This is the recently released report of the Toronto Regional Real Estate Board concerning the March 2022 results:
“April 5, 2022 – There were almost 11,000 Greater Toronto Area (GTA) home sales reported in March 2022, capping off the third-best March and second-best first quarter on record. Tight market conditions continued to support a double-digit annual pace of price growth, with an average selling price of $1.3 million. The average selling price dipped slightly month-over-month, bucking the regular seasonal trend.
“Now is the time for governments to govern and focus on measures that are proven to increase housing supply. The GTA population will experience rapid growth in the coming years as our region’s economic strength and diversity continues to attract people from around the world. In order to sustain this growth, we need adequate housing supply and choice. This needs to be the focus of policymakers rather than short-term and ineffective measures to artificially suppress demand. Evidence-based decision-making should inform government policies, and we encourage representatives at all levels of government to think big and act decisively to improve needed housing supply in a significant way,”
said TRREB President Kevin Crigger.
GTA REALTORS® reported 10,955 sales through TRREB’s MLS® System in March 2022, representing a 30 per cent decline compared to the record result of 15,628 in March 2021. While sales were down year-over-year for all major market segments, condominium apartment transactions dipped by a much lesser annual rate.
New listings were also down on a year-over-year basis, but by a much lesser annual rate than sales. This suggests that while market conditions remained very tight, home buyers did not experience the same level of competition from other buyers compared to a year earlier.
The MLS® Home Price Index Composite benchmark was up by 34.8 per cent year-over-year in March 2022. This annual rate of increase was down slightly from February. The average selling price was up by 18.5 per cent year-over-year. The annual growth rates for the MLS HPI® and average selling price differed, in part, because the mix of homes sold in March 2022 shifted in favour of condominium apartments which generally sell for a lower average price compared to other home types.
“Competition between home buyers in the GTA remains very strong in most neighbourhoods and market segments. However, we did experience more balance in the first quarter of 2022 compared to last year. If this trend continues, it is possible that the pace of price growth could moderate as we move through the year,”
said TRREB Chief Market Analyst Jason Mercer.”
TRREB always compares things to exactly one year ago. Sometimes that 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
$1,044,925 February
$1,097,351 March
$1,090,414 April
$1,108,124 May
$1,088,991 June
$1,061,724 July
$1,070,140 August
$1,135,035 September
$1,155,604 October
$1,163,027 November
$1,157,896 December
2022
$1,157,896 January 1st
$1,242,747 January 31st
$1,334,328 February
$1,299,894 March
For those following these numbers on a monthly basis, please note that some of the recent sales numbers in 2021 and 2022 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 $1,299,894, which is now just below the all time peak of $1,334,328 achieved in February.
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 2022, we’ re off to a fairly predictable start. The market got going in January, and rose again in February. The surprise is a slight dip in March. Why is this? What does this mean? Could we have a major fall like we experienced in 2017. Overall, that was just under a 20% decline from April to August.
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 $1,299,894, that’s an increase of $569,422 which is a 77.96% increase over the sixty three (63) month period. Expressed over 12 months, that’s a 14.84% annual increase.
2018 started with $734,837 and we are now at$1,299,894, that’s an increase of $565,057, which is a 76.90% increase over the fifty one (51) month period. Expressed over 12 months, that’s a 18.09% annual increase.
2019 started with $749,019 and we are now at $1,299,894, that’s an increase of $550,875, which is a 73.55% increase over the thirty nine (39) month period. Expressed over 12 months, that’s a 22.63% annual increase.
2020 started with $838,662 and we are now at $1,299,894, that’s an increase of $461,272, which is a 55.00% increase over the twenty seven (27) month period. Expressed over 12 months, that’s a 24.44% annual increase.
2021 started with $932,297 and we are now at $1,299,894, that’s an increase of $367,597, which is a 39.43% increase over the fifteen (15) month period. Expressed over 12 months, that’s a 31.54% annual increase
So, what’s the percentage rate of increase to the end of February?
From 2017 14.84% calculated
From 2018 18.09% calculated
From 2019 22.63% calculated
From 2020 24.44% calculated
From 2021 31.54% calculated
The most accurate number here is the 14.84% 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 $1,299,894, that’s an increase of $380,280 which is a 41.35% increase over the fifty nine (59) month period. Expressed over 12 months, that’s an 8.10% 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 14.84% (January) or 8.10% (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. In some cases, they lost hundreds of thousands of dollars. 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 were at 121,712 transactions for 2021 which breaks the previous record in 2016.
The reasons seem straightforward:
- Interest rates are low, and
- Buyers are optimistic about the market.
Here are the current sales:
2022
January 5,622
February 9,097
March 10,955
2021
January 6,888
February 10,929
March 15,628
We are down quite a bit from last year. There are still lots of Buyers, but the market lacks inventory. That places an upward pressure on prices. At a certain point, the Buyers back off. They become reluctant to surge ahead with higher and higher Offers in order to outbid their competition. This happened in the Spring of 2017 and it looks like we will see a repeat of something similar.
At that time, many pointed fingers at the Provincial Liberal Government and blamed the foreign buyers’ tax. But, really, it was just a coincidence. Every so often the market pauses, and then goes down or sideways, waiting for everyone to catch up.
In early February, we would often see 20 bidders per house; that dropped down to 10, and now to just a few. So, consistently, we still have many bidding wars, just 3 or 4 participants, but these are now the ones who can afford it.
There was a strange and bizarre practice of underpricing the property by hundreds of thousands of dollars. That brought more people to the table, however, they were all at the low end, not the high end. So, that practice fortunately is now close to being “yesterday’s news”. There are still many agents who like to advertise “sold over asking”. That really just means that you didn’t ask enough.
It’s important to appreciate that we will not see a balanced market until we see about 5 month’s worth of inventory on hand. Right now, we are still at about one month’s inventory.
The 2022 Federal budget was just released yesterday. Foreign buyers cannot buy for 2 years. However, they were less than 2.1% of the buyers.
Flipping will now be taxable. You will have to buy, and occupy for 12 months before you will qualify for the principal residence exemption. This will not really do anything until it kicks in in 2023.
Supply is the issue. Delays by municipalities with respect to development are the problem. It takes 7 years to develop property in Ontario, but only 7 months in Texas. They must be much quicker with the paperwork!
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 later April 2022. Many commercial premises should become available at that time.
If you would like to discuss the market, please give me a call at 647-404-8150.
Brian Madigan LL.B., Broker