July – REAL ESTATE RUNDOWN
Many things happening in the new’s lately and I’m talking about Russia, Trump or Whoopie Goldberg. Last month was the first time in 2018 that the media reported month to month and year to date real estate price increases. Those of you who live in Toronto and have been watching the sales in your neighbourhood know that prices in Toronto hit rock bottom in January and have been steadily climbing ever since. March and April where especially hot with bidding wars and bully offers dominating Toronto’s real estate market. York Region is also showing strong signs of recovery with year to date sales stats up 17% plus.
Detached house sales and values are on the rise. For the first time in three years, the annual change in detached sales outperformed condo apartment sales, which were down 5.3% from a year ago in June. Although market conditions for detached homes have improved, they remain significantly tighter for condo apartments. The supply of condo apartments was 0.7 months below its five-year average (2.5), whereas detached supply was 1.3 months above its five-year average (2.2 months) in June.
If you’ve been following the news you’ve heard of Toronto’s rental market CRISIS! Rents in the condominium market continued to soar in the second quarter, with the average for condo leases signed in Q2-2018 up 11.2% year-over-year to $2,302 based on an average unit size rented of 732 sf. The $231 average increase over the past year was the largest ever recorded by Urbanation, with rents having risen by $367 in two years. In the City of Toronto, average rents grew by 12.1% to $2,379 ($3.33 psf), including a 13.5% increase in the former City of Toronto to $2,505 ($3.61 psf). In the 905 Region, condo rents increased 9.2% to $1,998 ($2.49 psf), with 11.9% growth in Mississauga to $2,105 ($2.63 psf). Residential rents in every category are up whether your dealing with single family homes, basement apartments or 350 Square Foot studio apartments. I’ve been preaching about the merits of income property investment for ages – my message remains the same: Buy and Hold it turns to GOLD! Selling income properties is OK if you’re buying bigger buildings with the sales proceeds and lowering your cost per door.
- The Bank of Canada raised its benchmark for the overnight lending rate to 1.5%, marking the fourth increase since last summer and raising rates to their highest level in 10 years. Major banks quickly responded, raising their prime rate to 3.7%. The move by the Bank of Canada was largely expected, as policy is responding to a strengthening Canadian economy. However, the Bank was careful to note that it is keeping a close eye on the growing tariff disputes, calling what’s happening on the trade front “the most important threat to global prospects.” The consensus view is that the Bank of Canada will continue to act cautiously, and many believe this is the last interest rate increase of 2018. About
- TREB sales during the April to June spring period totalled 25,388 transactions, representing a 20% decline from 2017 and the slowest spring over the last 10 years. Sales activity over the last three months was still rebalancing from the exceptionally strong run-up that started in 2015. The swift decline in the market during the spring of 2017 restored activity to its 10-year average, although the extent of preceding surge required a longer cooling off period, which has been further impacted by new mortgage stress tests and higher interest rates. While sales in the spring of 2018 were 20% below the 10-year average, the spring of 2016 saw sales rise 27% above average.
- Signs of a late-spring improvement were seen in the June numbers, as sales increased by 4.4% over May — the strongest May to June increase since 2009 when the economy was recovering from the Great Recession. A typical June would see sales activity decline from a high in May, as only three of the past 10 June periods have recorded a month-over-month increase. The gain in June followed a flat May, which usually sees sales increase 5% over April, which helped bring the year-over-year change back into positive territory (+2.4%) for the first time since March 2017.
- Inventory levels continued to stabilize in June. The year-over-year growth in active listings at month-end slowed to 5.9%, which was the smallest increase recorded since April 2017 and followed exaggerated growth of above 100% in early 2018. The 20,844 active listings at the end of June was essentially in line with the 10-year average for the month. Furthermore, the months of supply edged down to 2.6 from 2.7 in May and has generally been trending down over the last 12 months, remaining slightly above the 10-year average of 2.2 months.
- For the first time in 2018, average year-over-year price growth was positive at 2.0% in June, which marked a substantial improvement following the double-digit annual declines reported during most of this year. On a two year basis, prices were up 8% (4%/yr.) and up 53% from five years ago (11%/yr.). Should market conditions remain stable and the monthly price trend continue gravitating towards the three-year trend level of roughly $850,000 (currently $808,000), annual price growth will continue improving in the coming months