The Toronto Real Estate Board (TREB) released its monthly resale housing report for July 2017, announcing a significant year-over-year drop in sales in the Greater Toronto Area (GTA).
Last month, GTA realtors reported 5,921 transactions through the MLS system, which is a 40.4% drop compared to the same period last year. In July 2016, the City of Toronto saw 3,485 sales, and this year there were only 2,303. As for the rest of the GTA, there were 2,826 fewer sales in July 2017 compared to last year. While sales dropped, new listings went up 5.1%.
“A recent release from the Ontario government confirmed TREB’s own research which found that foreign buyers represented a small proportion of overall home buying activity in the GTA,” says TREB President Tim Syrianos. “Clearly, the year-over-year decline we experienced in July had more to do with psychology, with would-be home buyers on the sidelines waiting to see how market conditions evolve.”
The typical summer slowdown plus the introduction of the province’s Fair Housing Plan combined for a weak month of sales.
“Summer market statistics are often not the best indicators of housing market conditions,” says TREB CEO John DiMichele. “We generally see an uptick in sales following Labour Day, as a greater cross-section of would-be buyers and sellers start to consider listing and/or purchasing a home. As we move through the fall, we should start to get a better sense of the impacts of the Fair Housing Plan and higher borrowing costs.”
Though sales decreased significantly year-over-year and new listings were up, the average selling price still increased by 5% to $746,218 (for all housing types). The average selling price in Toronto went from $690,597 in 2016 to $759,441. For the rest of the GTA, the average selling price went from $721,218 in 2016 to $737,801. It’s interesting that last year the 905 region was more expensive, but now Toronto homes are selling for more.
“Homebuyers benefitted from more choice in the market this July compared to the same time last year,” says Jason Mercer, TREB’s Director of Market Analysis. “This was reflected in home prices and home price growth. Looking forward, if we do see some would-be homebuyers move off the sidelines and back into the market without a similar increase in new listings, we could see some of this newfound choice erode. The recent changes in the sales and price trends have masked the fact that housing supply remains an issue in the GTA.”
Though listings have been up and sales down, TREB is still saying that supply is an issue in the resale market. It may not be obvious now, but we think they may be right. Once people understand the small effect of the Fair Housing Plan, we could see a surge in sales in the fall. If not the fall, there will at least be a clearer picture of the resale market by the beginning of 2018.
If potential buyers are taking a step back from the resale market, it’s fair to say that some are taking a wait-and-see approach in the new home market as well.
The Building Industry and Land Development Association (BILD) recently announced that supply is still an issue in the new home market, but condo sales hit a record high and the average price of a new condo unit in the GTA jumped 34%.
It’s possible that the longer term investment in the preconstruction market seems like a safer bet than the resale market. We can see a buyer looking at the resale condo market and deciding they would rather put a down payment on something preconstruction and wait a couple years before they need to worry about closing.
We’re interested to see if TREB is right about the resale market picking up pace this September!