Toronto Real Estate: Sales Down But Prices Up From Last Year

Excerpted from The Toronto Star
Toronto real estate: Sales down but prices up from last year

October 03, 2012

Susan Pigg

The average price of a GTA home was up more than 8.5 per cent in September over last year to $503,662, according to TREB.
VINCE TALOTTA/TORONTO STAR FILE PHOTO

The impact of Ottawa’s tighter lending rules really hit home in September with sales down 21 per cent year-over-year across the GTA, according to figures released Wednesday by the Toronto Real Estate Board.

Unlike Vancouver where house prices are starting to slip in the face of a 33 per cent downturn in sales in September, Toronto continues to record strong price gains despite the significant downturn in demand.

The average price of a GTA home was up more than 8.5 per cent in September over last year to $503,662, according to TREB.

Even the fast-growing condo sector, which has cooled considerably over the summer, saw price gains of 6 per cent over September of 2011. That’s despite the fourth round of tighter mortgage lending rules implemented by Ottawa in July which cut maximum amortizations from 30 to 25 years, boosting monthly carrying costs enough to shut many first-time buyers out of that entry-level market.

The biggest price gains were in the City of Toronto where the average condo sold for $377,422 in September, up 8 per cent from a year earlier. In the 905 regions, prices were up just 1 per cent to an average of $283,321.

Some 5,879 homes changed hands last month, down from 7,422 in September 2011.

Semi-detached homes saw the biggest price gains with the average price hitting $604,963 in the City of Toronto and $394,265 in the 905 regions, year-over-year increases of 16 per cent and 12 per cent respectively.

That may reflect the fact that detached homes — which now average $627,111 across the GTA, $781,826 in Toronto — are becoming priced out of reach.

The fall sales numbers are considered key to understanding whether the GTA housing market is heading for a crash or just a cool down as September and October are traditionally strong months for sales as buyers start flocking to open houses again after summer vacations.

TREB went to great pains to point out that this September had two fewer business days than last September, making the actual decline in sales about 12.5 per cent year over year.

“Barring a major change to the consensus economic outlook, home price growth is expected to continue through 2013. Based on inventory levels, price growth will be strongest for low-rise home types, including single-detached and semi-detached houses and town homes,” says Jason Mercer, TREB’s senior manager of market analysis.

Those gains are unlikely to continue in the condo sector, however, given slowing demand and the growing inventory of condos for sale, especially in the downtown core, with tens of thousands more in the planning or building stages across the GTA (most of them pre-sold) in the wake of last year’s record year for condo sales.

While sales of detached homes were down 19 per cent across the GTA — 27 per cent just in the City of Toronto — prices were up 8 per cent across the GTA and 10 per cent in the city.

That means bidding wars have eased but far from disappeared as condos outpace the construction of high-demand family homes, homeowners opt for renovations instead of costly moves, and the inventory of quality homes for sale remains below historic levels. That’s driving up demand — and prices — on anything that doesn’t reach for the skies.

“I’m not seeing first-time buyers pulling out, but I hear people asking a lot more questions,” says realtor John Pasalis of Realosophy who’s still seeing lots of bidding wars and bully bids for homes. “The second the market does moderate a bit, everybody thinks it’s crashing. We’re just moving a lot closer to a more balanced market.

“It’s still a seller’s market for houses, but condos have slowed down a lot.” Condo realtor Mark Savel said he’s seeing “insane” demand for condo rentals downtown fuelled, he believes, by the fact more people who might have been able to buy a year ago are now opting to rent longer.

That’s lead to bidding wars even on rental units he said, citing one client who lost out on three different units, even though he offered $250 per month more than asking on one.

He’s also finding that potential condo buyers who decided to put purchases on hold in the spring and see where the market was going are jumping back in, hoping to find deals as the inventory of condos for sale continues to climb.

“There’s definitely more of a sense of balance in the market. You don’t have to be the first one in to see a place. Chances are it will still be there a week from now.”