Toronto’s May real estate market was sluggish. While average prices remained stable, sales transactions were 18% lower than a year ago. Buyers had choice last month as new listings were 28% higher than May 2023.
While the monthly real estate stats are helpful to understand year over year comparisons, by looking back over a longer period, we can glean a better perspective of the divergent freehold and condo market happening today. Year to date 2024 condo transactions are 20% down from the 2020-2024 five year average compared to 16% down for freehold properties. However, new listings in 2024 for freeholds are actually lower by 4% while condo listings are up 22% than the 2020-2024 five year average. This means that the condo market will take longer to recover given the increased level of supply.
This increase in condo supply is a result of:
– insufficient purpose built rental properties for the last 20 years leading a rental market supplied primarily from individual condo investors
– a fractured regulatory framework where a hearing at the Landlord and Tenant Board takes over 8 months for Landlords to evict tenants who do not pay rent or Buyers attempting to obtain vacant possession to move into tenant occupied properties they purchased;
– financial environment where high interest rates result in negative cashflow for investors.
– recently announced change in inclusionary capital gains rate of 67% vs. 50% for gains over $250,000 for individuals slated for June 25, 2024.
The interest rate cut of 25 basis points last week will provide a little breathing room for variable rate mortgage holders and begin to restore confidence for buyers who have been on the sidelines. There is currently more than 4.5 months of condo supply which is unheard of in the spring market.
The price differential between the average freehold and average condo is currently ~$640,000. Over the past 5 years, this differential has been as low as $300,000 and as high as $800,000. When the difference exceeds $600,000, freehold prices drop, condo prices rise or both as the steady state has typically been closer to $540,000.
As for my prognostication, the summer market will continue to be quiet with sales picking up when the fall market resumes.
Shen Shoots the Breeze
I’m enroute to Montreal aboard a train to attend a friend’s wedding. Although it’s slower than flying, there’s something very convenient about it: no need to arrive 90 min before departure, no long security lines and cramped seats. Bring as many liquids on board as well!
I calculated that even if I flew there, it’d be only about an hour in savings door to door.
Train travel affords the ability to really get into a book. A friend of ours recently shared a good read with us: David Brooks’ newest book, How To Know A Person (The Art of Seeing Others Deeply and Being Deeply Seen).
I am three-quarters of the way through the book and already am seeing how I want to get better at getting to know people. Brooks writes with humility and he’s great at getting you to join this lifelong journey of being more curious and empathetic of the people that are put in our path – whether a brief encounter with a stranger or lifelong friends.
At the beginning of his book, Brooks shares that getting to know someone usually begins by talking and listening to each other. That means having conversations. “Being a mediocre conversationalist is easy. Being a good conversationalist is hard.” He writes that many people find this a hard skill to develop.
While his book is much more than just having good conversations, he offers samples of good questions.
I’m going to try some of these the next time I’m at a party (in a couple of days):
Where did you grow up?
That’s a lovely name. How did your parents choose it?
Which of your five senses is strongest?
What would you do if you weren’t afraid?
What has become clearer to you as you have aged?
He premises that, “In modern society, we generally refrain from asking the kinds of big questions I’ve just laid out. I guess we’re afraid of invading people’s privacy, afraid that the conversation will get too heavy… but I’ve found in almost all cases that people are too shy about asking questions, not too aggressive. People are a lot more eager to have deep conversations that you think.”
I think there gets to be a point when talking about the weather can be very tiresome – why not shake things up a bit? I’m betting that it will lead to good conversations or better yet, truly being able to see someone.