SALES COMMENTARYAugust sales on TRREB were 10,775. This represented a 40% increase over August of last year. Some are reading too much into these numbers, trying to explain a ‘pandemic real estate boom’. The real story can be found in the year-to-date sale numbers. Year-to-date sales are still 5% lower than the number for 2019.
Most experts and economists focus on the ’classic’ house price to rent or income ratios. There is lots to criticize with those stats. But instead, we want to focus on what really drives sales. It is the population base growth, marriages, divorces, kids, and deaths. There is no doubt that non-residents investing in Toronto can inflate our sales and 2016 with 113,000 sales speaks to that. Given the size of the GTA, sales should normalize around the 90,000 level. Our revised forecast for all of 2020 calls for sales of 85-87,000 units which is below the long-term average.
While the low-rise property market has shown continued strength, the condo market appears to be going in the opposite direction. Condo apartment sales were 2,286 in August of this year. August of 2019 produced 2,067 sales or an increase of 10% which looks encouraging but not close to the 40% of the overall market. Looking at the Downtown condo market, the increase this August over August of 2019 was similar at 11%.
Looking to the future, you need to focus on the listing side. In August there were 5,599 ‘new’ listings, which produced a sales-to-new listing ratio of 40%. A ‘balanced’ market is in the 40- 60% range so this is at the bottom. As previously stated, sales for August are 10% higher than in 2019 but both ‘new’ and ‘active’ listings are over 100% higher than a year ago. This can only mean one thing – lower prices. Our best guess is 5% over the next 6-12 months but if we get a second wave of COVID-19, then it could be 10%.
AUGUST RESULTS FROM THE TORONTO REGIONAL REAL ESTATE BOARD (TRREB)
Table 1: The sales-to-new listings ratio has dropped 7% compared to last year. Competition between buyers, especially for low-rise homes was strong which lead to robust annual rates of price growth. For condominium apartment listings, price growth was slower as condo market conditions were more balanced.
source: Toronto Real Estate Board
Table 1: The sales-to-new listings ratio has dropped 7% compared to last year. Competition between buyers, especially for low-rise homes was strong which lead to robust annual rates of price growth. For condominium apartment listings, price growth was slower as condo market conditions were more balanced.
source: Toronto Real Estate Board
WHAT LOW INTEREST RATES MEAN FOR BUYERS?
In today’s market you can get either a five-year fixed rate or a five-year variable rate for about 2%. Most people equate a mortgage payment to a rent payment which cannot be further from the truth. At these interest rates your payments will start repaying 65% in principal and only 35% in interest. On a $500,000 condo with 5% down, your equity after five years would be just over $100,000 even if the condo never appreciated by one dollar! Can a renter save that amount of money?