IS THE GTA REAL ESTATE MARKET TUMBLING DOWN?

By Steve Ezeude.
“Buy land, they’re not making it anymore”. — Mark Twain
 
You may think the real estate market in the Greater Toronto Area (GTA) is tumbling down based on what makes the news headline. The Toronto Real Estate Board (TREB) reported in April 4, 2018, that sales were down by 39.5% with 11,954 sales in a March 2017 whereas in March 2018, there were 7,228 sales. The report continued that prices were 14.3% down with average price in March 2017 being $915,126 whereas it was $784,558 in March 2018. The number of listings in March 2017 was 16,978 whereas it was 14,866 in March 2018. Listing was also down by 12.4% in comparison.
With these statistics, is the market really tumbling down? To answer this question, we need to look at the status quo ante.  The first half of 2017 was a crazy, unseen before, unprecedented market that sent panic every where about the Canadian real estate market especially in the GTA. Supply and demand have always been the determining factor. Early last year, inventory was very low with about one month’s supply and that drove prices to the roof top with some neighborhoods recording price increase to the tune of 30 to 37% above the previous years numbers. So, we should see this adjustment as a correction to the market.
Some were of the opinion that prices will fall and it did fall/still falling (depending on the neighbourhood and housing type), thanks to the Liberal Government’s measures of April 20, 2017 to cool down the market. So, the cooling down is just what we are witnessing now. However, the numbers are averages of all low-rise house types put together in the GTA and includes detached singles, town houses with the exclusion of condominium discussed below.
The consequences are different depending on the neighborhood and on whether you are on the buying side or the selling side. For intending buyers, there are lots of opportunities out there to strike a good deal. For example, if you want to upgrade from a condominium apartment ownership to town houses/detached or from townhouse/semi to single detached, you have lots of options with the supply now available and the prices that came down is some areas. On the other flip of the coin, if you are selling, you may think if you sell now, you are losing money. Two things. First, look at where prices were in 2015 and 2016 before 2017 and you can see that the trend is same if you assume that 2017 event did not happen. Secondly, if you think you are loosing money and you don’t want to sell, stay put in your home knowing that real estate is a long term investment and the circle will repeat itself again and when that time comes, you can sell.
Another consequence is the apathy and the thought that the real estate market will keep going down. I don’t think so, people are akin to inaction when changes are introduced or certain events happen. You will notice that in few months’ time, people will forget all the recent changes and market will be normal. The expectation is that the market will change in the second half of the year.
The noise is all around the declining detached homes and the numbers. What about the soaring condominium apartments’ prices. The year 2017 was dubbed the year of condominium and the market has continued to be very active since January 2018 with multiple offers being the case in recent transactions. Someone in my office was involved in an offer for a Toronto downtown condo mid March 2018 where there were 27 offers. Just a tip of the iceberg on the performance of the condominium market in the first quarter of 2018. TREB reported that the average selling price for condominium apartment was up by 9% year over year. Although prices appreciated averagely against low rise homes that dwindled, condominium sale was down by 29.7%. This quarter saw a record low inventory when compared with the same time last year with listings being down by 11.1%. No wonder prices are on the increase and TREB’s President, Mr. Syrianos puts it succinctly that “seller’s market conditions for apartment remained firm in the first quarter of 2018”. This market type is very popular now due to affordability and will remain hot. According to Jason Mercer, TREB’s Director of Market Analysis “…strong demand relative to supply will see this segment perform well from a pricing standpoint for the remainder of 2018 and beyond”.
The way forward is that the market is still very active. It is a great time to buy whether buying for the first time or adding to your real estate portfolio. Keep investing. and like Mark Twain stated, “Buy land, they’re not making it anymore”.