MARKET COMMENTARY: MAY 2020
The resilience of the Toronto real estate market is something to behold. In “normal” times, one might take for granted that houses sell, prices rise, and investments remain secure. In times of uncertainty, however, it is remarkable to note that Toronto real estate continues to be as reliable as a Swiss watch. Over the past two decades, the market has been hit with many challenges: The HST on new homes, the 2008 financial crisis, the municipal land transfer tax, the 15% foreign buyer’s tax, and yet, the region continues to surpass expectations.
When things are great, we look at the housing data on an annualized basis. When they tighten up a little, we compare the figures on a monthly basis. And when they really tighten, as they have now, it’s useful to see what’s happening on a weekly basis. This look at week-to-week activity revealed a dramatic uptick throughout the month of May. In fact, comparing the week ending May 31st to the week ending May 3rd, Property Showings in the GTA are up 95%, Offer Registrations are up 94%, New Exclusive Listings are up 70%, and Sold Transactions are up 95% (as per Broker Bay).
The Toronto Regional Real Estate Board (TRREB) has also released its figures for the month of May and they tell a similar story. Though the 4,606 sales reported through its Multiple Listing Service (MLS), represent a 53.7% decline from a year earlier, the reduced activity was much less dramatic than the year-over-year decline we reported in April. And, when comparing month-over-month activity, sales were up 55.2% in May.
Despite the current economic uncertainty, housing prices in the GTA continue to hold. At $863,599, the average sales price was up 3% from the same period last year and up 5.1% from April. The MLS Home Price Index Composite Benchmark, which is a more accurate indicator of inflation in the market, was up 9.4% year-over-year and unchanged from last month.
Looking more closely at pricing by category, condos ($625,445) showed the biggest gains at 6% year-over-year. The average sales price for semis ($867,717) and towns ($686,854) were up 4.8% and 3.1% respectively. The average price for single detached homes ($1,033,341) was down 0.9%, but this is slightly misleading as the average price for singles in the 416 (+2.7%) and 905 (+1.8%) both increased. The number of homes sold in Toronto, where prices are more expensive, was lower by a greater annual rate (-63.1%), which reduced the average price for the category.
While total transactions are down year-over-year, so are the number of new listings. As noted last month, this is not the time for owners to be testing the market, and this was seen through a decline of new listings by 53.1% to 9,104. On a month-over-month basis, new listings were up 47.5%. Monthly inventory is now up to 2.5 months, but there has not been a jump in new listings to place downward pressure on pricing.
Where we are seeing a decline is in the GTA’s rental market. At the end of April, landlords were asking on average 5.5% less than they were in the first quarter of 2020 (as per Realtor.ca). This is understandable as the lockdown and social distancing measures have delayed many tenants’ moving plans. As such, many investors have been forced to reduce their asking rents to attract would-be renters to consider a move.
Ontario’s state of emergency has been extended through June, and like all sectors of the economy, there has been an impact on real estate. Buyers and sellers alike have real concerns about the economy, while social distancing is adding new challenges to the sales and marketing process. However, as the economy begins its recovery, and as Realtors and members of the public become increasingly accustomed to virtual showings, offers, and other digital communications, expect to see upward trends as, once again, Toronto proves itself to be a model of resiliency.