Report prepared by Chris Kapches, LLB, President and CEO, Broker
June was, as have been all the months in 2016, exceptional. What we did not see however is a new monthly average sales price record, notwithstanding that June’s average sale price was almost 17 percent higher than the average sale price recorded last June. June’s average sale price came in at $746,546, about $6,000 less than the record of $752,335, established this past May.
One should not read anything into this decline. It is quite normal to see prices decline as we approach the summer months and families start focusing on the end of the school term and the holidays that lie ahead. For example, last June the average sale price dropped by about $10,000 compared to the previous month. Generally, the peak months for establishing record average sale prices are May and June, so the record average sale price established in May of this year ($752,335) will probably still be a record at year end.
And that is good news for buyers. Toronto and area’s average sale prices have been reaching dangerously high levels. This is dramatically illustrated when we consider that in January the average sale price for all properties sold was $630,193, and only six months later it is $746,546, almost a 20 percent increase.
In June we also witnessed, for the first time this year, a decline in sales from the previous month. In May there were 12,838 residential properties reported sold. In June that number fell marginally to 12,794. Again I wouldn’t read much into that decline. To some extent it is seasonal. As well it is due to the inventory shortage that has been causing so many buyers sleepless nights.
In June 16,980 properties came to market, a decline of almost 4 percent compared to the 17,659 that came to market in 2015. This decline compounded the active listing shortage. At the end of June there were only 12,327 residential properties available for buyers to view and purchase. That is more than 31 percent fewer properties available to buyers compared to last year. With only 12,327 properties on the market (17,972 in 2015) it is not surprising that those properties that did sell sold in record speed.
In June it took only 15 days for all properties (on average) to sell in the greater Toronto area. This is a torrid pace. Last year, which was a record breaking year, it took 19 days for all properties to sell. This number includes condominium apartments which do not move at the same pace as detached and semi-detached properties. The pace was even faster when we look at detached and semi- detached sales in various City of Toronto trading areas. For example all detached properties sold in only 11 days, and semi-detached properties in only 8 days. Not only did they sell quickly they also sold for more than their asking price. Detached properties sold for 107 percent of their asking price, and semi-detached sold for 111 percent. It is clear that a property’s list price is only a starting point. This phenomenon is no doubt due to the inventory shortage we are experiencing, but is also being aggravated by agents listing properties (knowingly and unknowingly) lower than they should.
It is noteworthy that the average sale price in Toronto’s central districts for detached properties came in at $2,072,978. A year ago the same house would only have cost a buyer $1,664,694. Semi-detached houses in Toronto are now (on average) selling for almost $1 Million ($912,724). In Toronto’s central districts a semi-detached house now sells for $1,186,443. These are not Vancouver prices, but they are becoming pricey.
Higher-priced properties are also selling in large quantities. In June 369 residential properties having a sale price of $2 Million or more were reported sold. Last June only 206 properties in this category were reported sold, an increase of almost 80 percent. It should be noted that Toronto is not Manhattan. Although there were many $2 Million plus sales in June, the sales activity for properties priced over $5 Million is considerably slower.
Condominium apartments continue to be an affordable alternative for most buyers. Although average sale prices are inching higher, they are considerably lower than detached and semi-detached properties. In June the average price for condominium apartment sales in the City of Toronto was $448,002, an increase of 6.9 percent compared to average sale prices last year. Although average sale price increases were moderate, the volume of condominium apartment sales was up by 15 percent. Condominium apartment sales now represent about 25 percent of all property sales in the greater Toronto area. That percentage is higher in the City of Toronto. In the central districts of Toronto, the average sale price for all condominium apartments sold in June was almost $500,000 ($494,578).
As indicated at the beginning of this report, the resale market, if it follows historical patterns, will “soften” during the second half of the year. This is what the market place needs, not only for affordability purposes, but to ensure that regulators and politicians do not create legislation to slow the pace of the market and rising prices. Generally, market intervention by government has had negative results – one cannot help by remember the 1974 Ontario Speculation Tax Act. It killed the market after it was introduced. It was repealed by 1978.