Toronto Real Estate Market Report
January 2010
2010's Toronto residential resale market was kicked off in fine style with 4,986 properties reported sold. This compares vary favourably against the 2,670 properties sold in January 2009. Last year at this time the residential resale (and new construction) market was miredin the global recession. Although some industries and economies continue to struggle, the resale market, led by historically low interest rates, has led the recovery in Canada and in the greater Toronto area. This stronger than expected recovery is creating new challenges which I will explore in this report.
Listed properties in Toronto continue to sell quickly. In January days on market for the entire market place were only 28. In comparison, last January it took 49 days on average for properties in Toronto sell, an improvement of 43 percent. Given the number of sales and the speed with which buyers purchased properties in the greater Toronto area, it was predictable that average sale prices would remain strong. In January Toronto area sales produced an average sale price for all properties of $409,058. Although this average price is almost 20 percent stronger than the average sale price of $343,632 achieved in January 2009, it must be remembered that any comparison to that dark economic period will produce unfair and unrealistic comparisons. These comparisons are a concern, however, because there are various sectors, banks, economists, and the federal government that are pondering the possibility of a housing market bubble and proposing more rigid lending practices.
The problem with the Toronto residential resale market is not loose lending practices which encourage unqualified buyers to enter the market, but a dire shortage of inventory. The confluence of a recessionary market, during which sellers refrained from placing their properties on the market due to lack of demand, followed by an unexpected and rapid resurgence in the residential resale market since March of 2009, has resulted in historically low listing inventories, especially for this time of the year. The market finds itself in a classic syndrome. Sellers will not market their properties for sale until they have found a new purchase. Since there are so few properties available, sellers (and being potential buyers) simply wait. This is unquestionably evidenced by the numbers.
In January 2009 there were 20,450 active listings. Based on January's sales this represented about 7.6 months of housing supply. By January this year there were only 12,052 active listings (a decline of 41 percent compared to January 2009) and representing only 2.4 months of supply. This is an unprecedented reversal in only 12 months. This dramatic change has put tremendous pressure on average sale prices.
The bulk of the reported sales for January were in the $300,000 to $400,000 range. 1,364 properties were sold in this price point, representing 27.4 percent of the entire market. But the market was not restricted to the lower end. There were 137 properties reportedsold having a sales price of $1,000,000 or more. Last January there were only 28. This year's results compare very favourably to other strong years in the recent past. For example, in 2007, the best year on record as reported by the Toronto Real Estate Board, there were only 106.
Going forward in 2010 the concern remains inventory, average prices, and potential government intervention to prevent a housing market bubble. The reality is that house prices in Toronto have not increased dramatically in the last two years. Nowhere near the increases that would constitute a housing bubble. In 2008 the average sale price for all properties sold in Toronto was $379,347. In January of this year the average sale price came in at $409,058. This represents only a 7.9 percent increase in two years. Comparing this January to January 2009 is inappropriate.
It is more appropriate to review house price trends prior to the 2008-9 economic recession with current average sale prices. That comparison is consistent with house price trends, and is a far cry from annual double-digit increases in average sale prices that are the cornerstone of a housing market bubble.
Prepared by: Chris Kapches, Senior Vice-President
December 2009
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