Toronto and GTA Markets in December 2021

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This is the recently released report of the Toronto Regional Real Estate Board concerning the December 2021 results:

“January 6, 2022 – A record 121,712 sales were reported through TRREB’s MLS® System in 2021 – up 7.7 per cent from the previous 2016 high of 113,040 and up 28 per cent compared to 2020. Record demand last year was up against a constrained supply of listings, with new listings up by 6.2 per cent – a lesser annual rate than sales. The result was extremely tight market conditions and an all-time high average selling price of $1,095,475 – an increase of 17.8 per cent compared to the previous 2020 record of $929,636.

“Despite continuing waves of COVID-19, demand for ownership housing sustained a record pace in 2021. Growth in many sectors of the economy supported job creation, especially in positions supporting above-average earnings. Added to this was the fact that borrowing costs remained extremely low. These factors supported not only a continuation in demand for ground oriented homes, but also a resurgence in the condo segment as well,”

said TRREB President Kevin Crigger.

One sales trend that stood out in 2021 compared to 2020 was the resurgence in demand for homes within the City of Toronto. Overall sales in the “416” area code were up by a substantially greater annual rate (+36.8 per cent) compared to sales growth for the surrounding Greater Toronto Area (GTA) suburbs combined (+23.6 per cent). The marked recovery in the condominium apartment segment was a key driver of this trend.

“Tight market conditions prevailed throughout the GTA and broader Greater Golden Horseshoe in 2021, with a lack of inventory noted across all home types. The result was intense competition between buyers, pushing selling prices up by double digits year-over-year. Looking forward, the only sustainable way to moderate price growth will be to bring on more supply. History has shown that demand-side policies, such as additional taxation on principal residences, foreign buyers, and small-scale investors, have not been sustainable long-term solutions to housing affordability or supply constraints,”

said TRREB Chief Market Analyst Jason Mercer.

In December, GTA REALTORS® reported 6,031 sales – a strong result historically, but still down by more than 1,000 transactions (-15.7 per cent) compared to the record of 7,154 set in December 2020. Over the same period, new listings were down by 11.9 per cent to 5,174. The MLS® Home Price Index Composite benchmark was up by 31.1 per cent year over-year in December. The average selling price was up by 24.2 per cent annually to $1,157,849.”

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.

REVIEW

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
 

2018
 

$734,837              January 1st

$735,874              January 31st

$767,801              February    

$784,514              March

$804,926              April

$803,440              May

$808,066              June

$781,918              July

$765,252              August

$796,814              September

$807,538              October

$787,741              November

$749,019              December

2019
 

$749,019              January 1st

$747,175              January 31st

$779,791              February

$788,133              March

$820,373              April

$838,248              May

$831,882              June

$806,971              July

$792,134              August

$842,421              September

$851,877              October

$843,307              November

$838,662              December

2020

$838,662              January 1st

$838,087              January 31st

$910,068              February

$902,788              March

$820,226              April

$863,563              May

$931,131              June

$943,594              July

$951,219              August

$960,613              September

$968,535              October

$955,889              November  

$932,297              December

2021

$932,297              January 1st

$966,068              January 31st

$1,044,933           February

$1,097,351           March        

$1,090,541           April

$1,108,109           May

$1,089,238           June

$1,062,071           July

$1,070,053           August                   

$1,135,092           September

$1,155,566           October

$1,155,566           November

$1,157,849           December

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 $1,157,849 which is just off the all-time peak which was achieved in November 2021 at $1,163,287.

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. We would expect to see increases in September and October, both of which took place. November was the all-time high, but we did have a predictable decline in December. From the perspective of foreboding, in 2016 November was also the peak. That was the forerunner for the market in 2017 which saw an exponential rise an February and a drop of about 20% mid year. There are still lots of Buyers and very little inventory.

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 $1,157,849, that’s an increase of $427,377 which is a 58.50% increase over the sixty (60) month period. Expressed over 12 months, that’s a 11.70% annual increase.

2018 started with $734,837 and we are now at $1,155,345, that’s an increase of $420,508, which is a 57.57% increase over the forty eight (48) month period. Expressed over 12 months, that’s a 11.99% annual increase.

2019 started with $749,019 and we are now at $1,157,849, that’s an increase of $408,830, which is a 54.58% increase over the thirty six (36) month period. Expressed over 12 months, that’s a 18.19% annual increase.

2020 started with $838,662 and we are now at $1,157,849, that’s an increase of $319,552, which is a 38.06% increase over the twenty four (24) month period. Expressed over 12 months, that’s a 19.03% annual increase.

2021 started with $838,662 and we are now at $1,157,849, that’s an increase of $225,187, which is a 24.19% increase over the twelve (12) month period.

So, what’s the percentage rate of increase to the end of December?

From 2017             11.70%               calculated

From 2018             11.99%               calculated

From 2019             18.19%               calculated   

From 2020             19.03%               calculated 

From 2021             24.19%               calculated

The most accurate number here is the 11.70 % 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. Right now, we are double that, or for the very short term, quadruple that number.

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 $1,155,345, that’s an increase of $235,731 which is a 25.90% increase over the fifty six (56) month period. Expressed over 12 months, that’s a 5.55% 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 11.70% (January) or 5.55% (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.

2015                     101,214

2016                     113,040

2017                     92,340

2018                     78,018

2019                     87,750

2020                     95,066

2021                     121,712

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 currently at 121,712 transactions which breaks the previous record in 2016.

The reasons seem straightforward:

  1. Interest rates are low, and
  2. Buyers are optimistic about the market.

COMMENT

Some market trends that we have been seeing:

  • Increase in the demand for cottages,
  • 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
  • Baby boomers staying in place rather than downsizing
  • Renewed interest in downtown condos

It’s impossible to predict the future, but we can certainly observe the current trends in the marketplace to give us some guidance.

Predictions

It looks like the impact of Covid is over, at least when it comes to residential real estate. There will still likely be an affect once the moratorium on commercial tenancy evictions is lifted, which will not take place until April 2022. Many commercial premises should become available at that time.

I thought that you may find the Re/Max Canada outlook for the housing market to be of some interest. This is what is expected of housing prices in various areas in Ontario over 2022.

Location                                           Increase in prices over 2022

Sault Ste. Marie                                          15%

Windsor                                                      9.5%

Thunder Bay                                               10%

Collingwood/ Georgian Bay                        9.5%

Sudbury                                                      5%

North Bay                                                    4%

Grand Bend                                                7.5%

London                                                       10% 

Kitchener Waterloo                                     6%

Niagara                                                       14%

Hamilton                                                     16%

Burlington                                                   17%

Oakville                                                       7.5% 

Mississauga                                                14%

Brampton                                                    8%

Toronto                                                       10%

York Region                                                10%

Barrie                                                          15%

Muskoka                                                     20%

Durham Region                                          7%

Peterborough/ Kawartha Lakes                  10%

Kingston                                                      10%

Ottawa                                                         5%

This largest increase is anticipated to take place in cottage country in Muskoka at 20%. The largest GTA increase is expected to be in Burlington at 17%.

If you would like to discuss the market, please give me a call at 647-404-8150.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

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