mortgage insurance monthly charge and obtain the 30 years amortization. (i.e. if less 20%, u have to choose 25 yrs) If so, a $350,000 one bedroom condo at downtown Toronto would have monthly mortgage payment of $1,200 with a average condo fee of $350/mo. Property tax at $250/mo. Total cost is 1,800/mo. But the rate of renting out is around $1,500-$1,700/mo for 1 bedroom unit at downtown. Investors would run it at a lost! Not to mention the purchase power they have lost from the 20% down payment.
Therefore, home price must come down for these 2 major types of buyers.
The extension to allow for a 30 year mortgage and lower interest rates was supposed to open up the opportunity for home ownership for those that did not have access. Instead it just gave the realtors more room to drive up prices to another level using tactics such as ‘phantom bids’ to create bidding wars. The greed of the real estate industry and speculators have created this bubble and now they bury their heads in the sand. At a recent real estate conference each panelist had a reason why the city’s condo market is not a bubble. I personally would not trust anything that comes from an industry stakeholder.
We’ve seen this many times before. As rules change and the media creates a frenzy of panic with headlines aimed at driving ad sales and subscriptions NOT reporting an unbiased analysis of both sides of the theory – buyers sit in the sideliness.
However, a few months later, realizing that prices aren’t leveling and the stock of properties is in short supply, frantic buyers rush back in to the market driving sales and prices to record levels.
Smart investors, aka buyers, buy when others are panicked. Why is it so difficult to understand “buy low sell high” – the past month and upcoming ones present great opportunity to “get a deal” but you have to do your homework. I really have tio give credit to a book I once read that changed my perspective n investing – basically it said smart investors are cash rich and can take advantage of recessions (“smart investors finish rich” by Seymour Schulich)
In general I would only buy if I have 20% down or the cost is <25% of my household NET income. Be conservative and live within your means…and think long term.
Feel free to think otherwise – i'm, on my 3rd home since mid-2006 and have "done well" because I took advantage of bumps in the market.
Does no one remember the 1989 and the early 1990’s!!!!????
My father’s house in Aurora went from $240,000, to $600,000, he took out another mortgage and leased a whole bunch of new cars during that time, then the market crashed and his house went back down to $280,000 and he was in hot water…. Not saying this will be history repeating it’s self but interest rates cant stay this low forever!
A dream for house will just be a dream for common man. Head south and you will be amazed at the unbelievable prices.For e.g construction costs on a 2000sf house works around 150k, so the developers are minting money on behalf of buyers who line up at their sales offices. If buyers go little cautious, and do not rush lot of needy people will be benefited.