The Toronto Real Estate Board released its November Market Watch Summary yesterday which revealed the following statistics:
– November 2012 sales were down 16% from November 2011.
– There were 17.8% more active listings in November 2012 than the year prior.
– The average price for all properties (freehold and condominium) increased 1.6% from the year prior.
– Compared to last November, the City of Toronto saw a 16% decrease in the number of freehold sales and a 25% decrease in the number of condominium sales.
Urbaneer pulled out its handy pocket calculator (which runs on coal) to extrapolate some stats on the downtown core for the condominium market. We believe, with its symphony of construction cranes, that the area is a barometer of the overall condominium market. Based on our Tales From The Real Estate Trenches stories at the beginning of last month, we’re not surprised to learn that:
– In Districts C01 and C08, which span the Don Valley west to Dufferin and from Lake Ontario north to Bloor Street (the ‘downtown core’), only 309 of the 1442 active condominium listings sold last month. That translates into 1 of 5 condominium sellers secured a buyer. It’s now taking around 35 days for a Seller to negotiate a successful offer with a Buyer. A year ago, nearly 1 in 2 condominium sellers (44%) found a buyer in 28 days. Values are down 5% from the previous year.
Unlike the condominium market, there aren’t many new freehold dwellings being constructed in the City of Toronto. We took a look at the City proper (an area much larger than the 42 neighbourhoods urbaneer operates in) to analyze whether the market for detached and semi-detached houses is more stable. We found:
– In the City of Toronto (All City Central, West and East Districts), only 43% of the active freehold detached and semi-detached houses listings sold last month, compared to 65% in November 2011. It now takes 22 days instead of 20 days for a freehold property in the City to sell, and they are now attaining an average of 98.5% of their list to sale price, as opposed to 100% last year. Using a direct November 2011 to November 2012 comparison, the average price last year for detached and semi-detached houses in the City was $669,000. It is now $662,000.
Urbaneer has long been predicting an adjustment in the condominium market. Our experience in the real estate trenches has revealed downtown condominium values have dropped, in several instances, to 2009 prices over the past 60 days. Although freehold housing prices and demand remains steady in the central core, there is an increased reluctance (if not outright defiance) on the part of Buyers to engage in bidding wars. Without question we are moving towards a more balanced freehold market.
Urbaneer’s principal concern lay with the ability for condominium owners to climb the property ladder into the freehold housing market, which is a necessary part of the filtering of housing stock required to keep market momentum. If condominium prices continue to drop (we anticipate a further decline in values based on supply relative to demand) and freehold property prices remain stable, there will be an increasing gap in affordability between these two housing types. Toronto’s own fiscal cliff will occur when condominium owners find themselves having no (or in some cases negative) equity. If this happens, the freehold housing market could see demand drop and potentially experience a decline in values.
Our red flag? This dynamic, impacted by the oversupply of small condominiums and government tightening of mortgage lending practices, exists independent of the low mortgage rate environment. If mortgage rates increase (there are no government initiatives to increase them in the near future) then it will further erode affordability and impact market conditions. Are you financially stable enough to weather this? If yes, there may be some real estate opportunities for you. If not, then perhaps you should consider liquidating (some of) your condominium assets and wait for better opportunities.
Did you read our Summer 2012 Forecasts PART ONE and PART TWO which predicted these market changes? Or did you read our behind the scenes tale about the Toronto Life Article called ‘House Wars‘?
At urbaneer.com, we’re here to steer you right, all without hassle or pressure.
~ Steven and the urbaneer team
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Tales From The Real Estate Trenches