This is the recently released report of the Toronto Regional Real Estate Board concerning the August 2021 results:
“September 3, 2021 – TRREB is reporting the third-best sales result on record for the month of August. While the market has taken its regular summer breather, it is clear that the demand for ownership housing remains strong. At the same time, the supply of listings is down. The result has been tighter market conditions and sustained competition between buyers, resulting in double-digit annual increases in selling prices.
Greater Toronto Area REALTORS® reported 8,596 sales through TRREB’s MLS® System in August 2021 – down by 19.9 per cent compared to the August 2020 record of 10,738. The condominium apartment market segment bucked the overall sales trend, with year-over-year growth in sales, continuing a marked resurgence in 2021. The number of new listings entered into the System was down year-over-year by 43 per cent.
“The fact that new listings were at the lowest level for the past decade is alarming. It is clear that the supply of homes is not keeping pace with demand, and this situation will become worse once immigration into Canada resumes. The federal parties vying for office in the upcoming federal election have all made housing supply and affordability a focal point. Working with provincial and municipal levels of government on solving supply-related issues is much more important to affordability than interfering with consumer choice during the home buying and selling offer process or revisiting demand-side policies that will at best have a short-term impact on market conditions,”
said TRREB President Kevin Crigger.
The August 2021 MLS® Home Price Index Composite benchmark was up by 17.4 per cent year-over-year. The average selling price for all homes combined was up by 12.6 per cent year-over-year to $1,070,911. The strongest annual rates of price growth are still being experienced for low-rise home types. However, average condominium apartment price growth is now well-above inflation as well. On a seasonally adjusted basis, the average selling price continued to trend upward in August.
“Sales have accounted for a much higher share of new listings this year compared to last, and the story was no different in August. There has been no relief on the supply side for home buyers, in fact, competition between these buyers have increased. As we move toward 2022, expect market conditions to become tighter as population growth in the GTA starts to trend back to pre-COVID levels,”
said TRREB Chief Market Analyst Jason Mercer.”
TRREB always compares things to exactly one year ago. It sometimes provides rather odd comparisons. That’s why I don’t do that in this report.
Here are the average sale prices as reported by TRREB for single family homes of all types in the GTA, including houses, townhouses and apartments starting at the beginning of 2018 until now:
Average Prices Month
$734,837 January 1st
$735,874 January 31st
$749,019 January 1st
$747,175 January 31st
$838,662 January 1st
$838,087 January 31st
$932,277 January 1st
$966,068 January 31st
For those following these numbers on a monthly basis, please note that some of the recent sales numbers in 2020 and 2021 have had to be restated. A few transactions may have fallen through and not closed as originally scheduled. Consequently, TRREB deletes them and re-enters them in the proper month. That will throw the average prices off by a few hundred dollars if you are looking back at previous monthly reports for consistency. Changes are more likely for the most recent months.
You will notice that the market is now at $1,070,911 or $37,451 below $1,108,453, in May of this year which was the all-time peak for prices.
What usually happens each year? The market starts off in January, rises in February, gains momentum in March and April and reaches its peak for the year in May. The market declines in June, declines in July and then bottoms out in August. In September, it reverses itself and rises once again, and in October, it reaches its second peak for the year. In November, the market declines, as it does again in December, and the cycle repeats itself the following year.
For 2021, we re off to a predictable start. The market got going in January, rose in February and rose again in March. April prices dropped which is unusual, however, nothing is more predictable than a May peak. The decline in June and July were predictable, but the sudden rise in August was somewhat unexpected. The global recession implications of Covid-19 seem to have come and gone and the buyers are back a little early for the anticipated rise in demand in the Fall.
Let’s undertake an analysis with respect to the rates of return achieved over the last several years. The purpose of this calculation is to smooth out the returns over a longer time period to produce more accurate results. This avoids the rise and fall in a month or two and notably the reference to the exact same month a year ago, which may not be a particularly relevant calculation. You will notice that TRREB refers back 12 full months for comparison purposes. The results should always look reasonably good, because after all, that was a year ago. As you go forward, there should always be good news to report. On the other hand, you would clearly see the ups and downs of the market if you looked at the monthly results. Hence, this report provides you with all those numbers.
The market has declined substantially a few times. Within the last three decades, there are three examples: 1990, 2008 and 2017. The first two are largely historical now.
We will start with 2017 which was a year with a peak in the market and the sudden drop. 2017 started with $730,472 and we are now at $1,070,911, that’s an increase of $340,439 which is a 46.60% increase over the fifty five (55) month period. Expressed over 12 months, that’s a 10.17% annual increase.
2018 started with $734,837 and we are now at $1,070,911, that’s an increase of $336,074, which is a 45.73% increase over the forty three (43) month period. Expressed over 12 months, that’s a 12.76% annual increase.
2019 started with $749,019 and we are now at $1,070,911, that’s an increase of $321,892, which is a 42.96% increase over the thirty one (31) month period. Expressed over 12 months, that’s a 16.64% annual increase.
2020 started with $838,662 and we are now at $1,070,911, that’s an increase of $232,249, which is a 27.69% increase over the nineteen (19) month period. Expressed over 12 months, that’s a 17.49% annual increase.
So, what’s the percentage rate of increase to the end of August?
From 2017 10.17% calculated
From 2018 12.76% calculated
From 2019 16.64% calculated
From 2020 17.49% calculated
The most accurate number here is the 10.17 % annual increase from the beginning of 2017. It’s the longest time period, and is therefore the most steady and accurate. Historically, over one thousand years of history we have seen increases of over 5% per annum. So, this is certainly not new! Typically, for the GTA we might expect 6.5% annually in terms of increases. This is a fairly consistent pattern.
We do run into a substantial difficulty with many buyers from 2017. If you bought in April 2017 at the peak, you paid $919,614. That property is now worth $1,070,911, that’s an increase of $151,297 which is a 16.45% increase over the fifty one (51) month period. Expressed over 12 months, that’s a 3.87% annual increase. You can appreciate what a significant difference is made by using a different starting point for the purposes of the calculation. Just four months, and we either have 10.17% (January) or 3.87% (April).
It does speak to the decision for those who faced closing in 2017 after paying the high prices. They actually broke even in June 2020, while those who failed to complete have suffered substantial losses, with no property at all to show for it. They are now well ahead of just having their money sit in the bank. The message is clear: if you can close, do so, and hold on, because at some point the market will reward you. Those who closed have now achieved a positive rate of return. Those who failed to close have simply lost all of their money, without anything today to show for it.
Volume of Sales
Here are the sales over the last number of years. It’s important to be aware that potentially, there is a great deal of interest. It was only when the market skyrocketed and then plunged in 2017, that many prospective purchasers were frightened to participate. To a certain extent they have returned but there is very limited supply. That makes it a “super-sellers’ market”. As more and more inventory arrives, the market is likely to transition, but in all probability it will remain a “sellers’ market” until the end of 2021.
You will notice that there have been a great many transactions. The market is “hot” and relatively, there is little to no inventory. It’s a Seller’s market. We are almost close to 90,000 transactions, so, with four (4) months to go, this could be a record breaking year
The reasons seem straightforward:
- Interest rates are low, and
- Buyers are optimistic about the market.
Some market trends that we have been seeing:
- Vast increase in the demand for cottages, but now leveling off (leasing and owning)
- Increase in demand for properties with backyards (semis and detached)
- Increase in demand for properties in the suburbs and outlying areas
- Toronto based families looking to relocate to the 905 and 519 areas
- 905 based families looking to relocate to 519, 705 and 613 areas
It’s impossible to predict the future, but we can certainly observe the current trends in the marketplace to give us some guidance.
Buyers are getting tired of being consistently outbid. So, they will pause to some extent. This will take the pressure off the bidding wars and price acceleration. This occurred to some extent in May, but we still saw price increases even with fewer bidders.
The market will still be a Sellers’ market for the balance of 2021, but the pace will slow down.
The election will to some extent throw a little bit of a “monkey wrench” into the market in September, but it will resume its mobility after that. It really doesn’t matter which p[arty wins or which housing platform is accepted by the public. There is a shortage on the supply side of the equation. We would see the pressure off, once the supply is increased substantially.
If you would like to discuss the market, please give me a call at 647-404-8150.
Brian Madigan LL.B., Broker