Everyone seems to agree that the Toronto housing market is expensive and getting more so each year. This month I will delve into recent history to find out if prices for different types of homes are at all time highs.
Toronto’s June real estate market continues a 3-month trend where the number of solds increased compared to the same month in 2018. The overall average price increased despite a decrease in detached property prices.
While comparing monthly data to prior years is helpful to account for seasonality; as the calendar flips to July, it’s helpful to compare the first half of the year with prior years. As you may recall, the Toronto market experienced significant volatility highlighted by the white hot market in the first half of 2017 giving rise to the Fair Housing Plan. By the first half of 2018, the OFSI stress tests came into effect making it more difficult to qualify for mortgages.
In taking a closer look at first half data for the last 5 years, we can view the market with a broader lens to gauge the ebbs and flows of Toronto’s market to determine if home ownership is currently more expensive for Torontonians compared to prior years.
I’ve separated the data between freehold (ie. detached, semi-detached, link and townhouses) and condomium (ie. apartments and townhouses) to mitigate the impact of maintenance fees.
Below, you will 3 key sales metrics (no. of sales, $ volumes and average prices) from January 1 to June 30 for the past 5 years:
The proportion of condo solds has increased steadily from 52% to 58% of the total market in the past 5 years; however other key trends become more apparent by taking the above data and indexing 2015 as a base year.
- From 2015 to 2019, there was a drop in the number of sales of 27% for freeholds and 10% for condominiums.
- Dollar volumes peaked for both freehold and condominiums in 2017.
- Freehold prices have not returned to peak 2017 prices whereas price growth has been steady for condominiums throughout the 5-year period.
In order to confirm if Torontonians are paying more for real estate, we need to take into account the change in mortgage rates from 2015 to 2019.
By applying the increasing mortgage rates to average prices (assuming 20% downpayment and 25-year amortization), we obtain the resulting mortgage payments (and index)
In summary, to answer our original question, after taking into account changes in interest rates, while prevailing prices are high, the cost of real estate for condo buyers is currently at its highest while freehold buyers paid peak prices in 2017.
3 Things I’m noodling through:
1) My wife is a theatre buff and we recently attended Come From Away. While I’m an old skool Phantom of the Opera guy, this musical was so creative in having the cast play so many different characters and how they retold the events of 9/11 from an entirely different and Canadian perspective. It made me think back to where I was and what I was doing on that day. I remember I was driving to a tuxedo fitting for my upcoming wedding and listening to news trickle in on the radio. Like so many, that day will unfortunately forever be etched into our memories. What were you doing on that day?
2) We recently attended a friend’s milestone birthday. Her husband organized a live-music themed party and asked friends if they were willing to sing or perform a tune for her and friends. Our friend is passionate about musical theatre, the Beatles and music in general – she is also a music teacher. It was such a fun evening listening to various friends belt out popular tunes and various renditions of Beatles songs. We were the beneficiaries of all their talents and did our part by being an excellent audience and applauding where appropriate. Makes me want to take some vocal lessons – do you know of someone in the East York/North York area who is a good vocal teacher?
3) Several years ago, we decided to dedicate a portion of our garden to veggie planting. We’ve generally experienced success with tomatoes, scallions and herbs. The rest not so much. Last year, we got a little greedy and planted 6 tomato plants. Of course, we had forgotten how big they get so our visions of bushels of tomatoes that we would consume and share with our neighbours were dashed as our plants were crowding each other out for sun and water. We were living the Arab proverb: Greed lessens what is gathered. This year we have learned our lesson and planted only 2 tomato plants in our raised bed and it still is growing larger than we’d like. Are you green thumb? Any advice as to whether we should be pruning our plants back?
Summer is finally here and that’s great news for those of us who enjoy spending time in the great outdoors! Whether you prefer sports or leisure activities – or ambitious do-it-yourself projects – here’s hoping the days unfold just the way you wish.
Some of the best summer days are spent getting together with family and friends for fun, food, refreshments and relaxing conversation. If your discussions turn to real estate, I sincerely hope you will refer me to your friends and family for general inquiries or any specific questions they may have. I appreciate it when you let others know that I’m available to assist them as I would assist you.
Have a wonderful summer!