While summer may be a traditional slow period for real estate, the latest housing figures for July point to a sharp drop in activity that can’t just be pinned on seasonality.
According to the Toronto Real Estate Board (TREB) home sales across the Greater Toronto Area (GTA) were down 40.4 per cent last month compared to the same time last year.
Prices did fare far better, as the GTA-wide average for all home types (houses and condos combined) hit $746,218, up five per cent year-over-year. However, prices did see month-to-month fluctuations, down roughly six per cent from June. Last month also marked a notably slower pace in price growth when compared to the 16.6 per cent increase observed in July 2016.
The decline in sales and more down-to-Earth single-digit price increase come in the wake of a recent interest rate hike, sweeping Provincial housing regulations implemented back in April (which included a 15 per cent foreign buyer tax) and a far from unusual lull in summer buying activity.
In the eyes of many industry professionals, the blip in activity won’t last after the shock of new regulations begin to wear off and the market is thrust back into the far busier fall season. For now, TheRedPin broke down some key facts about the current market.
GTA Home Prices – July 2017
To find out how home prices fared in your neighbourhood, type out your area and home type in the comments section below and we’ll provide you with the numbers.*
- Home buyer psychology
In an official media release, TREB President Tim Syrianos stated a shift in home buyer psychology, rather than an underlying change in demand, was a key factor behind the sales decline seen in July.
In a clear rebuttal against the introduction of the 15 per cent foreign buyer tax, Syrianos said “A recent release from the Ontario government confirmed that foreign buyers represented a small proportion of overall home buying activity in the GTA. Clearly, the year-over-year decline we experienced in July had more to do with psychology, with would-be home buyers on the sidelines waiting to see how market conditions evolve.”
Between April 24 and May 26, real estate purchases made by non-resident individuals and corporations accounted for just 4.7 per cent of home sales in Ontario’s Greater Golden Horseshoe. Data on foreign buyer activity only started rolling in after the 15 per cent tax was put into place back in April.
It’s not unusual for buyers to respond to new regulations with a cautious wait and see approach and it seems Toronto house hunters are echoing those in Vancouver after the west-coast city implemented its own foreign buyer tax.
“We haven’t seen a significant decline in foreign investment activity in Vancouver following the tax,” Benjamin Tal, deputy chief economist at CIBC, told the Toronto Star in a recent interview. “What led to the slowdown was really more domestic buyers waiting to see what the tax will do.” Meanwhile, Metro-Vancouver’s housing market has already bounced back, as home prices in July climbed 8.7 per cent year-over-year and even up 2.1 per cent from June 2017.
Another, more local, example of when policy led to a short-term shift in sales was in 2008 when then Toronto Mayor David Miller introduced an additional Municipal Tax targeted to properties in Toronto-Proper. Between February (when the new tax was put into effect) and August in the same year, home sales dropped around 16 per cent and prices fell 1.5 per cent in the city compared to the GTA’s surrounding suburbs.
That trend was obviously short lived.
- Seasonality still has an impact
Along with the 16-point Fair Housing Plan and its resonating impact on home buyer’s mindsets, seasonality did have a part to play in last month’s numbers too.
Even in July 2016, when sales hit a record breaking 9,899 sales, average home prices saw a 4.9 decline from June, while transactions were down a staggering 21.9 per cent. Overall, this highlights how month-to-month lulls in activity aren’t exactly a new phenomenon in GTA real estate.
Hence why TREB CEO John DiMichele’s made the official statement that “Summer market statistics are often not the best indicators of housing market conditions.”
“We generally see an uptick in sales following Labour Day, as a greater cross-section of would-be buyers and sellers start to consider listing and/or purchasing a home,” continued DiMichele, suggesting that activity will pick up as we step out of the summer and into the far busier months of fall.
- Condo prices continue to skyrocket
Single-family detached homes may have traditionally led the pack in terms of price growth, but in July, figures clearly showcased how that trend has now moved into the condominium apartment sector.
While the average price of a detached home in the GTA still stands at seven figures, prices did see a more modest 4.9 per cent year-over-year bump. On the other hand, the condo market continued its hot streak of double-digit jumps seen at the start of 2017 as prices climbed 23.2 per cent in July.
It’s important to note that unlike condo apartments, detached home price growth is slowing down from a historical peak. Between 2012 and 2017, the average prices of detached properties across the GTA climbed 82 per cent (or $519,000). Meanwhile, condos were up 51 per cent (or $173,530) during the same time.
Home buyers can therefore arrive at two conclusions: 1.) it’s never been a better time to break into the detached housing market and 2.) condo apartments are quickly climbing outside of first-time buyer territory and now average for above half a million dollars.
- Better conditions for buyers
One year ago, TREB hammered down on the issue of housing supply (or more specifically, the lack of it). In the release of July 2016’s housing figures, TREB stated “Unfortunately, listings for single-detached and semi-detached houses and townhouses continue to be in short supply” and how that represented the “continuation of a troubling trend in the GTA.”
In sharp contrast to then, July 2017’s report includes the following quote from Director of Market Analysis Jason Mercer “Home buyers benefitted from more choice in the market this July.”
The numbers clearly make that case. Active listings (properties for sale) were up 63.3 per cent, home sales were down 40.4 per cent and average days on market was up 31.3% – which all point to conditions that favour buyers.
Despite the recent spike in inventory seen last month, Mercer does believe supply remains to be an underlying issue that will come back to light “if we do see some would-be home buyers move off the sidelines and back into the market.” Further stating “The recent changes in the sales and price trends have masked the fact that housing supply remains an issue in the GTA.”