Toronto and GTA Markets in February 2021

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

“March 3, 2021 – Record home sales in the Greater Toronto Area (GTA) continued in February as buyers remained confident in their employment situations and took advantage of ultra-low borrowing costs. With multiple buyers continuing to compete for many available listings, double-digit annual price growth was the norm throughout the GTA, with stronger rates of growth in the suburbs surrounding the City of Toronto.

GTA REALTORS® reported 10,970 sales through TRREB’s MLS® System in February 2021 – a 52.5 per cent increase compared to 7,193 sales reported in February 2020. Looking at all areas of the GTA combined, the condominium apartment segment led the way with a 64 per cent sales increase compared to last year, with similar rates of increase in the ‘416’ and ‘905’ area codes.

“It’s clear that the historic demand for housing experienced in the second half of last year has carried forward into the first quarter of this year with some similar themes, including the continued popularity of suburban low-rise properties. It’s also evident that the supply of listings is not keeping up with demand, which could present an even larger problem once population growth picks up following widespread vaccinations later this year and into 2022,”

said TRREB President Lisa Patel.

The MLS® Home Price Index Composite Benchmark was up by 14.8 per cent year-over-year in February 2021. Over the same period, the average selling price was up by 14.9 per cent to $1,045,488. While market conditions were tight throughout the GTA region in February, the detached, semi-detached and townhouse market segments in suburban areas were the drivers of average price growth, with annual rates of increase above 20 per cent in all three cases.

“In the absence of a marked uptick in inventory, the current relationship between demand and supply supports continued double-digit average home price growth this year. In addition, if we continue to see growth in condo sales outstrip growth in new condo listings in Toronto, renewed price growth in this market segment is a distinct possibility in the second half of the year,”

said TRREB Chief Market Analyst Jason Mercer.”

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

$910,142              February

$902,787              March

$820,226              April

$863,563              May

$931,089              June

$943,597              July

$951,516              August

$960,633              September

$968,535              October

$955,869              November  

$932,131              December

2021

$932,131              January 1st

$967,611              January 31st

$1,045,488           February

For those following these numbers on a monthly basis, please note that some of the recent sales numbers in 2020 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 has increased to $1,045,488 this month, exceeding the all-time peak which was October 2020 at $968,318.

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.

In 2020, the cycle was thrown off due to the COVID-19 pandemic and the consequent global recession. Unpredictably, the market simply gained momentum month after month until it reached a peak in October. It then fell in November, which was expected, and then again in December, which was also expected.

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.

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.

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 $1,045,488, that’s an increase of $315,016 which is a 43.12% increase over the fifty (50) month period. Expressed over 12 months, that’s a 10.35% annual increase.

2018 started with $734,837 and we are now at $1,045,488, that’s an increase of $310,637, which is a 42.27% increase over the thirty eight (38) month period. Expressed over 12 months, that’s a 13.35% annual increase.

2019 started with $749,019 and we are now at $1,045,488, that’s an increase of $296,469, which is a 39.58% increase over the twenty six (26) month period. Expressed over 12 months, that’s an 18.27% annual increase.

2020 started with $838,662 and we are now at $1,045,488, that’s an increase of $206,826, which is a 24.66% increase over the fourteen (14) month period.

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

From 2017             10.35%               calculated

From 2018             13.35%               calculated

From 2019             18.27%               calculated   

From 2020             24.66%                calculated  

The most accurate number here is the 10.35 % 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 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 $1,045,488 that’s an increase of $125,824 which is a 13.69% increase over the forty six (46) month period. Expressed over 12 months, that’s a 3.57% 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 10.35% or 3.57%.

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.

As for TRREB, they want to undertake a comparison to February of 2020. That’s specifically, those particular 12 months. My comparison was to the commencement of several different calendar years.

The numbers to avoid are the very short term numbers. So, that would be what’s happening right now in 2021.

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           95,087

You will notice that there were more transactions in 2019 compared with 2018.This trend put the pressure on prices. Buyers obviously chose to enter the market rather than continue to sit on the sidelines. In 2020, the market continued at a faster pace, but stopped rather abruptly in the last half of March and April due to Covid-19. Activity in the market resumed in May and that has continued throughout December.

The prices in real estate are governed by supply and demand just like everything else. The buyers have returned and relatively speaking the inventory has not. Artificially, this provides “price support”. Record low interest rates also support prices.

A factor to take into consideration would be specific categories. For example, there are many new listings for condominium apartments in downtown Toronto. This is due in part to the rental market and the virtual shutdown of Air B&B facilities. This additional inventory is being quickly absorbed.

The Federal Government and the Provincial Government have provided funds to those who can’t work due to Covid, assisted commercial tenants paying rent, eliminated evictions and lowered interest rates.

We have yet to see a decline in the commercial or residential markets due to the global economic crisis as had been predicted. It may simply be due to the difficulties with the legal system and government intervention. However, the impact is inevitable, we are simply deferring it to sometime into the future. We might see the market become “stale” for a considerable period of time.

We should soon see evidence of the commercial impact. Numerous restaurants have now closed, as have other some retailers.

With many office workers working from home, there is no need to attend at the downtown office towers. Zoom is available for meetings and it takes a long time to wait for an elevator in the lobby. We are now seeing quite a few commercial office tenants rethink the amount of space they require. The result seems to be fewer people but more elbow room per person.

COMMENT

Some market trends that we have been seeing:

  • Vast increase in the demand for cottages (leasing and owning)
  • Increase in demand for properties with backyards (semis and detached)
  • Increase in demand for properties in the suburbs and outlying areas
  • Increased inventory of condo apartments (formerly Air B&B)
  • Toronto based families looking to relocate to the 905 areas
  • 905 based families looking to relocate to 519 areas

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

There is some very positive news:

  • Vaccinations are being rolled out now, one vaccination per person in Canada by 21 June 2021
  • Government support for workers and businesses will still continue for several months
  • Interest rates continue at surprising low rates, the best in 60 years
  • Immigration with an increased demand for housing will resume
  • The end of Covid-19 is in sight

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

Brian Madigan LL.B., Broker

www.iSourceRealEstate.com

www.OntarioRealEstateSource.com

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