|Welcome to the 2018 Market!
2017 might go down as one of the craziest years on record for Toronto Real Estate. In total, the Toronto Real Estate Board reported 92,394 sales through TREB’s MLS system, which is 18.3% fewer sales compared to the record set in 2016. What’s crazy about this statistic is the story behind it: bidding wars at the beginning of the year that saw desperate buyers offer $1M over the asking price, followed by government intervention, fear mongering, a lack of product and the grand finale of a balanced market.
Yes, 2017 was one for the record books! If you were a buyer, a seller or someone who was keeping track, you’ll remember that the first quarter of the year was literally like the Wild West. There wasn’t a freehold listing that couldn’t sell. Literally everything that came onto the market sold. Buyer’s were so aggressive that the market experienced a 26.1% increase in the average price of freehold homes during the first quarter.
The market moved at a pace that very few predicted would last. It got to a point where the Liberal Government had to step in. Their response was the introduction of a 16 Point Fair Housing Plan, which specifically highlighted a new foreign buyer’s tax. There was growing concern that foreign buyer’s were the ones driving up prices across the GTA. While the importance of the other 15 points should not be understated, the main objective of the FHP was to slow down the market and slow down it did.
The physiological impact of the FHP brought about a major decline in the number of sales in both the second and third quarters of the year. Housing prices decreased approximately 18.6% during that time. Despite the government policy decision to introduce a foreign buyer’s tax ironically, research conducted later in the year by TREB, showed that foreign home buying was not a major driver of sales in the GTA. In fact, the number of foreign buyer sales accounted for less than 5%.
It became all too clear that Canadians and Canadian residents were the ones who were driving the market, and when freehold homes became too expensive, condos became king once again. According to TREB, “the detached market segment – the most expensive on average – experienced the slowest pace of growth as many buyers looked to less expensive options during the last two thirds of the year. Conversely, the condominium apartment segment experienced double-digit growth as condos accounted for a growing share of transactions.”
Condos, who knew! Yet it makes an incredible amount of sense for anyone who was looking to buy into the market. The average sale price for detached homes in the City’s core rose to $1,250,235 in December, while condos averaged $532,700. And the average selling price for 2017 as a whole was $822,681, which is up 12.7% compared to 2016. The increase in price was primarily driven by the aggressive market conditions at the beginning of the year, but in the latter half of the year, fewer sales combined with an increased number of listings resulted in slower growth. In fact, according to TREB, the overall average selling price was up just 0.7% year over year. It’s as close as we’ve been to a balanced market for a long time!
Now that 2018 is here, a lot of clients have been asking me for predictions. I think that it’s safe to say that we will continue to see prices rise once again this year, but at a much more conservative pace than what we saw in 2017. This is in part due to yet another form of government intervention. The newest government policy is known quite simply as the “stress test” and it has a lot of people stressed out! It’s a formula used to test mortgage applicants 2% above their pre-approval rate. Thus, it’s you’ve been preapproved for a rate of 3.5%, your income is going to be tested against a rate of 5.5%. It’s a plan designed to slow the market once again. I have no doubt that this will happen initially, but people will adjust and adapt as they always do. I have no doubt that we will continue to have a very strong 2018 market starting with a strong spring market. Rates are still historically low, land is at a premium and demand is still incredibly strong.
If I had the pleasure of working with you in 2017, I can’t thank you enough for your business! And for anyone considering a move in 2018, the start of the year is always a fantastic time to take advantage of relaxed market conditions prior to the onslaught of the spring market.
I look forward to a great year ahead and hope that I have the opportunity to touch base with both past and present clients!